The healthcare sector has been one of the top-performing sectors on the ASX in recent years with strong share price gains from a number of healthcare companies.
In my opinion, healthcare will continue to be one of the top-performing ASX sectors over the next decade, along with the tech sector, as the demand for healthcare services and products continues to increase, both locally and internationally.
Here we examine 2 leading S&P/ASX 200 Index (ASX: XJO) healthcare shares: CSL Limited (ASX: CSL) and ResMed Inc (ASX: RMD). Both companies have evolved over the last 5 to 10 years to become leading international companies in their respective healthcare fields, with strong revenue and profit growth.
I believe that this strong growth will continue well into the next decade, which is likely to translate into continued strong share price growth.
Other specialist ASX healthcare shares which I believe have strong growth potential include Cochlear Limited (ASX: COH) and Nanosonics Ltd (ASX: NAN).
CSL Limited
CSL has developed into a highly successful global business through innovative research treatments that are protected by product patents, combined with the utilisation of a highly efficient global production and distribution network that generates strong cash returns. These returns are then cleverly reinvested back into the company to develop further innovative products and make targeted acquisitions.
In the 12 months to 30 June 2019, CSL invested over US$800 million into research and development across its businesses, which amounts to around 10% of its total operating revenue.
CSL produces blood medicines and plasma products that could potentially play a vital role in the production of products to help in the coronavirus fight. It does have a major division within its company that produces vaccines, which it has called upon in the past in previous health crises such as the swine flu.
ResMed Inc
ResMed is another amazing Aussie success story, growing from a backyard Australian operation 30 years ago to now become a major US-based global company employing more than 7,500 people worldwide.
The company is a leading designer and manufacturer of healthcare devices and cloud-based software solutions, targeting sleep apnea and other respiratory conditions. Its global scale and breadth now provide it with a distinct advantage over its competitors.
This specialist healthcare product provider is currently a leading provider of cloud-based software solutions for out of hospital care and is seeing particularly strong growth from its software-as-a-service (SaaS) segment, which now constitutes around 12% of its total revenue. This percentage is likely to grow significantly over the next 5 years.
I believe that the strong demand for ResMed's products is likely to persist over the next decade. It is estimated that over 20% of US adults are unaware that they are suffering from sleep apnea, providing ResMed with a large potential untapped revenue stream.
