The COVID-19 pandemic has stunted the growth of many S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) shares. Conversely, it has presented opportunities for ASX 200 healthcare shares, particularly those that are engaged in products and services used in the prevention and treatment of COVID-19. Could these ASX 200 healthcare shares be a buy despite a significant run-up this year?
1. Resmed Inc (ASX: RMD)
Resmed is engaged in the development, manufacturing and distribution of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders. More recently, the company has pivoted its business to support the surge in demand for respiratory devices. This involves ramping up production for products such as life support ventilators, non-invasive ventilators and ventilation mask systems.
In its Q3 update, Resmed advised its revenues had increased by 16% while net operating profit soared by 39%. I believe it is very challenging to buy at today’s Resmed share price. It trades at an expensive valuation and also hit an all-time record high last week. However, the company does play a pivotal role in supplying critical COVID-19 related products. Furthermore, its accelerated earnings are likely to push the Resmed share price higher in the medium to long term.
2. Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)
Fisher & Paykel delivered its full year results on 29 June. The company saw its operating revenue up 18% over the last year while net profit after tax increased 37%. The increase in revenue was largely driven by growth in the use of the company’s Optiflow nasal high flow therapy, demand for products to treat COVID-19 patients and strong hospital hardware sales throughout the course of the year. Like Resmed, the company is ramping up production, having brought forward capital expenditure to complete its fourth manufacturing building in New Zealand. Looking forward, the company has forecast operating revenue for 2021 to increase by 18% and net profit after tax to increase in the range of 13% to 18%.
3. Ansell Limited (ASX: ANN)
Ansell will announce its FY20 full year results on Tuesday 25 August. In February, the company highlighted that macroeconomic conditions were softening with political and cyclical uncertainties likely to prevent a strong rebound in global business investment. While overall business conditions remain a challenge, COVID-19 is likely to be an opportunity to lift Ansell’s earnings. Its 1H20 results highlighted the company’s involvement in producing personal protective equipment (PPE) for Chinese authorities. Given Ansell’s global footprint, it’s quite likely the company will expand sales of its PPE products to other geographies.
All three ASX 200 healthcare shares have experienced significant gains in 2020. Despite the companies trading at tech-like valuations, it’s possible they will grind even higher. Particularly given increasing global COVID-19 cases and the relevance of their products and services. While I wouldn’t be buying these shares at today’s prices, I would watch them closely for opportunistic pullbacks.
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Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. and ResMed Inc. 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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