The epidemic spurred the global adoption of digital health and virtual care, a trend that is likely to persist for the remainder of this decade. Healthcare practitioners are currently adopting technology at an unprecedented rate, and the delivery of healthcare is no longer exclusive to hospitals. Stocks of companies engaged in pharma, drug discovery, research, or related companies have the potential to be winners in the healthcare business.
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What Are Healthcare Penny Stocks?
Healthcare penny stocks are small-cap health care stocks that include pharmaceutical companies creating pharmaceuticals to treat ailments, surgical and medical tool companies manufacturing hospital-use items, and biological companies.
Different Types of Healthcare Stocks
Pharmaceutical Healthcare Stocks
Pharmaceutical companies manufacture nearly all OTC and prescription medications. Large pharmaceutical companies are typically less risky to invest in than their younger or smaller competitors. These companies devote a substantial percentage of their resources to R&D (Research & Development) in order to bring novel medicines to market.
Consequently, a company’s stock will perform well if it introduces a new medicine with high revenue potential. A limited group of healthcare shares is known as “Big Pharma,” which consists of large-cap pharmaceutical companies. However, even while investing in “Big Pharma,” you need to be aware of the following:
- The range of the medicines
- The number of individuals affected by the ailment the medicine treats.
- The availability of replacements and medications by rivals
- The intellectual property rights associated with the manufacturing process and the drug’s patent.
- Profit and revenue sharing agreements with other companies.
Clinical studies are done before a drug’s release, and their results impact the healthcare sector’s stock values. Positive outcomes have a tendency to increase prices, whereas unfavorable ones could potentially cause a market crash. Investing in pharmaceutical companies demands active investigation from investors.
Service-Based Healthcare Stocks
Hospitals and clinics constitute the core of every healthcare system. Therefore, they typically present favorable investment prospects when their stock is offered for investment. Similarly, larger companies, such as Acadia healthcare stock, would offer a more steady potential with less risk. Obviously, the risk is inherent to any investment, and it is essential to employ effective risk management measures.
Providers of healthcare services face huge regulatory risks. In order to improve their facilities and attract more patients, hospitals frequently implement costly hardware and software upgrades. This may make hospitals susceptible to bad debt and impact their payouts.
Medical insurance companies are also crucial players in the healthcare services industry. Since they foot the price, underwriting accuracy directly impacts the bottom line.
Before investing in such healthcare sector stocks, it is essential to evaluate the medical cost and loss ratios. Regulatory framework modifications can contribute to the insurance industry’s extreme volatility. However, the volatility of these companies is often lower than that of hospital stocks.
If you would like to invest in medicine and choose this sector, you must maintain a close check on the regulatory framework to minimize losses linked with these stocks.
Medical Device Healthcare Stocks
Medical technologies are becoming more crucial than ever before as life expectancy rises. In general, the growth rate of medical device companies is low. They offer a variety of items, including bandages, artificial joints, digital blood pressure monitors, and heart stents, among others. The need for such gadgets will never go away, but it’s unlikely that any particular one will suddenly become mainstream.
In addition to spending a significant portion of their resources on research and development and the stages that follow R&D, these businesses devote considerable capital to these activities. There are both older, more stable businesses and new startups with tremendous development potential, and hardware producers provide less development potential than healthcare software companies. Today, hospitals around the world are implementing automated solutions to improve patient care.
On the other hand, technological advancements are introducing AI and robotics into the healthcare sector, thereby altering the delivery of medical care. Before making an investment, you must investigate a company’s technology, alternative products, and rivals. Typically, the performance of these healthcare technology stocks is determined by adoption rates and gross margins.
Biotechnology Healthcare Stocks
Investing in biotechnology stocks is generally regarded as a high-yielding endeavor, but it is not without risk. Consider investing in the stocks of companies engaged in research and development for the treatment of chronic and fatal diseases such as cancer, AIDS, diabetes, heart disease, neurological diseases, immunological diseases, viral infections, stem cell regeneration, and tissue regeneration.
If these projects are successful, they will significantly impact the lives of people around the world, which would increase the share price. You might even consider investing in companies with a robust network of collaborative support, indicating financial and logistical stability.
Biotech stocks nearing the end of their R&D phase or seeking regulatory approval are also likely to be superior investments. However, keep in mind that the share price would decrease if the clinical trial fails to generate the intended results or if regulatory impediments are encountered.
Is It A Good Time to Invest in Healthcare Stocks?
Is it an appropriate time to invest in healthcare stocks? How will healthcare stocks perform in the future? As noted previously, the healthcare market is one of the largest and most complicated industries, comprising a vast array of enterprises.
The emergence of the COVID-19 pandemic prompted a number of companies to concentrate on developing new methods for administering health care services. Numerous companies have focused on creating a coronavirus vaccine, and several of them have already begun delivering their vaccinations after receiving regulatory authorization.
Others continue to concentrate on developing and gaining approval for further coronavirus treatments. Still, other businesses have created and are refining diagnostic methods for coronaviruses. Traders believe it is a good moment to invest in the proper healthcare stocks because many companies on the market are creating and supplying healthcare services in innovative ways.
