Investors who are seeking growth opportunities in the stock market should consider health tech stocks. While the healthcare sector has traditionally been viewed as a defensive investment, health tech is now emerging as an increasingly promising area for growth. As the economy continues to improve, health tech stocks are poised to perform exceptionally well, making them an attractive choice for investors looking to capitalize on the current market conditions.
Barclays’ Insight: Profitability as the Growth Engine
Stephanie Davis, a Barclays analyst, highlights the importance of profitability in health tech investing. She emphasizes that as the sector matures, discerning the profitable players will be crucial. This perspective marks a shift from viewing health tech as merely a momentum growth area to recognizing sustainable, profitable business models.
Spotlight on Health Catalyst:
Health Catalyst (HCAT: NSD) exemplifies this growth trajectory. Specializing in data platforms and analytics, the company aids healthcare organizations in managing data effectively. Their tools have proven effective in reducing unwarranted variations in clinical care, with one client achieving a significant cost reduction. Despite a downward trend in stock prices, Barclays sees Health Catalyst’s tech-enabled managed services as a promising avenue for growth??.
Health Catalyst’s (HCAT: NSD) total revenue for 3Q23 was $73.8 million, up 8% YoY. Barclays’ Davis believes that Health Catalyst’s underappreciated tech-enabled managed services (TEMS) present a source for revenue and bookings expansion. Davis has established the name as a top idea for 2024 with an Overweight (Buy) rating and a $14 price target for a one-year gain of 53% for the stock. The Strong Buy consensus rating holds seven Buys and two Holds, and the $11.78 average target price implies a 29% one-year increase from the current trading price of $9.16.
R1 RCM: Revolutionizing Revenue Cycle Management
R1 RCM (RCM: NSD) another company on Barclays’ radar, offers revenue cycle management solutions, streamlining the financial aspects of healthcare services. Their technology and service mix have driven significant revenue growth and operational improvements. Notably, their recent agreement with Providence to acquire a revenue cycle management subsidiary marks a strategic expansion, enhancing their execution-driven business model??.
A company recently reported a 15.5% YoY revenue growth in 3Q23, with $572.8 million in revenue, surpassing the forecast by $4.4 million. It also reported a GAAP net income of $1.3 million. The company acquired Acclara, a revenue cycle management subsidiary of Providence, for $675 million in cash and stock warrants. Analyst Davis believes that the Providence agreement shows that the company is focused on its core competency. Davis also recommends buying the stock, with a price target of $14, representing a 39% upside potential.
GoodRx Holdings: Merging Pharmacy and Telehealth
GoodRx Holdings (GDRX: NSD) stands out for its innovative approach to pharmacy services and telehealth. This platform offers critical information and discounts on medications, addressing medication non-compliance issues. With a strong track record of facilitating consumer savings and a focus on informed healthcare decisions, GoodRx, despite recent revenue dips, is seen as positioned for a rebound, as per Barclays’ analysis??.
GoodRx (GDRX: NSD) reported a revenue of $180 million in its last quarter, which was down by almost 4% year-over-year and missed the forecast by $8.26 million. However, the earnings were in line with expectations. The company expects to see a 2% to 5% y/y quarterly revenue growth, but the full-year will likely see a 2% to 3% y/y revenue decline.
Conclusion:
As the healthcare sector evolves, it is crucial to identify the profitable players in the health tech industry for investors in 2024. Companies like Health Catalyst, with their tech-enabled managed services, have shown promise for revenue and booking expansion. R1 RCM’s revenue cycle management solutions and strategic expansion through acquisitions demonstrate their focus on their core competency. GoodRx Holdings, with its innovative approach to pharmacy services and telehealth, is positioned for a rebound despite recent revenue dips.
