Looking to add high-quality ASX healthcare shares to your portfolio? The Australian share market is home to some of the most disruptive, innovative health companies on the planet.
ASX healthcare shares have traded flat as a group in the last three months. The S&P/ASX 200 Health Care Index (ASX: XHJ) has moved less than 1.5% since 5 March.
However, two standouts among the crowd are ResMed Inc (ASX: RMD) and CSL Ltd (ASX: CSL). Both companies are leaders in their fields and could offer attractive opportunities for growth and income, in my view.
Why ResMed is a top ASX healthcare share
ResMed is a leading player in the sleep disorder treatment market. With the rising prevalence of obstructive sleep apnoea (OSA), experts say ResMed is well-positioned for significant growth.
According to analysts at Bell Potter, the OSA market is huge. The broker says more than a billion people globally suffer from OSA, and many more remain undiagnosed.
Bell Potter reckons this massive underpenetration presents a large growth opportunity for ResMed. The broker has given the company a buy rating with a $36.00 price target. The broker cited the sleep company's competitive edge as a tailwind, which is boosted by the ongoing recall of competitor Philips' respiratory devices.
My colleague James reported that Macquarie analysts are also bullish on ResMed, with an ASX healthcare share valuation of $34.85. If correct, both price targets represent an upside potential of 15% and 12%, respectively.
ECP Asset Management likes ResMed as well. In April, portfolio manager Sam Byrnes told the Australian Financial Review that he believed the company was undervalued.
The ASX healthcare share "derated due to the frenzy" surrounding GLP-1s weight loss drugs, Byrnes said. "This raised concerns about the future of ResMed's sleep apnoea treatment".
But, even with the market's strength in 2024, ECP still finds ResMed's valuation "very appealing".
CSL remains a favourite ASX healthcare share
Biotech giant CSL has long delivered attractive capital gains and dividends for its shareholders. But it has traded flat for the last two to three years.
Despite this period of sideways movement, CSL's future looks bright, according to leading fund managers and analysts.
ECP's Sam Byrnes is positive about CSL's prospects as well. He highlights the company's volume growth and reduced cost of plasma collections as key drivers of future performance.
Byrnes – along with investment bank Macquarie – has set an eye-popping share price target of $500 over the next three years.
In the short-term, Macquarie has set a price target of $330 per share (next 12 months), driven by strong earnings growth in CSL's Behring business. This is expected to account for around 90% of CSL's profits over the next five years.
This, it says, can drive earnings higher and push the stock price to $500 per share. Analysts at Morgans and UBS are also optimistic, with the former adding CSL to its best ideas list and setting a price target of $315.40, indicating a potential upside of 11.17%.
Putting it all together, CSL could potentially trade back above $300 per share.
Two of the best?
Both ResMed and CSL could offer compelling opportunities for ASX investors. I think ResMed's growth potential in the sleep disorder market and CSL's fundamentals outlook make them two of the best ASX healthcare shares that money can buy.
It pays to remember that investing comes with a degree of risk and that past performance – or price targets – are no predictors of future performance.
