Technological developments, including AI, telemedicine, wearables and robotics, are boosting the medical industry. Therefore, high-quality medical stocks Encompass Health Corporation (EHC), Tenet Healthcare Corporation (THC), and HCA Healthcare, Inc. (HCA), which is poised for steady gains, could be worth a look.
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The U.S. healthcare system faces a growing gap between supply and demand due to an aging population and limited resources. Also, the demand for well-equipped hospitals is driven by the increasing need for better patient care and advances in healthcare technology.
The US hospital facilities market, valued at $1.4 trillion by 2022, is expected to grow at a CAGR of 7.7% from 2023 to 2030.
Furthermore, the digital healthcare sector is booming thanks to technological advancements, government support, and increased investments. The proliferation of tablets, smartphones and other mobile platforms has contributed significantly to the growth of the digital healthcare sector.
Notably, the global digital healthcare market is expected to grow at a magnitude CAGR of 23.7%and reach a value of $1.30 trillion by 2030.
Furthermore, increasing cases of drug abuse, alcoholism and depression are driving the demand for rehabilitation services. Additionally, 11% of older patients are referred to rehabilitation centers after hospitalization to improve functionality and mobility, further supporting market expansion.
As a result, the global medical rehabilitation services market is expected to grow at 6.1% CAGR from 2022 to 2030.
Given these favorable trends, let’s take a look at the fundamentals of the three best stocks in the medical sector, starting with number 3.
Stock #3: Encompass Health Corporation (EHC)
EHC provides post-acute healthcare services in the United States. It provides specialized rehabilitation treatment on an inpatient basis to patients who have experienced physical or cognitive limitations or injuries due to medical conditions, such as stroke, hip fractures and various debilitating neurological conditions.
EHC’s trailing twelve month EBIT and EBITDA margins of 15.10% and 20.82% are higher than the industry averages of 0.35% and 5.25%.
On September 13, 2023, EHC and Piedmont announced the opening of Rehabilitation Hospital of Columbus, a 40-bed inpatient rehabilitation hospital located at 8321 Veterans Parkway in Columbus, Georgia.
The hospital serves patients recovering from debilitating illnesses and injuries, including strokes and other neurological conditions, brain injuries, spinal cord injuries, amputations and complex orthopedic conditions.
On July 20, 2023, EHC declared a quarterly cash dividend on its common stock of $0.15 per share, payable on October 16, 2023. EHC pays $0.60 in dividends annually, which translates into a 0.88% yield at the current price. The average dividend yield over four years is 1.53%.
EHC’s net operating income increased 11.7% year over year to $1.19 million in the second quarter ended June 30, 2023. adjusted EBITDA increased 27.1% year over year to $249.60 million and adjusted earnings per share increased 50.8% year over year to $0.95.
Analysts expect EHC’s earnings per share and revenue to rise 13.7% and 9.5% year-over-year to $0.76 and $1.19 billion in the current quarter ending September 2023. Moreover, EHC exceeded consensus revenue and earnings per share in each of the four subsequent quarters. is impressive.
The stock is up 34.1% over the past year, closing the last trading session at $67.97.
EHC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which corresponds to a Buy in our proprietary rating system. The POWR ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
EHC has a B grade for Growth and Sentiment. It ranks number 5 out of ten stocks in the B-rated Medical – Hospitals.
Click here to access EHC’s additional POWR Ratings for Momentum, Value, Quality, and Stability.
Stock #2: Tenet Healthcare Corporation (THC)
THC operates as a diversified healthcare company. The company operates in three segments: Hospital Operations; Outpatient care; and Conifer.
THC’s trailing twelve month EBIT and EBITDA margins of 14.13% and 18.36% are higher than the industry averages of 0.35% and 5.25%.
In the fiscal second quarter ended June 30, 2023, THC’s net operating revenues increased 9.6% year over year to $5.08 million. Adjusted EBITDA was $843 million and earnings per share available to THC common shareholders increased 228.6% year over year to $1.15.
THC’s revenue for the current quarter ending September 30, 2023 is expected to rise 4.7% year over year to $5.02 billion. In each of the four subsequent quarters, earnings per share have exceeded estimates.
THC shares are up 56.8% over the past nine months, closing the latest trading session at $69.78.
THC’s solid fundamentals are reflected in the POWR ratings. The stock has an overall rating of B, which corresponds to a Buy in our proprietary rating system.
The stock has a B rating for growth and value. Within the same industry, it ranks number 4.
In addition to what is mentioned above, we also rated THC for stability, sentiment, quality, and momentum. View all THC reviews here.
Stock #1: HCA Healthcare, Inc. (HCA)
HCA is a healthcare company that owns and operates general and acute care hospitals offering medical, surgical, emergency and outpatient services. In addition, the company operates in two geographically organized groups: the National and American Groups.
HCA’s trailing twelve month EBIT and EBITDA margins of 15% and 19.88% are higher than industry averages of 0.35% and 5.25%.
On August 29, HCA and Google Cloud announced a new partnership designed to use generative AI technology to improve workflows for time-consuming tasks such as clinical documentation, so doctors and nurses can focus more on patient care.
On July 27, 2023, HCA declared a quarterly cash dividend on its common stock of $0.60 per share, payable on September 29, 2023. While the four-year average dividend yield is 0.83%, HCA will pay $2.40 annually in dividends, which translates to a yield of 0.94% at the current price.
During the second fiscal quarter ended June 30, 2023, HCA’s revenues increased 5% year over year to $15.86 billion. Adjusted EBITDA increased marginally from the year-ago quarter to $3.06 billion, while earnings per share improved 10% year-over-year to $4.29.
Street expects HCA’s fiscal third quarter revenue and earnings per share (ending September 2023) to rise 5.9% and 3.5% year over year to $15.85 billion and $4.07, respectively . Additionally, it exceeded EPS estimates in three of the four subsequent quarters.
The stock is up 22.6% over the past year, closing the last trading session at $256.68.
HCA’s robust fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system.
It has a B grade for stability, value and sentiment. Within the same industry, it ranks first.
Click here to see HCA’s other ratings for growth, momentum, and quality
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HCA shares were trading at $254.70 per share Monday morning, down $1.58 (-0.62%). Year-to-date, HCA is up 6.87%, versus the S&P 500 index’s 16.97% gain over the same period.
About the author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She received her bachelor’s degree in commerce and is currently enrolled in the CFA program. With her fundamental approach she wants to help investors identify untapped investment opportunities. More…
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