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Buy 3 Medical Info Systems Stocks to Brave Industry-wide Challenges
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The COVID-19 pandemic has in a way increased the pace of progress of the Medical Information Systems industry. Digital health has sustained its strong growth momentum in the second half of 2021, thanks to the growing demand for contactless services surrounding the more infectious new virus variants. Market watchers claim that even beyond the pandemic, digital health is expected to maintain this strength as healthcare professionals and patients leverage its benefits. This industry is currently witnessing growing demand for all kind of digital healthcare support including telehealth, cloud computing, artificial intelligence and robotics, analytics, EHR and IoT, which have proved beneficial in controlling the spread of the infection. This has created a unique opportunity for companies like 10x Genomics Inc. (TXG - Free Report) , Omnicell, Inc. (OMCL - Free Report) and Inspire Medical Systems, Inc. (INSP - Free Report) . However, there is a counterargument that with the continued vaccination drive and a gradual decline in COVID-19 cases, this trend might get disrupted going forward.
Industry Description
The Zacks Medical Info Systems industry comprises companies, which develop and market healthcare information systems. They offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time-efficient manner. Focus on patient satisfaction, security of patient data and administrative cost control have increased the need for big data, 3D printing, blockchain and AI. Industry players like Cerner Corporation are raking in billions from the sale of software and related hardware, professional services and IT outsourcing services, recurring service contracts for software maintenance, and transaction processing services.
4 Trends Shaping the Future of the Medical Information Industry
Growing Demand for Contactless Services: Amid the pandemic, the need for contactless services has grown enormously. Within the Medical information systems space, the telehealth and remote patient monitoring segments are particularly growing at a faster rate. Per a Markets and Markets report, the global remote patient monitoring market is projected to reach $117.1 billion by 2025 from $23.2 billion in 2020, seeing a CAGR of 38.2% between 2020 and 2025. Also, realizing the importance of digitization in healthcare, the FDA earlier this year launched the Artificial Intelligence/Machine Learning (AI/ML)-Based Software as a Medical Device (SaMD) Action Plan. Healthcare information Technology (HCIT) players like Cerner are expected to benefit from this.
Subsiding COVID-19 Cases Might Disrupt the Trend: While COVID-19 has introduced an all- new era of virtual healthcare service, it has also brought in associated pitfalls. A Wall Street Journal report says, major insurers have been rolling back the terms of this virtual care coverage, upon which customers are facing out-of-pocket charges on certain virtual visits. Adding to the complication, thanks to the successful vaccination drives globally, the severity of COVID-19 is declining day by day despite the emergence of more infectious variants of the virus. Accordingly, even amid a rise in case count over the past few months, social restrictions have been lifted to a significant extent. This has led to a rise in the number of physician office and hospital visits with significant reduction in demand for virtual physician appointments. Going by a Healthcare Finance report, insurers are currently wondering how virtual care will look, and what it will be like when the pandemic is finally in the rearview mirror.
EMR and Blockchain Gain Ground: Among the long-term trends, EHRs, electronic medical records (EMR), predictive analytics and real-time alerting have been gaining prominence. This has led to the emergence of Internet of Medical Things (IoMT), which has enabled the use of a number of wearables, including ECG and EKG monitors, apart from other common medical measurement devices to determine temperature, glucose level, and blood pressure readings. Evolution in telemedicine and blockchain is other mega trends worth mentioning here. Leading healthcare companies like Humana, MultiPlan, Quest Diagnostics and UnitedHealth Group’s Optum and UnitedHealthcare formed an alliance to launch Synaptic Health Alliance pilot project on blockchain.
Rising Instances of Cyber Attacks: As healthcare becomes more wired and interconnected, cybersecurity is the primary concern of hospitals. In fact, security flaws are being increasingly found in electronic medical device operating systems or other devices like ECG machines, imaging scanners, infusion pumps and telemetry systems. Indeed, the pandemic has led to growing cyber dependency, which has made the space vulnerable to cyber-attacks. Interpol’s recent report claims that cybercriminals are particularly targeting hospitals, medical centers and public institutions for ransomware attacks as these institutions are already entangled in a healthcare crisis.
Zacks Industry Rank
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #190, which places it in the bottom 24% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Underperforms S&P 500 and Sector
The industry has underperformed the Zacks S&P 500 composite but outperformed the sector over the past year.
The industry has declined 32.6% compared with the Zacks Medical sector’s decline of 9.5%. The S&P 500 has risen 27.1% in the said time frame.
One Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing medical stocks, the industry is currently trading at 3.48X compared with the S&P 500’s 4.31X and the sector’s 2.76X.
Over the last five years, the sector has traded as high as 4.61X, as low as 1.70X, and at the median of 2.34X, as the charts below show.
