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These 3 emerging healthcare shares could be the next big thing

Investors can’t be blamed for trying to guess who will be the next CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH).

These three emerging healthcare shares are also worth keeping your eye on.

Here’s why.

Clover Corporation Limited (ASX: CLV)

With a market cap of just $272.5 million it’s early days for this small cap stock – involved in the refining and sale of omega-3 oils for infant formula, children’s food, supplements and medical foods.

But if the boom of the infant formula market for players like Bellamy’s Australia Ltd (ASX: BAL) and A2 Milk Company Ltd (ASX: A2M) is anything to go by this niche could prove profitable for Clover – which has seen a share price surge of 256% in the last 12 months, up from 46c per share at this time last year to $1.64 today.

It’s hard to ignore such gains and Ord Minnett placed a buy rating on the stock back in May with a price target of $1.40 – which has already been exceed by 17%.

Ord Minnett has forecast EPS out of Clover to grow at a compound annual growth rate (CAGR) of 28% between FY18 and FY21.

Not only is the Asian market a potential stamping ground for Clover in the future, but changing regulations in Europe could mean Clover finds itself relevant in that region too.

Looks like the potential for growth is pretty astronomical – one to watch.

Pacific Smiles Group Ltd (ASX: PSQ)

Shares in dental centre operator Pacific Smiles Group Ltd are down 5.7% to $1.65 at the time of writing after a trading update was released today.

Pacific announced its underlying EBITDA growth would now be between 2% and 4% – a downgrade from 10% in previous guidance – which may have shaken investors today as the weaker-than-expected top line performance comes as a surprise.

But with 10 new centre openings in the pipeline and patient fee growth of 11% Pacific looks to have a fairly strong growth strategy in place, with strong EBITDA growth estimated for FY19 and the long term target of opening 250 dental centres in Australia on track.

I still think Pacific has a bright future, and the uptake of new dental centres should ramp up earnings next year.

Capitol Health Ltd (ASX: CAJ)

Shares in diagnostic imaging services company Capitol Health remain steady at 32c per share, with little reaction from the market on the announcement yesterday it would acquire 9 independent radiology clinics in Western Australia.

Capitol’s market update in early June indicated it was on track to reach EBITDA guidance of between $23 million and $25 million, with its doctor’s incentive scheme also a unique play – with the issue of unlisted options over ordinary shares at a 10% premium to the 30-day-trading volume.

Capitol shares might be stagnant right now, but they’ve experienced a short surge throughout May and June – up from 28c on May 21 to a 52-week high of 34c on June 20.

Capitol is somewhat under the radar, but its strategy to continue to acquire radiology clinics across Australia could see it log some decent growth in the medium term.

One to watch as these businesses begin to turn profit for the company.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Cochlear 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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