The medical industry thrives due to rising demand for healthcare products and services, fueling significant returns. So, investors looking for quality medical stocks can consider buying CVS Health Corporation (CVS). However, I think it could be wise to wait for a better entry point in Walgreens Boots Alliance, Inc. (WBA) and TRxADE HEALTH, Inc. (MEDS).
According to Statista, the worldwide pharmaceuticals market is predicted to grow at a 5.8% CAGR to reach $1.48 trillion by 2028. Oncology drugs are the largest segment, with a forecasted market volume of $188 billion in 2023.
Moreover, the global patented drugs industry is expected to reach $1.46 trillion by 2032, growing at a 6% CAGR. An increase in research and development of new drugs for treating various chronic conditions and a rise in patent filing activities by middle-income countries drive market growth.
In addition, healthcare providers are increasing spending on IT services and software. Gartner forecasts that healthcare and life sciences enterprise IT spending will grow 9.1% in 2023 to reach $240.5 billion in constant currency.
Investors’ interest in medical stocks is evident from Vanguard Health Care ETF (VHT) 2.6% returns over the past month.
Take a detailed look at the stocks mentioned above:
Stock to Buy:
CVS Health Corporation (CVS)
CVS is a health service provider operating through four segments: Health Care Benefits; Pharmacy Services; Retail/LTC; and Corporate/Other. Its offerings include health & wellness services, health plans, pharmacy services, and prescription drug coverage.
CVS’ forward EV/Sales multiple of 0.46 is 87.2% lower than the industry average of 3.58. Its forward Price/Sales multiple of 0.27 is 93.4% lower than the industry average of 4.09.
CVS’ trailing-12-month asset turnover ratio of 1.41x is 281% higher than the industry average of 0.37x. Its trailing-12-month EBIT margin of 4.17% is significantly higher than the industry average of 0.16%.
During the fiscal second quarter that ended June 30, 2023, CVS’ total revenues increased 10.3% year-over-year to $88.92 billion. Its total current assets came in at $67.76 billion for the period that ended June 30, 2023, compared to $65.63 billion for the period that ended December 31, 2022. Its total assets came in at $250.07 million, compared to $228.28 million for the same period.
CVS’ revenue grew at CAGR of 8.7% over the past three years. In addition, its total assets grew at 2% CAGR over the past three years.
The consensus revenue estimate of $350.66 billion for the year ending December 2023 represents an 8.7% increase year-over-year. Its EPS is expected to come in at $8.58 for the same period. CVS’ shares have gained 6.6% over the past month to close the last trading session at $73.96.
CVS’ POWR Ratings reflect this promising outlook. It has an overall B rating, translating to a Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CVS has a B grade for Value and Sentiment. It is ranked first among five stocks in the Medical - Drug Stores industry. Click here for the additional POWR Ratings for Growth, Sentiment, Momentum, and Quality for CVS.
Stocks to Hold:
Walgreens Boots Alliance, Inc. (WBA)
WBA operates as a pharmacy-led health and beauty retail company. It operates through two segments, the United States and International.
WBA’s forward EV/Sales multiple of 0.51 is 70.8% lower than the industry average of 1.73, while its forward EV/EBIT multiple of 17.70 is 12.2% higher than the industry average of 15.77.
WBA’s trailing-12-month asset turnover ratio of 0.42x is 55.1% higher than the industry average of 0.92x, while its trailing-12-month CAPEX / Sales of 1.56% is 50.5% lower than the industry average of 3.16%.
For the fiscal third quarter that ended May 31, 2023, WBA’s net income and EPS came to $118 million and $0.14, down 59.2% and 57.6% year-over-year, respectively.
WBA’s revenue grew at CAGR of 2.7% over the past three years. In addition, its total assets grew at 4.5% CAGR over the past three years.
Analysts expect WBA’s revenue to increase 4.3% year-over-year to $138.37 billion for the year ending August 2023. However, its EPS is expected to decline 20.6% year-over-year to $4 for the same period. The stock has gained 26.7% over the past year to close the last trading session at $29.23.
WBA has an overall C rating, equating to a Neutral in our POWR Ratings system. It has a C grade for Value, Stability, and Quality. It is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated WBA for Growth, Sentiment, and Momentum. Get all WBA ratings here.
TRxADE HEALTH, Inc. (MEDS)
MEDS operates as a health services IT company in the United States. The company focuses on digitalizing the retail pharmacy experience by optimizing drug procurement, prescription journey, and patient engagement.
MEDS’ trailing-12-month asset turnover ratio of 2.12x is 473% higher than the industry average of 0.37x, while its trailing-12-month CAPEX / Sales of 0.22% is 95.4% lower than the industry average of 4.66%.
MEDS’ total current assets came in at $2.39 million for the period that ended March 31, 2023, compared to $2.09 million for the period that ended December 31, 2022. Its total assets came in at $4.04 million, compared to $3.71 million for the same period.
In the fiscal first quarter ended March 31, 2023, MEDS’ net loss and loss per share came in at $0.70 million and $0.07.
MEDS’ revenue grew at CAGR of 8.7% over the past three years.
Street expects MEDS’ revenue to decrease 22.1% year-over-year to $8.92 million for the year ending December 2023. Its EPS is expected to come in at negative $1.05 for the same period. Over the past six months, the stock has gained 79.8% to close the last trading session at $9.
MEDS’ fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which equates to a Neutral in our proprietary rating system.
It is ranked #4 in the same industry. It has a C grade for Growth and Quality. To see additional MEDS ratings for Sentiment, Value, Momentum, and Stability, click here.
What To Do Next?
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CVS shares were trading at $74.22 per share on Friday morning, up $0.26 (+0.35%). Year-to-date, CVS has declined -18.48%, versus a 17.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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