Price-to-Sales Forward Twelve Months (F12M)
Price-to-Sales Forward Twelve Months (F12M)
3 Medical Info Systems Stocks to Buy
10x Genomics: The company builds products to interrogate, understand and master biology to advance human health. Its integrated solutions include instruments, consumables and software for analyzing biological systems at a resolution and scale that matches the complexity of biology. It is currently seeing strong demand for its Chromium instruments. Further, the adoption of its single cell and spatial consumables continues to grow. With the company’s ability to measure gene expression proteins, epigenetic programming in new features and other modalities, its customers currently have access to a comprehensive toolkit for interrogating biology of the right resolution and scale. The company currently holds a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2021 earnings indicates a year-over-year increase of 47.1%. Year to date, the stock has gained 2.6% against the industry’s loss of 38.6%.
Omnicell: Headquartered in Mountain View, CA, Omnicell develops and markets end-to-end automation solutions for the medication-use process. Omnicell has an elaborate vision for the Autonomous Pharmacy. Per management, the Autonomous Pharmacy vision integrates a comprehensive set of solutions across three key segments — automation solutions (designed to digitize and streamline workflows), intelligence (provides actionable insights to better understand medication usage and improve pharmacy supply chain management) and automation of medication dispensing workflows (includes expert services as an extension of pharmacy operations). In terms of its 2025 financial roadmap, Omnicell is targeting a 14% to 15% compounded total annual revenue growth rate from 2021 to 2025. Over the same period of time, it is also targeting an expansion of non-GAAP EBITDA margin from 21% in 2021 to 25% by 2025, representing a margin expansion of approximately 400 bps. According to the company, its strong position in the market, growing customer base and strategic focus on innovation will help it to achieve these goals. The company currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 earnings indicates a year-over-year increase of 46.1%. Over the past year, the stock has gained 99.7%, comparing favorably with the industry’s 32.6% dip.
Price and Consensus: OMCL
Inspire Medical Systems: The company is focused on the development and commercialization of innovative and minimally invasive solutions for patients with obstructive sleep apnea. It is currently witnessing strong recovery momentum, with pent-up demand unleashed, following the relaxation of travel restrictions. The company is making good progress in major focus areas, such as content, product, service, technology and supply chain. The company carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2021 sales indicates year-over-year growth of 84.7%. Over the past year, the stock has gained 87.1%.
Price and Consensus: INSP
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Buy 3 Medical Info Systems Stocks to Brave Industry-wide Challenges
The COVID-19 pandemic has in a way increased the pace of progress of the Medical Information Systems industry. Digital health has sustained its strong growth momentum in the second half of 2021, thanks to the growing demand for contactless services surrounding the more infectious new virus variants. Market watchers claim that even beyond the pandemic, digital health is expected to maintain this strength as healthcare professionals and patients leverage its benefits. This industry is currently witnessing growing demand for all kind of digital healthcare support including telehealth, cloud computing, artificial intelligence and robotics, analytics, EHR and IoT, which have proved beneficial in controlling the spread of the infection. This has created a unique opportunity for companies like 10x Genomics Inc. (TXG - Free Report) , Omnicell, Inc. (OMCL - Free Report) and Inspire Medical Systems, Inc. (INSP - Free Report) . However, there is a counterargument that with the continued vaccination drive and a gradual decline in COVID-19 cases, this trend might get disrupted going forward.
Industry Description
The Zacks Medical Info Systems industry comprises companies, which develop and market healthcare information systems. They offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time-efficient manner. Focus on patient satisfaction, security of patient data and administrative cost control have increased the need for big data, 3D printing, blockchain and AI. Industry players like Cerner Corporation are raking in billions from the sale of software and related hardware, professional services and IT outsourcing services, recurring service contracts for software maintenance, and transaction processing services.
4 Trends Shaping the Future of the Medical Information Industry
Growing Demand for Contactless Services: Amid the pandemic, the need for contactless services has grown enormously. Within the Medical information systems space, the telehealth and remote patient monitoring segments are particularly growing at a faster rate. Per a Markets and Markets report, the global remote patient monitoring market is projected to reach $117.1 billion by 2025 from $23.2 billion in 2020, seeing a CAGR of 38.2% between 2020 and 2025. Also, realizing the importance of digitization in healthcare, the FDA earlier this year launched the Artificial Intelligence/Machine Learning (AI/ML)-Based Software as a Medical Device (SaMD) Action Plan. Healthcare information Technology (HCIT) players like Cerner are expected to benefit from this.
