Top Healthcare Stocks for April 2021

Healthcare, one of the largest and most complex sectors, is comprised of a broad range of companies that sell medical products and services. The healthcare sector includes companies that sell drugs, medical devices, and insurance, as well as hospitals and healthcare providers. Some of the largest healthcare companies in the world include UnitedHealth Group Inc. (UNH), Pfizer Inc. (PFE), and Abbvie Inc. (ABBV). The healthcare sector has caught investors’ attention since some of these companies have already received regulatory approval for drugs to treat COVID-19 and begun distributing vaccines, and others are rushing to develop and win approval for new COVID-19 drugs. There are also companies involved in various ways, such as supplying products to test for and manage treatments of the virus.

Healthcare stocks, represented by the Health Care Select Sector SPDR ETF (XLV), have underperformed the broader market. XLV’s total return was 56.2% over the past 12 months, below the Russell 1000’s total return of 83.1%, as of March 23. The statistics in the tables below are also as of March 23.

Here are the top 3 healthcare stocks with the best value, the fastest growth, and the most momentum.

These are the healthcare stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Source: YCharts

• Bio-Rad Laboratories Inc.: Bio-Rad manufactures and distributes life science research products and more than 3,000 clinical diagnostics products. These tools are used to separate and analyze complex chemical and biological materials. In Q4 2020, the company’s sales increased 26.5% year-over-year (YOY) as net income rose 51.6%. Bio-Rad said that its sales benefited from a damages award related to intellectual property litigation covering the period 2015 to 2018.
• Sage Therapeutics Inc.: Sage Therapeutics is a biopharmaceutical company developing novel therapies that seek to treat brain disorders. The U.S. Food and Drug Administration (FDA) approved its first product, Zulresso CIV injection, in 2019. It’s the first FDA-appproved medicine to treat postpartum depression. It posted Q4 2020 net income of $974.9 million on revenue of $1.1 billion. This year’s results were bolstered by collaboration revenue from Biogen Inc. (BIIB), including an $875 million upfront payment. The company also recently announced that Chief Operating Officer Michael Cloonan is leaving in May. Chief Executive officer Barry Greene will fill Cloonan’s role until a replacement is found.
• Quidel Corp.: Quidel develops and manufactures diagnostic healthcare products and solutions. The company’s offerings aid in the detection and diagnosis of critical diseases and other medical conditions. In Q4 2020, net income rose by more than 15-fold to more than $470 million on a greater than five-fold increase in revenue. Nearly 84% of revenue came from COVID-19 diagnostic products.

These are the top healthcare stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year over year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Source: YCharts

• Quidel Corp.: See company description above.
• Cooper Companies Inc.: Cooper Companies is a medical device company. It’s organized into two segments: the CooperVision business manufactures products for contact lens wearers, and CooperSurgical sells diversified products and services, including medical devices, fertility, diagnostics, and contraception. The company’s fiscal first-quarter (ended Jan. 31) net income attributable to stockholders surged by more than 23 times to $2.1 billion, fueled mainly by a large $2.0 billion income tax benefit. Sales were up 5.3% YOY.
• Seagen Inc.: Seagen is a biotechnology company that develops and commercializes targeted therapies to treat cancer. Its Q4 2020 net income soared six-and-a-half times to $167.1 million from the year earlier as revenue doubled. Seagen’s results were boosted by higher collaboration revenue from Merck & Co. Inc. (MRK).

These are the healthcare stocks that had the highest total return over the last 12 months.

Source: YCharts

• Moderna Inc.: Moderna is a clinical stage biotechnology company focused on the discovery and development of messenger RNA (mRNA) therapeutics and vaccines. It develops mRNA medicines for infectious, immuno-oncology, and cardiovascular diseases. Moderna, a young biotech company that went public in 2018, has seen seen its revenue and stock price explode due to soaring global demand for its COVID-19 vaccine. Moderna’s has agreements with several countries to supply them with its COVID-19 vaccine, including up to 500 million doses in the U.S. and 460 million to the European Union.
• Acadia Healthcare Company Inc.: Acadia Healthcare Company provides behavioral healthcare services in the U.S. through hundreds of behavioral healthcare facilities. In January, it sold the money-losing U.K. operations for $1.5 billion. Although the sale occurred this year, the company accounted for the business as a discontinued operation in last year’s results. Acadia Healthcare Company’s Q4 2020 income from continuing operations was $46.2 million versus a $12.2 million loss in the year-ago period. Revenue grew 8.0% YOY.
• Align Technology Inc.: Align Technology is a medical device company that designs and manufactures products that help straighten misaligned teeth. One of its product lines is Invisalign.

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