S&P/ASX 200 Index (ASX: XJO) healthcare shares have soared 39% since the sector pivoted just three months ago.
The S&P/ASX 200 Health Care Index (ASX: XHJ) slumped to a 9-year low on 3 June after a terrible 12 months.
The index fell 39% due to many headwinds, including higher costs of living prompting consumers to delay healthcare expenditure.
Eventually, ASX 200 healthcare shares became too cheap to ignore, and value investors swooped in to capitalise.
They targeted fallen blue-chip stocks at first.
Sector giant CSL Ltd (ASX: CSL) saw its share price skyrocket 32% in just the first month of the rebound.
Investors were further buoyed by CSL management's outlook when the company reported its FY26 results last month.
This boosted the CSL share price further, and now the stock is up 82% since 3 June.
Not all healthcare stocks have performed as well, and experts say there are still good opportunities afoot.
If you're looking for opportunities in this buoyant sector, here are two buy-rated ASX healthcare small-caps from the experts.
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SomnoMed Ltd (ASX: SOM)
The SomnoMed share price is 34 cents, down 2.9% today and down 55% over 12 months.
Top broker Morgans refers to this ASX healthcare share as the "cheaper sleeper".
Morgans has a speculative buy recommendation on SomnoMed shares.
The broker has a 12-month price target of 76 cents on this stock, which implies a potential 127% upside ahead.
Morgans said:
The FY26 result landed where the July trading update flagged, with revenue of A$114.5m and adjusted EBITDA of A$10.9m (9.6% margin), a touch under our A$11.1m EBITDA forecast.
The management restructure is now formalised (Karen Borg sole CEO, Greg Knight COO, Nathan Minnich CMO), removing the leadership overhang flagged in July and giving the FY27 growth reinflection case a settled team to execute against.
With A$16.8m net cash against a A$73m market cap, SOM is now trading on <8x EV/EBITDA, it's too cheap.
Mach7 Technologies Ltd (ASX: M7T)
The Mach7 Technologies share price is 26 cents, down 5.5% today and down 13% over 12 months.
Morgans has a buy rating on this ASX healthcare share with a 48-cent target.
This suggests a potential 84% upside ahead.
Morgans said:
The market should be broadly comfortable with the result given recent trading updates, but new contract delivery remains the key requirement before investors are likely to begin marking the stock materially higher.
Revenue and OPEX landed broadly in line with guidance, while the NPAT miss was driven by a A$1.9m restructuring charge and a weaker tax benefit rather than deterioration in the core subscription business.
Moderate increase in target price due to model roll-forward, lower share count, and leaner-than-expected cost base.
Upside potential to target presents an opportunity but needs new contract momentum to spark renewed interest.