However, it is impossible to forecast the future performance of healthcare stocks. Every trader must conduct extensive research to invest in which stock is optimal for their portfolio.
How to Locate The Leading Healthcare Stocks?
How can the greatest health care stocks be identified? There are four primary factors to consider:
1. Growth prospects
When determining which company to invest in, one of the most prominent aspects traders assesses is the firm’s growth possibilities. You may do this by determining their revenue growth rate over the past few years. While this cannot indicate whether or not the firm will grow in the future, it may help you assess whether or not you are optimistic about the company’s future.
2. Financial stability
You can examine the regulatory filings that companies submit to the SEC. These documents provide financial statements that can assist you in analyzing and determining the financial health of a certain business. Numerous investors seek out companies that are already lucrative. If a company is not yet profitable, some traders will seek to determine how and when it will become lucrative.
3. Valuation
Before purchasing a company’s stock, many investors want to know its market value. The valuation of a certain healthcare stock might assist you in determining whether you are paying a fair price.
There are numerous value metrics available. Investors widely use the price-to-earnings (P/E) ratio, which compares a stock’s price to its earnings per share.
Some P/E ratios reflect a company’s earnings from a previous period (i.e. the past 12 months). A forward-looking P/E ratio employs earnings forecasts for the upcoming year. Traders can compare the price-to-earnings ratio of one stock to others in the same industry to determine whether a stock is inexpensive or costly.
4. Dividends
Some healthcare stocks, such as the ones listed above, provide dividends to their shareholders. Investors commonly refer to such stocks as healthcare dividend stocks. This is the number of firm profits distributed to shareholders, and dividends can occasionally increase a shareholder’s overall return on investment.
Best Healthcare Penny Stocks to Invest in
Merck & Co. (ticker: MRK)
Merck is one of the major pharmaceutical companies in the world. Merck just reported a 28% increase in revenue for the second quarter, including a 26% increase in sales of its top cancer medicine Keytruda. Additionally, Merck’s HPV vaccination Gardasil sales increased by 36% during the quarter. Keytruda remains the cornerstone of Merck’s growth thesis, according to analyst Stewart Glickman, and is now approved for six different early-stage cancer indications. According to Glickman, Merck will continue to benefit in the short term from COVID-19 diagnosis and in the long term from its varied pipeline of medication prospects. CFRA has a “strong-buy” rating and a price target of $101 for MRK stock, which closed on August 10 at $89.19.
Plant-Based Investment Corp. (OTC: CWWBF)
The Plant-Based Investing Corporation is an investment firm. It serves the Canadian cannabis business. This makes it an exceptional chance for the top healthcare penny stocks.
The imminent launch of its website could foreshadow further expansion. In March of 2020, the stock price plummeted to less than $0.20, and since then, it has been recovering. The market capitalization of Plant-Based Investment Corp is about $5 million.
Vertex Pharmaceuticals
The company’s sales are primarily driven by its cystic fibrosis (CF) medications, Trikafta in the United States and Kaftrio elsewhere. These therapies accounted for 84% of VRTX’s total revenue in the first quarter. However, Vertex has further aces up its sleeve.
Stuart Arbuckle, chief operating officer at Vertex, stated on the company’s Q1 earnings call, “I believe there is a bit of a misunderstanding that we are a rare or orphan [disease] company.” Not the way we identify ourselves.
Arbuckle highlighted the growing potential of the various pain market sectors, such as acute and neuropathic. “Acute pain costs the United States alone about $1.5 billion annually in B treatment days,” he said. Despite more than 90% of these prescriptions being generic, the market is worth $4 billion.
In the future, VRTX may investigate opioids, but Yee is optimistic about the company’s existing pipeline, which includes possible treatments for APOL1-mediated kidney illness and Type 1 diabetes.
UnitedHealth Group
UnitedHealth Group (UNH, $497.56) has been active in the M&A sector in the past year. The health insurer announced in August 2017 that it would acquire Change Healthcare for almost $8 billion. Due to antitrust concerns from the Department of Justice, the merger deadline was recently extended to December 31, 2022.
In March, UNH announced that it would buy the biggest provider of home healthcare, LHC Group (LHCG), for $5.4 billion. A stakeholder of LHC has filed a lawsuit against the company, alleging that it did not give shareholders enough information to make an educated judgment regarding the sale.
Despite legal disputes, UnitedHealth Group’s business is thriving. Its most recent quarterly report revealed a growth in revenue of 14% year-over-year, reaching $80.1 billion. UnitedHealthcare (healthcare benefits) and Optum (healthcare services) each saw double-digit percentage growth in quarterly sales. UnitedHealthcare generates 59% of overall income, while Optum generates the remaining 41%.
In addition, the insurance titan announced adjusted earnings per share (EPS) of $5.49 for the first quarter, an increase of 3.4% from the same period in the prior year. The cash flows from operations created by the Dow Jones stock were $5,3 billion, which is a reasonable 100% of net income. UnitedHealth Group’s quarterly net margin was 6.3%, 60 basis points (a basis point is one-hundredth of a percentage point) lower than the same period last year.
