One area of the share market that I think has bright long-term growth prospects is the healthcare sector.
While the likes of CSL Limited (ASX: CSL) and Ramsay Health Care Limited (ASX: RHC) are well-known in the investment community, there are some high quality up and coming healthcare companies at the small-end of the market that I think investors should be better acquainted with.
Three that have caught my eye are listed below. Here’s why I like them:
Ellex Medical Lasers Ltd (ASX: ELX)
This medical device company had a disappointing FY 2017 and has admittedly had a reasonably mixed start to FY 2018. Although first-half sales have bounced back strongly from a decline last year, the company posted a half-year loss after tax of $2.4 million last month on the back of higher sales and marketing spending. But I believe this will prove to be a smart move by management and puts the company in a position to win a share of a rapidly growing market. Management estimates that the minimally invasive glaucoma surgery market will grow from approximately US$200 million today to US$1 billion by 2021.
Volpara Health Technologies Ltd (ASX: VHT)
Thanks to its exciting breast imaging analytics and analysis products I think Volpara has enormous potential. The company’s technology allows personalised, high-quality breast cancer screening based on automated, objective measurements of breast density, compression and radiation dose. Unsurprisingly, demand for the technology has been growing strongly and has put the company on course to grow annual recurring revenues by over 200% growth in FY 2018.
Zenitas Healthcare Ltd (ASX: ZNT)
I believe this small cap home care and health services company will be a big winner from reforms in the healthcare sector that aim to push the burden of healthcare services from hospitals into primary care. I feel its recent half-year results Zenitas demonstrated the lucrative opportunity the company has in the sector as a result of these reforms. It delivered pro forma net revenue of $34.8 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $5 million. This was a 53% and 51.5% increase, respectively, on the prior corresponding period.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Ellex Medical Lasers Limited and VOLPARA FPO NZ. The Motley Fool Australia has recommended Ramsay Health Care Limited and Zenitas Healthcare Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.