Subsiding COVID-19 Cases Might Disrupt the Trend: While COVID-19 has introduced an all- new era of virtual healthcare service, it has also brought in associated pitfalls. A Wall Street Journal report says, major insurers have been rolling back the terms of this virtual care coverage, upon which customers are facing out-of-pocket charges on certain virtual visits. Adding to the complication, thanks to the successful vaccination drives globally, the severity of COVID-19 is declining day by day despite the emergence of more infectious variants of the virus. Accordingly, even amid a rise in case count over the past few months, social restrictions have been lifted to a significant extent. This has led to a rise in the number of physician office and hospital visits with significant reduction in demand for virtual physician appointments. Going by a Healthcare Finance report, insurers are currently wondering how virtual care will look, and what it will be like when the pandemic is finally in the rearview mirror.
EMR and Blockchain Gain Ground: Among the long-term trends, EHRs, electronic medical records (EMR), predictive analytics and real-time alerting have been gaining prominence. This has led to the emergence of Internet of Medical Things (IoMT), which has enabled the use of a number of wearables, including ECG and EKG monitors, apart from other common medical measurement devices to determine temperature, glucose level, and blood pressure readings. Evolution in telemedicine and blockchain is other mega trends worth mentioning here. Leading healthcare companies like Humana, MultiPlan, Quest Diagnostics and UnitedHealth Group’s Optum and UnitedHealthcare formed an alliance to launch Synaptic Health Alliance pilot project on blockchain.
Rising Instances of Cyber Attacks: As healthcare becomes more wired and interconnected, cybersecurity is the primary concern of hospitals. In fact, security flaws are being increasingly found in electronic medical device operating systems or other devices like ECG machines, imaging scanners, infusion pumps and telemetry systems. Indeed, the pandemic has led to growing cyber dependency, which has made the space vulnerable to cyber-attacks. Interpol’s recent report claims that cybercriminals are particularly targeting hospitals, medical centers and public institutions for ransomware attacks as these institutions are already entangled in a healthcare crisis.
Zacks Industry Rank
The Zacks Medical Info Systems industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #190, which places it in the bottom 24% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Underperforms S&P 500 and Sector
The industry has underperformed the Zacks S&P 500 composite but outperformed the sector over the past year.
The industry has declined 32.6% compared with the Zacks Medical sector’s decline of 9.5%. The S&P 500 has risen 27.1% in the said time frame.
One Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing medical stocks, the industry is currently trading at 3.48X compared with the S&P 500’s 4.31X and the sector’s 2.76X.
Over the last five years, the sector has traded as high as 4.61X, as low as 1.70X, and at the median of 2.34X, as the charts below show.
Price-to-Sales Forward Twelve Months (F12M)
Price-to-Sales Forward Twelve Months (F12M)
3 Medical Info Systems Stocks to Buy
10x Genomics: The company builds products to interrogate, understand and master biology to advance human health. Its integrated solutions include instruments, consumables and software for analyzing biological systems at a resolution and scale that matches the complexity of biology. It is currently seeing strong demand for its Chromium instruments. Further, the adoption of its single cell and spatial consumables continues to grow. With the company’s ability to measure gene expression proteins, epigenetic programming in new features and other modalities, its customers currently have access to a comprehensive toolkit for interrogating biology of the right resolution and scale. The company currently holds a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2021 earnings indicates a year-over-year increase of 47.1%. Year to date, the stock has gained 2.6% against the industry’s loss of 38.6%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: TXG
Omnicell: Headquartered in Mountain View, CA, Omnicell develops and markets end-to-end automation solutions for the medication-use process. Omnicell has an elaborate vision for the Autonomous Pharmacy. Per management, the Autonomous Pharmacy vision integrates a comprehensive set of solutions across three key segments — automation solutions (designed to digitize and streamline workflows), intelligence (provides actionable insights to better understand medication usage and improve pharmacy supply chain management) and automation of medication dispensing workflows (includes expert services as an extension of pharmacy operations). In terms of its 2025 financial roadmap, Omnicell is targeting a 14% to 15% compounded total annual revenue growth rate from 2021 to 2025. Over the same period of time, it is also targeting an expansion of non-GAAP EBITDA margin from 21% in 2021 to 25% by 2025, representing a margin expansion of approximately 400 bps. According to the company, its strong position in the market, growing customer base and strategic focus on innovation will help it to achieve these goals. The company currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 earnings indicates a year-over-year increase of 46.1%. Over the past year, the stock has gained 99.7%, comparing favorably with the industry’s 32.6% dip.
Price and Consensus: OMCL
Inspire Medical Systems: The company is focused on the development and commercialization of innovative and minimally invasive solutions for patients with obstructive sleep apnea. It is currently witnessing strong recovery momentum, with pent-up demand unleashed, following the relaxation of travel restrictions. The company is making good progress in major focus areas, such as content, product, service, technology and supply chain. The company carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2021 sales indicates year-over-year growth of 84.7%. Over the past year, the stock has gained 87.1%.
Price and Consensus: INSP