Some ASX healthcare shares have been rated as buys for 2022 by experts.
Healthcare companies have the potential of producing both growth and defensive earnings. People don’t choose when they get sick, and health is very important to most people (and use services).
There are plenty of different sectors within healthcare, including private health insurance, hospitals, medical devices and products, diagnostic and software.
Experts rate these two ASX healthcare shares as buys for the year ahead:
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is currently rated as a buy by the broker Morgans, with a price target of $1.87. That suggests that the business could rise by around 80% over the next year (if the broker is right about how the market treats the business).
A significant part of Volpara’s advantage is the ability of the company to analyse millions of images that will help the company find breast cancer, perhaps even before it has developed.
The company recently released its FY22 first half result, which showed that subscription revenue went up 35% to NZ$11.8 million (up 42% in constant currency terms).
Its market share continues to grow. At least one of Volpara’s products are now used on approximately 34% of women in the US. That was an increase from 27% a year ago.
The company has a very high gross profit margin. It was 91.4% in the last result. This is very high for a company on the ASX.
Volpara has made a number of partnerships that has positioned the business for lung expansion. It has made an initial investment in RevealDx, a lung AI company based in Seattle and it has signed a collaboration agreement with Riverain Technologies. Management thinks that lung is a large opportunity too.
Sonic Healthcare Ltd (ASX: SHL)
Sonic is an essential healthcare services business which provides a number of pathology services, as well as imaging. It generates revenue from across several countries including the USA, Germany, Australia, New Zealand, the UK, Ireland, Switzerland and Belgium.
COVID-19 has been a boost for the ASX healthcare share’s earnings and the base business revenue continues to grow by mid-single digits. Total FY21 revenue increased 28% and net profit jumped 149%. It benefited from being able to utilise existing infrastructure to generate operating leverage.
FY22 has seen continuing growth. In the first four months of FY22, revenue increased 5% and earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 16%.
Morgans rates Sonic Healthcare as a buy, with a price target of $47.05. It thinks that Sonic’s profit margins continue to grow.
The ASX healthcare share has also announced recent strategic moves.
It has signed an agreement to form a joint venture company with Harrison.ai, an Australian healthcare AI company, to co-develop and commercialise effective and accurate clinical AI solutions in pathology. It has also taken a “significant strategic shareholding” in Harrison.ai.
The business has also revealed it has bought ProPath, an anatomical pathology (AP) company based in Dallas, Texas. Its annual revenue generation is around US$110 million, serving more than 20 hospital groups across 45 states. This acquisition was deemed as a very significant additional step in developing its AP and clinical laboratory operations in the US.