With the risks involved in healthcare stocks, can the opportunity outweigh them this year?
Competitors developing better products, failure to secure regulatory approvals and significant litigations are a few risks when you invest in healthcare. Yet, despite these, the sector should have sound returns considering the ageing demographic and technology.
Fact: The healthcare sector spends about $8.3 trillion worldwide, and its market behaviour shows rapid growth faster than the overall global economy. By 2030, the figures are expected to grow exponentially. In the ASX market, healthcare shares are already shifting upwards, and investors bank on a year wherein innovations will further progress.
With that, here are the top 3 ASX healthcare shares to consider.
Sonic Healthcare Limited (ASX: SHL)
Sonic Healthcare Limited, one of the leading medical diagnostics operators, offers various pathology services and imaging with revenues from Belgium, Switzerland, Ireland, the UK, Germany, the USA, New Zealand and Australia. They currently serve more than 130 million patients globally.
The pandemic has improved its share’s earnings and the base business revenue continues to soar. In 2021, Sonic Healthcare Limited’s revenue increased by 28%, and it pays only 33% of its profit as dividends. The remaining amount is earmarked for acquisitions and other long-term ambitions. From January to April 2022, its revenue increased by 5%, and its earnings grew by 16%.
Harrison.ai, a healthcare AI company based in Australia, has partnered with Sonic Healthcare Limited to develop pathology AI that might expand the global healthcare capacity. Mirroring the company’s growth is their recent acquisition of ProPath, an anatomical pathology company in Dallas. ProPath serves more than 20 hospital groups in 45 states, and has an annual revenue of US$110 million.
Volpara Health Technologies (ASX:VHT)
Volpara Health Technologies’s selling point is its ability to analyse millions of images that identify breast cancer even before it has developed. According to the company’s FY22 first half result, the subscription revenue increased by 35%. The company remains a strong industry player, with at least one of its products being used by 34% of women in the US. This is an increase of 27% from 2021.
The company reported an increase in their annual recurring revenue by 100% since its listing on the Australian Securities Exchange in 2016. With a gross profit margin of 91.4%, Volpara Health Technologies is a good buy.
Volpara has made its bold move by partnering with other businesses for lung expansion as the management believes in the sector’s potential. It has already made an initial investment in RevealDX, an AI lung company based in Seattle. A collaboration agreement with Riverain Technologies, an AI imaging solutions company, has been finalised as well.
Nanosonics Limited (ASX:NAN)
Nanosonics Limited is the infection control specialist behind the trophon EPR disinfection systems. It has had solid growth in recent years, generating high consumable sales. Today, the company works on several innovations, including Nanosonics Coris which aims to improve how flexible endoscopes are cleaned. The device will be launched by 2023 and is a game-changer considering the health concerns brought by contaminated endoscopes.
Whilst the company only gained 17% over the last five years, the stock may still be a good opportunity with their new products and the global market behaviour. The endoscopy devices market is projected to grow from $31.8 billion in 2019 to $43.82 billion in 2027.
