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3 top small cap healthcare shares on my watchlist

One area of the share market that I believe has extremely bright long-term growth prospects is the healthcare sector.

I think the sector is home to several high quality up and coming companies which investors should be better acquainted with.

Three that have caught my eye are listed below. Here’s why I like them:

Paragon Care Ltd (ASX: PGC)

Paragon Care is a fast-growing provider of integrated services to the health and aged care markets. The company recently announced a major acquisition that is expected to be highly accretive to earnings next year. It has agreed to acquire New Zealand-based specialised medical distribution company REM Systems for a net enterprise value of NZ$54.4 million. Whilst the acquisition does carry integration risks, I feel confident that it will be a great addition and support its long-term growth. This could make Paragon Care worth a closer look, especially considering its shares are trading at a reasonable 15x estimated forward earnings.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara Health Technologies is a fast-growing breast imaging analytics and analysis product provider which I think has a lot of potential. Thanks to the increasing popularity of its technology the company has been growing its share of the U.S. market at a quicker than expected rate. At the last count, approximately 3.2% of all women screened in the United States for breast cancer were contracted to Volpara’s software. Management is targeting a 9% share of the market by the end of FY 2019 and I would not be surprised to see it achieve this. This could lead to strong top line growth which goes some way to justifying its current valuation. It is, however, a reasonably high risk investment option and one that may not be suitable for all investors.

Zenitas Healthcare Ltd (ASX: ZNT)

In April this home care and health services company provided a trading update which revealed that it is on course to achieve its EBITDA guidance of between $13 million and $13.5 million in FY 2018. This was then followed by the announcement of two earnings accretive acquisitions that I believe were done at an attractive price and offer solid long-term growth prospects. Because of this and the favourable Federal Budget, I feel investors ought to consider Zenitas as a long-term buy and hold investment.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

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*Returns as of February 15th 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia has recommended Paragon 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.

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