Zacks Industry Outlook Highlights Medpace, HealthEquity and Surgery Partners
For Immediate Release
Chicago, IL – August 30, 2023 – Today, Zacks Equity Research discusses Medpace MEDP, HealthEquity HQY and Surgery Partners, Inc. SGRY.
Industry: Medical Services
Link: https://www.zacks.com/commentary/2141930/3-medical-services-stocks-countering-industry-wide-headwinds
During the COVID-19-led emergency, digital healthcare treatment suddenly became indispensable with the emergence of data and analytics. Even when the severity of COVID-19 is over, the medical services industry has been witnessing significant demand for telemedicine-focused online medical and AI-powered technology services.
Going by a recent WNS report, the global healthcare analytics market is expected to surpass $43 billion in 2023. Mainly, primary stakeholders — payers, healthcare professionals and patients — will benefit from the all-new insights, services and levels of experience that next-generation healthcare-related data and analytical capabilities provide. Medical Services stocks like Medpace, HealthEquity and Surgery Partners, Inc. are expected to gain the most from this rapidly transforming healthcare services landscape.
However, the pandemic dealt a huge blow to the manual workforce in healthcare infrastructure. Per a February 2023 report by Research and Markets, WHO estimates a shortage of 10 million health workers in low- and lower-middle-income countries by 2023.
Industry Description
The Zacks Medical Services industry comprises third-party service providers and caregivers appointed by core healthcare companies for economies of scale. The industry includes pharmacy benefit managers, contract research organizations, wireless MedTech companies, third-party testing labs, surgical facility providers and healthcare workforce solutions providers among others.
Over the years, this industry has strategically moved from volume- to value-based care. This changing pattern of care calls for advanced facilities, thus increasing the need to appoint specialized external service providers. With the growing importance of effective healthcare management, the medical service industry has become an integral part of the modern healthcare system.
3 Trends Shaping the Future of the Medical Services Industry
Staffing Shortage: Although the healthcare emergency is now over (on May 5, WHO declared the end of COVID-19 as a global health emergency), the trauma of the past few years' uncertainty and commotion has forced frontline workers like doctors and medical staff to leave the field. Going by a National Institute of Health (NIH) report of February 2023, the U.S. Bureau of Labor Statistics projects that more than 275,000 additional nurses are needed from 2020 to 2030.
Going by the Research and Markets report, the gap between healthcare demand and supply of nurses and doctors is widening and more evident in developing countries due to the limited capacity and number of medical schools. Consequently, employment opportunities for nurses are projected to grow at a faster rate than all other occupations.
Digital Revolution Amid the Pandemic: With an increase in the adoption of digital platforms within the medical device space, remote monitoring, robotic surgeries, big-data analytics, 3D printing and electronic health records are gaining prominence in the United States. A 2023 digital health market report by Grand View Research suggests that this market, valued at $211 billion in 2022, will witness a 18.6% CAGR through 2030. Other reports suggest that the companies that adopted artificial intelligence technologies witnessed a 50% reduction in treatment costs and experienced more than 50% improvement in patient outcomes.
Nursing Care Market Boom: With rising cognizance about the benefits of specialized medical caregiving, the need for healthcare workforce/staffing service providers has increased significantly. For example, the demand for nurses has increased manifold, driven by the rising incidence of chronic disorders in the United States, and is expected to be high in the days ahead. Going by a Research and Markets report, the global healthcare staffing market size is expected to reach $62.8 billion by 2030, registering a CAGR of 6.93% from 2023 to 2030.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Medical Services industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #189, which places it in the bottom 23% 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 bleak 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 Sector and S&P 500
The Medical Services Industry has underperformed its sector as well as the S&P 500 over the past year. The stocks in this industry have collectively lost 9.7% during the said time frame against the S&P 500 composite's rise of 15.6%. The Medical sector has declined 4.4% in the same time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing medical stocks, the industry is currently trading at 15.24X compared with the S&P 500's 19.07X and the sector's 22.09X.
Over the last five years, the industry has traded as high as 22.31X, as low as 12.41X, and at the median of 15.72X.
3 Stocks to Buy Right Now
Below are three stocks from the Medical Services industry that have been witnessing positive earnings estimate revisions and carry a Zacks Rank #1 (Strong Buy) or #2 (Buy) at present.
You can see the complete list of today's Zacks #1 Rank stocks here.
Medpace: Based in Cincinnati, OH, Medpace is a scientifically-driven, global, full-service clinical contract research organization providing Phase I-IV clinical development services to the biotechnology, pharmaceutical and medical device industries. In the last reported second quarter of 2023, the company registered a 31.2% increase in revenues, reflecting a backlog conversion rate of 18.7%.
Medpace's 2024 expected earnings growth rate is pegged at 16.2%. The Zacks Consensus Estimate for Medpace's 2024 revenues indicates a year-over-year rise of 13.7%. The stock carries a Zacks Rank #1.
Surgery Partners: The company operates a network of surgical facilities and ancillary services in the United States. The company operates through two segments, Surgical Facility Services and Ancillary Services. Its surgical facilities comprise ambulatory surgery centers and surgical hospitals that offer non-emergency surgical procedures in various specialties, including orthopedics and pain management, ophthalmology, gastroenterology, and general surgery.
Surgery Partners' 2024 earnings growth rate is pegged at 18.7%. The Zacks Consensus Estimate for SGRY's 2024 revenues indicates a year-over-year rise of 9.1%. The stock sports a Zacks Rank #1.
HealthEquity: Draper, UT-headquartered HealthEquity provides integrated solutions for healthcare account management, health reimbursement arrangement and flexible spending accounts for health plans, insurance companies and third-party administrators in the United States. HealthEquity offers multiple cloud-based platforms, accessed by its members online via a desktop or mobile device. Individuals can make health saving and spending decisions, and pay healthcare bills, among other activities, via these platforms.
HealthEquity's 2024 expected earnings growth rate is pegged at 28.8%. The Zacks Consensus Estimate for HealthEquity's 2024 revenues indicates a year-over-year rise of 13%. The stock carries a Zacks Rank #2.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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HealthEquity, Inc. (HQY) : Free Stock Analysis Report
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