2 ASX healthcare shares to buy that you've not heard of: expert

If you want to invest in a sector that people still need during economic downturns, here's a pair of small caps that might interest you.

| More on:
a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Healthcare is one of those industries that enjoys relatively stable demand through tougher economic times.

With consecutive interest rises forcing Australians to close their wallets, this might be a consideration for the coming period.

But of course, the well-known ASX shares in the sector are already well bought.

So one Wilson Asset Management analyst has dug deeper into his research to come up with a couple of buys that are not yet household names:

'This company can re-rate over the next few years'

Probiotec Limited (ASX: PBP) only has a market capitalisation of $180 million. 

But for such a small cap it has managed to hold its stock price pretty well in 2022, only down 1.76% so far.

Wilson senior equity analyst Sam Koch is buying the pharmaceutical manufacturer and distributor.

"We believe the stock offers investors valuation and earnings upside," he said in a Wilson video.

"What the market's missing here is their ability to compound earnings growth at a very high rate, relative to its current valuation."

The business' "strong organic growth" is accompanied by bolt-on acquisitions, he added.

"Trading at 10 times P/E with over 15% [earnings per share] growth projected, we believe that this company can re-rate over the next few years."

While coverage is sparse on Probiotec, at least Shaw and Partners currently agrees with Koch, rating the stock as a strong buy.

Probiotec hands out a 2.5% dividend yield.

Share price now below PE ratio of ONE

CogState Limited (ASX: CGS) is arguably a technology business in addition to its involvement in the health sector.

That's because it's a cognitive science company that provides tech and services to biotechnology and pharmaceutical clients conducting clinical trials.

Koch said that big pharma relies on CogState's technology for their studies into Alzheimer's Disease.

"What we're really attracted to in CogState is that they were one of the first companies to provide the software-first technology, which has accelerated the industry's push towards decentralised clinical trials."

The value of CogState's services was recognised in one of its largest clients actually taking a 7% shareholding, according to Koch.

"The company's trading at below one times earnings-to-price growth multiple with over 15% of the market cap caught up in cash," he said.

"We believe that acquisitions and earnings upgrades will drive the stock from here."

According to CMC Markets, three of four analysts currently rate the stock as a strong buy.

The CogState share price has dropped more than 19% so far this year.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CogState Limited and Probiotec Limited. The Motley Fool Australia has positions in and has recommended CogState Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

Shot of a scientist using a computer while conducting research in a laboratory.
Healthcare Shares

Telix Pharmaceuticals share price sinks 5% on giant debt deal

This high-growth drug developer is turning to debt for its next wave of expansion.

Read more »

Lab worker puts hands in the air and dances around
Healthcare Shares

Guess which ASX healthcare stock just rocketed 46% on major news!

Investors are sending this ASX healthcare stock flying higher on Wednesday. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Earnings Results

Polynovo share price surges after 57% revenue gain in FY24

Global sales continue to grow for Polynovo.

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Healthcare Shares

If you invested $5,000 in this ASX pharmaceuticals stock a year ago, you'd have $34,711 now!

Just how lucky have investors been with this stock?

Read more »

A doctor or medical expert in COVID protection adjusts her glasses, indicating growth or strong share price movement in ASX medical, biotech and health companies
Healthcare Shares

Should I buy CSL shares now for their 'steadily growing' dividends?

CSL has increased its interim and final dividend payouts for four years running now.

Read more »

Shot of a young scientist using a digital tablet while working in a lab.
Healthcare Shares

Guess which ASX healthcare stock is surging on big FDA news

The update is a critical milestone for the company.

Read more »

Scientist looking at a laptop thinking about the share price performance.
Healthcare Shares

Up 308% in 6 months, why is the Mesoblast share price tumbling today?

The Mesoblast share price is taking a tumble on Monday. But why?

Read more »

Three Archer Materials scientists wearing white coats and blue gloves dance together in their lab after making a discovery
Healthcare Shares

This ASX 200 med-tech stock has no debt, pays dividends and is growing at 30% per year!

This stock is delivering very healthy growth.

Read more »