President Trump’s Obamacare replacement saga continues, raising uncertainties in the MedTech space.
Trump’s failure to pass the Graham-Cassidy bill, which was targeting the termination of the Obamacare Act and seeking to replace it with a block grant of health care expenses for states every year, had stolen the limelight of late.
A Sneak Peek in to the Political Scenario
The Graham-Cassidy bill debacle followed previous failed attempts to repeal Obamacare. According to a few economists, the implementation of the bill would have resulted in reduced access to reasonable coverage and care for public, lowered health insurance coverage along with weaker insurance markets. This has been substantiated by a report by the Congressional Budget Office (CBO), which stated that millions of Americans would have lost healthcare coverage due to $1 trillion in Medicaid cuts through 2026.
Meanwhile, a few economists opine that the bill posed concerns for maternity care and prescription drugs coverage while challenging pre-existing ailments like cancer or Alzheimer’s protections among patients.
Will Obamacare Stay?
Chairman of the Republican Study Committee Mark Walker has said, “The House is going to continue to fight if we have to look at this piece by piece or bill by bill,” in an exclusive Facebook Live interview to The Daily Signal . He further said that, “”We are going to continue to fulfill the promise that we made last year, and even longer [ago] than that, to remove this huge legislative burden of what is Obamacare.”
How Is MedTech Positioned?
Though Medtech is faced with intense volatility, there are bountiful opportunities in the space. Per a Centers for Medicare and Medicaid Services report published by Advisory Board, the U.S. health care spending is estimated to reach approximately $5.5 trillion by 2025, representing 19.9% of Gross Domestic Product (based on assumptions that the Affordable Care Act will continue through 2025).
In the view of this, investors should ideally pick stocks that have the potential to safeguard their portfolios from market volatility.
Our Screening Parameters
In order to save investors from the time-taking process of identifying the best performing MedTech stocks, we have taken the help of the Zacks Stock Screener .
We also chose stocks that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .
We have selected stocks that have a favorable Growth Style Score of A or B.Our research shows that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities.
This apart, we filtered out MedTech stocks with attractive long-term (three-to-five years) earnings growth rate as well as impressive earnings and sales growth rates for the current fiscal year.
Strong fundamentals, strategic implementation, planned execution and certain other positive factors show that these shortlisted best performers carry substantial upside potential.
Accordingly, we have zeroed in on the following stocks:
Straumann Holding AG SAUHF : This company is a global leader in implant and restorative dentistry and oral tissue regeneration. Straumann Holding has been consistently delivering impressive results on strength across all businesses. Moreover, the company exited the first half of 2017 with the ninth consecutive quarter of double-digit organic revenue growth.
The company recently forayed into the lucrative orthodontics space with the buyout of ClearCorrect, a leading provider of full clear-aligner tooth-correction solutions in the United States. Straumann also acquired a 38% stake in Geniova, a developer of innovative hybrid approach combining the advantages of clear-aligner systems with the benefits of conventional brackets in Spain. The international exposure should protect the company’s business from political uncertainties in the United States to some extent.
It sports a Zacks Rank #1 and a Growth Score of B. The stock promises a long-term expected earnings growth rate of 15%. Also, annual earnings growth for the current year is estimated at 26.3%. The stock has an annualized sales growth rate of 12.1%.
The stock has gained 71.7% in the last year, compared to the broader industry ‘s 9.5% gain.
Tandem Diabetes Care, Inc. TNDM : Headquartered in San Diego, CA, this medical device company designs, manufactures and markets a wide range of products for patients with insulin-dependent diabetes in the United States.
Tandem Diabetes’ leading product is the t:slim X2 insulin delivery system that includes t:slim X2 pump, its disposable insulin cartridge and an infusion set. The company’s recent receipt of FDA approval followed by the launch of the t:slim X2 pump with Dexcom G5 Mobile continuous glucose monitoring (CGM) integration strengthened its position in the insulin delivery market.
Tandem Diabetes has a Zacks Rank #2 with a Growth Score of A. The stock promises a long-term expected earnings growth rate of 40.2%. Also, annual earnings growth for the current year is estimated at 36.5%. The stock has an annualized sales growth rate of 15.7%.
Tandem Diabetes has been consistently gaining investors’ confidence on positive results. In the last month, the stock has gained 2.3% compared to the broader industry ‘s 0.8% gain.
Intersect ENT, Inc. XENT : Headquartered in Menlo Park, CA, this commercial stage drug-device company provides beneficial solutions for patients with ear, nose, and throat ailments in the United States. Intersect ENT has been posting strong top-line numbers on the back of increased uptake of the PROPEL family of products and a rise in the average selling price. Interestingly, the company recently launched PROPEL Contour, expanding its PROPEL family of steroid releasing implants.
Intersect ENT has a Zacks Rank #2 with a Growth Score of B. The stock promises a long-term expected earnings growth rate of 25%. Also, annual earnings growth for the current year is estimated at 31.5%. The stock has an annualized sales growth rate of 27.8%.
The stock has been consistently gaining investors’ confidence on impressive results. Last year, the stock has gained 89.8% compared to the broader industry ‘s 7.6% gain.
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