AMN Healthcare Services
AMN Healthcare Services (AMN, $88.13) is the largest U.S.-based healthcare staffing firm. It provides personnel in three primary areas: nursing, physicians, and information technology. More than sixty percent of its Nursing and Physicians’ annual revenue is earned by Managed Services Programs (MSPs). AMN has over 500 MSP clients, with the top 30 utilizing more than seven recruitment solutions.
The company’s first-quarter revenue increased by 75% year-over-year to $1.6 billion, while its adjusted earnings per share increased by more than 100% to $3.49. During the quarter, AMN placed a record number of healthcare professionals. As a result, demand for its services is currently greater than it was before the pandemic.
All three of its main segments experienced strong revenue growth over the prior year. During the quarter, the Nurse and Allied Solutions segment’s revenue increased by 87%, while Physician and Leadership Solutions’ revenue increased by 28%, and Technology and Workforce Solutions’ sales increased by 64%.
And this tremendous rise likely continued into the second quarter. AMN predicts that revenue for the quarter will increase by between 56% and 61%, to between $1.34 billion and $1.38 billion.
Pluristem Therapeutics Inc. (NASDAQ: PSTI)
Pluristem Therapeutics Inc. (NASDAQ: PSTI) is an Israeli biotechnology company specializing in regenerative medicine to treat a variety of ailments, including inflammation, muscular injuries, hematological abnormalities, and radiation exposure. It develops placenta-derived cell products that may be utilized “off-the-shelf” and in any therapeutic setting, as opposed to the stringent tissue matching requirements of conventional cell therapies.
Pluristem Therapeutics Inc. (NASDAQ: PSTI) has partnered with Israel’s largest food producer, Tnuva Group, to develop a cultured food platform. Under the terms of the collaboration, Pluristem’s cell production processes will be paired with the latter’s food manufacturing capabilities, with the goal of producing its first raw cultured beef product in 2023. Pluristem Therapeutics Inc. (NASDAQ: PSTI) also has a partnership with NASA’s (National Aeronautics and Space Administration) Ames Research Center to investigate the potential of Pluristem’s PLX cell therapies in preventing and treating medical conditions caused by space missions, such as bone, blood, muscle, brain, and heart conditions.
AzurRx BioPharma
On January 30, 2014, AzurRx BioPharma, Inc. was incorporated as a clinical development-stage biopharmaceutical business. AzurRx BioPharma is involved in the research and development of non-systemic biologics for the treatment of… see Detailed Company Profile, Dividend History, and List of ETFs holding AzurRx BioPharma stock.
The New York, New York-based company AzurRx BioPharma, Inc. (AZRX) ranks sixth among the top-performing Healthcare Penny stocks of 2022. The Biotech industrial sub-sector comprises the Healthcare business. AzurRx BioPharma’s stock price has increased by 255.67 percent from the beginning of 2022, based on the previous year’s closing price of $0.97 per share and the year-to-date closing price of $3.45 per share as of this writing. The company’s market capitalization increased from $29.5 million to $34.38 million within the same period. In addition to Healthcare Penny, the company also offers Healthcare, Biotech, Biotechnology, and Healthcare, as well as other common products and services.
Medical Marijuana (OOTC: MJNA)
Medical Marijuana Inc. is now one of the cheapest healthcare penny stocks, trading for less than $0.10. The company is positioned to profit from loosening regulations on cannabis and CBD products. Already, it has expanded into regions that permit medical marijuana cards, such as Arizona and California. It markets itself as the first publicly traded cannabis firm in the United States.
The business operates via its subsidiaries, which include HempVap, CanChew Biotechnologies, Wellness Management Services, Red Dice Holdings, Kannaway, and HempMeds Brasil. With government permits, it strives to be the first to market in the United States and Brazil. Additionally, MJNA is driving efforts to introduce cannabis goods to Mexico.
Medical Marijuana Inc. is a pink-sheet stock, which carries a greater risk. All brokers do not offer pink sheet stocks. If you wish to trade this company, you must associate with a broker capable of trading it.
Intercare DX, Inc. (OTC: ICCO)
Intercare DX produces and provides software products and services. Specifically, it focuses on healthcare administration and information systems, and Telemedicine and point-of-care solutions are its specialties.
The stock price has been rising over time. Since around 2018, the stock’s price has been gaining traction, and it has been increasing at a faster rate, and June of 2021 saw a significant rise.
Due to its low market capitalization, Intercare could now be an excellent stock to invest in. It also appears to be the beginning of something significant for the corporation’s stock price.
Conclusion
Several considerations must be made if you desire to invest in healthcare stocks. Before investing in a business in the medical industry, you will need to conduct research in order to understand how it functions and what it does.
Numerous investors who purchase healthcare stocks also monitor government policy. Significant policy changes might trigger market volatility in the healthcare sector. In addition, the FDA has the ability to make judgments that might benefit or harm pharmaceutical companies. Investors in healthcare stocks frequently invest in changes in government legislation and political upheavals.
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