2 Healthcare Stocks That Are Changing the Future of Medicine

Intuitive Surgical Inc. (ISRG) and Teladoc Health Inc. (TDOC) are providing innovative solutions that are changing the future of medicine. These two companies are accelerating changes across the healthcare ecosystem while adapting to new healthcare norms, initiated since the beginning of the Covid-19 pandemic. 

The pandemic has placed enormous strain on the global healthcare system affecting workforce, infrastructure, and supply chain. Yet, these two companies are well-positioned to bring about the necessary change for the future of medicine. 

According to Precedence Research, the global smart healthcare market size is predicted to hit around US$ 482.25 billion by 2027, growing at a CAGR of 17.97%.

ISRG has posted a strong stock performance of 23.9% year-to-date, whereas TDOC underperformed its markets, losing 32.2% in the same period. 

Nevertheless, both companies are leading their respective businesses and are expected to see high revenue growth in coming years. 

Intuitive Surgical Inc. (ISRG)

ISRG is a global technology leader in minimally invasive care and the pioneer of robotic-assisted surgery. The company brings more than two decades of leadership in robotic-assisted surgical technology and solutions. ISRG develops, manufactures, and markets the da Vinci surgical system, as well as the Ion Endoluminal system. 

ISRG’s stock surged 26% year-to-date, beating moderately one of its benchmarks the Health Care Select Sector SPDR Fund (XLV), which advanced 16.4% since the beginning of the year.

ISRG’s growth jumped significantly in 2021, as net sales are expected to climb significantly, up 29.5% year-on-year to $5.64b in 2021, and should continue to advance by 13% in 2022-2023. On the other hand, the company is highly profitable. Bottom-line growth has skyrocketed by 56.2% in 2021 to $1.65b, the company’s net margin reached 29.4% in the period.

Investors should be thrilled with the company’s balance sheet. With a net cash position of $3.02b in 2021, up 86.6% year-on-year. The robotic-assisted surgery company expects its cash position to grow at a fast pace in the next two years, enabling it to focus on external growth projects.

The company also benefits from a myriad of patents for its devices and accessories, setting a high barrier for competitors looking to enter this market. 

ISRG trades at a 2022e EV/EBITDA of 44.2x and a P/E ratio of 78.2x, which isn’t cheap. However, with its patents, its intellectual property that protects its devices, and the high barriers to entry, ISRG’s share should continue on this positive momentum.

Teladoc Health Inc. (TDOC)

TDOC is the global leader in whole-person virtual care, offering the technology to connect, expertise, and power to improve health for all individuals. It provides virtual healthcare services on a business-to-business (B2B) basis to its clients. The company’s consumer brands include Teladoc, Livongo, Advance Medical, Best Doctors, BetterHelp, and HealthiestYou.

Since the beginning of the year, TDOC’s stock performance has disappointed investors, as the company’s stock price lost 30.6%, underperforming significantly the Health Care Select Sector SPDR Fund (XLV).

Nevertheless, the company managed to nearly double yearly net sales in 2021 to $2.01b, compared to $1.09b the prior year. The company is focusing on raising top-line growth, which is anticipated to climb by more than 25% in the next two years. Despite that, investors seem to have shunned the healthcare service specialist this year, due to its poor bottom-line figures. TDOC is expected to post a net loss of $513m in 2021, which should halve in 2022 to $237m.

In terms of balance sheet, TDOC is expected to moderately improve its leverage, as the healthcare company should post a net debt of $322m in 2021, down 49.4% year-on-year. 

With TDOC’s stock price plunging this year, the valuation metrics seem correctly priced, with a 2022e P/B ratio of 1.44x and a 2022e EV/Revenue of 8.84x.

Conclusion 

Both companies are well-positioned to benefit from the growing healthcare market and each company provides innovative solutions that will transform the medical landscape.