The medical industry is well positioned for growth thanks to medical device innovation, the increasing use of clinical diagnostics by healthcare providers and the rising demand for high-quality healthcare.
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Against this backdrop, it might be wise to buy high-quality medical stocks CorVel Corporation (CRVL) and Aveanna Healthcare Holdings Inc. today. (AVAH) to buy. On the other hand, Carriage Services, Inc. (CSV) are worth adding to your watchlist.
Technological developments, such as the development of minimally invasive procedures, advanced materials and 3D printing, are driving the growth of the medical sector. These innovations improve the accuracy, efficiency and effectiveness of medical devices and create new treatment options for patients.
The global medical device market is expected to grow at a CAGR of 6.2% reaching a value of approximately $965.20 billion by 2031.
Also, the growing adoption of automated platforms for disease prevention, detection and management represents one of the key factors driving the medical industry. Apart from this, the increasing use of clinical diagnostics by healthcare providers to develop targeted therapies through specific and sensitive diagnostic tests is fueling the growth of the market.
The global clinical diagnostics market is expected to reach $124.70 billion by 2028. CAGR of 8.6% until 2028.
Furthermore, the increasing use of clinical diagnostics by healthcare providers to develop targeted therapies through specific and sensitive diagnostic tests is strengthening the medical industry. Moreover, the increasing demand for personalized medicine among patients has a positive impact on the market.
Given these favorable trends, let’s take a look at the fundamentals of the above-mentioned stocks in the medical sector, starting with the ones to buy.
Stocks to buy:
Aveanna Healthcare Holdings Inc. (AVAH)
AVAH is a diversified home healthcare platform company providing pediatric and adult healthcare services in the United States. The patient-centric care platform allows patients to stay at home and minimizes the overuse of expensive healthcare environments, such as hospitals.
The company operates in three segments: Private Duty Services (PDS); Home care and hospice (HHH); and medical solutions (MS).
AVAH’s trailing 12-month leveraged FCF margin of 0.99% is 291% higher than the industry average of 0.25%, while its trailing 12-month EBIT margin of 4.18% is significantly higher than the industry average of 0.24%.
AVAH’s revenue for the fiscal second quarter ended July 1, 2023 increased 6.5% year over year to $471.95 million. Net income came in at $25.60 million, compared to a loss of $473.89 million in the year-ago quarter. Additionally, net earnings per share were $0.13, compared to negative $2.56 in the prior year quarter.
AVAH’s revenue for the quarter ending September 30, 2023 is expected to increase 2.8% year over year to $455.29 million. Additionally, the company has exceeded revenue expectations in three of the four subsequent quarters.
Over the past nine months, the stock has risen 68.8% to close the last trading session at $1.40.
It’s no surprise that AVAH has an overall rating of B, which equates to Buy in our POWR rating system. The POWR ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for stability and sentiment. Within the Medical Services sector, it ranks number 19 out of 70 stocks.
In addition to the POWR ratings we listed above, we also have AVAH ratings for Growth, Value, Momentum, and Quality. View all AVAH reviews here.
CorVel company (CRVL)
CRVL provides workers’ compensation, auto, liability and healthcare solutions for employers, third-party administrators, insurance companies and government agencies to help them control medical costs and monitor the quality of care associated with healthcare claims.
On September 12, 2023, CRVL announced the release of its first Genative AI module. The module is a new addition to CRVL’s CogencyIQ service offering and uses machine learning to interpret medical records for experts and take immediate action.
CRVL’s trailing twelve month leveraged FCF margin of 7.90% is significantly higher than the industry average of 0.25%, while its trailing twelve month EBIT margin of 12.12% is significantly higher than the industry average of 0. 24%.
CRVL’s revenues increased 7.9% year over year to $190.25 million in its fiscal second quarter ended June 30, 2023. Net income grew 18.7% from the prior-year quarter to $19.81 million, while earnings per share rose 21.3% year-on-year. -year to $1.14.
The stock is up 42.3% over the past nine months, closing the last trading session at $199.49.
CRVL’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
CRVL has a B rating for Quality and Stability. Within the same industry, it ranks at number 18.
In addition to what’s mentioned above, we also rated CRVL on momentum, sentiment, value, and growth. View all CRVL reviews here.
Stock to keep an eye on:
Carriage Services, Inc. (CSV)
CSV provides funeral and cemetery services and merchandise throughout the United States. The company operates through two segments: Funeral Home Operations and Cemetery Operations.
The company’s annual dividend of $0.45 translates into a yield of 1.43% at prevailing prices, while the four-year average dividend yield is 1.26%.
In terms of trailing twelve months EBIT margin, CSV’s 21.14% is 190.5% higher than the industry average of 7.28%. However, its twelve-month asset turnover ratio is 68.3% lower than the industry average of 0.31x.
For the second fiscal quarter ended June 30, 2023, CSV’s total revenues increased 7.8% year over year to $97.68 million. However, it is net income decreased 24% from the same quarter last year to $8.29 million. Adjusted earnings per share fell 8.6% year over year to $0.53.
Street expects CSV’s revenue and earnings per share for the current quarter (ending September 2023) to rise 6.9% and 11.1% year-over-year to $93.53 million and $0.50, respectively. Additionally, the company exceeded its EPS and revenue expectations in three of the last four quarters, which is impressive.
Over the past nine months, the stock is up 22.3%, but is down 8.3% over the past year to close the last trading session at $31.57.
CSV’s POWR Ratings reflect its mixed outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system.
It has a C grade for momentum, stability, value and quality. It ranks #20 out of 70 stocks in the same sector.
Click here for additional reviews for CSV’s Growth and Sentiment.
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Shares of CRVL were trading at $199.88 per share Monday afternoon, up $0.39 (+0.20%). Year-to-date, CRVL is up 37.54%, versus the S&P 500 index’s 17.20% gain over the same period.
About the Author: Nidhi Agarwal
Nidhi has a passion for the capital markets and asset management, which led her to pursue a career as an investment analyst. She has a bachelor’s degree in finance and marketing and is enrolled in the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More…
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