The U.S. Medical Services industry is likely to embark onto a new era with the latest federal rule that has taken effect for hospitals since Jan 1. The rule mentions certain price transparency requirements for the U.S. hospitals, which are now asked to post a list of ‘charge prices’ on thousands of services. Analysts believe this will benefit patients as they would know the cost of medical services before committing to those.
Meanwhile, over the past year, the Medical Services industry has rallied 13.7% against the S&P 500 index’s 6.4% decline.
Let’s also find out some other factors that make the Medical Services space a prospective one for investors.
Home-Based Care Boosts Medical Services
The Medical Services industry essentially comprises third-party service providers and care givers that are appointed by core healthcare companies. Notably, these providers offer home-based services as well which have been slowly gaining popularity, backed by the growing old population in the United States. This includes medical social services, nursing care, home health aides and others.
In fact, players from outside the space have joined as well. In 2018, retail bigwig Amazon AMZN also acquired online pharmacy PillPack, with an aim to offer prescription coordination and home delivery to consumers.
Going by a report in CNBC, each day, about 10,000 seniors turn 65 in the United States. This has boosted the demand for home-based care in the country.
Zion Market Research predicts the global home healthcare market to generate revenues of $391.41 billion by 2021, at a CAGR of 9.4%. The research further shows that North America has, by far, the largest share in the space and is set to continue its dominance till 2021.
Reduced Regulatory and Tax Burdens Create Scope
A significant reduction in regulatory and tax burden on U.S. healthcare companies is creating opportunities for mobile and wireless medical technology companies. DexCom’s DXCM G6 Continuous Glucose Monitoring System deserves a mention in this regard.
This apart, treatments are also becoming less invasive with shorter recovery times. Accordingly, terms like ‘bed less hospitals’ have become trend of the future. Third-party laboratory testing providers and contract research organizations are also recording increasing demand, thanks to the rising need for complex tests, services and clinical research.
Clearly, medical services companies have opportunities of raking in huge profits.
Choosing the Winning Stocks
In a backdrop like this, the Zacks Rank and the Momentum Score come in handy. Using the Zacks Stock Screener, we have zeroed in on three Medical Services stocks. Notably, each of these stocks carry a Zacks Rank #2 (Buy) and have a Momentum Score of A or B. This reflects possibilities of outperformance at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2, are better picks than most.
Our first pick is HealthEquity, Inc.HQY which has a Momentum Score of A.
The Utah-based healthcare services provider’s fourth-quarter earnings growth rate is projected at a whopping 233.3%.
HealthEquity is an Internal Revenue Service approved non-bank custodian of HSA, which is a medical savings account available to taxpayers in the United States. Interestingly, it has clinched the top position in the HSA (Health Savings Account) industry through its first-mover advantage, focus on innovation and differentiated capabilities.
Additionally, for 2019, HealthEquity projects revenues of $281-$285 million, up from $279-$285 million anticipated earlier.
Next on our list is Apollo Medical Holdings, Inc. AMEH having a Momentum Score of A.
The California-based provider of healthcare services offers integrated care, inpatient and physician alignment solutions. The company’s data-enabled clinical platform provides care for patients continuously, whether they are in the hospital, in a skilled nursing facility or at home.
The company recently announced that its wholly-owned subsidiary, APA ACO, generated $12.96 million in gross savings in the first performance year (2017) and that, as a result, it achieved $5.90 million in shared savings from the Centers for Medicare & Medicaid Services.
Investors may also consider OpGen, Inc. OPGN which has a Momentum Score of B.
The Maryland-based microbial genetics analysis company’s fourth-quarter earnings growth rate is projected at 68.4%.
The company offers optical mapping services for analysis of microbial, yeast and fungal genomic architecture.
Last month, the company announced the submission of the final report for completion of the contract from the Centers for Disease Control and Prevention to develop smartphone-based clinical decision support solutions for antimicrobial stewardship and infection control in low and middle-income countries.
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