Dec 22, 2020 9:06AM EST
The pandemic has highlighted the importance of telemedicine among other things, thus transforming the traditional healthcare system. Telemedicine or the option of availing medical advice digitally has become a major choice for contactless healthcare services amid the surging coronavirus infections. An added advantage of telemedicine is that it has the potential to reduce healthcare costs, and improve patient outreach and health outcomes.
During the pandemic, the hospitals which initially suffered due to a significant drop in revenues and patient volumes are expected to eventually recover from the strength in telemedicine services. This rapidly expanding service is likely to continue to gain strength from the booming digital health space as customers continue to avail services from the comfort of their homes in the post-pandemic period. This potential is keeping the market sentiment buoyant as we step into 2021.
Telemedicine 2020 Snapshot
The telemedicine space began to witness growth soon after the pandemic was declared in March. Due to the widespread lockdown situation and the ever-increasing cases of COVID-19 infections, patients gradually shifted to the telehealth space from the traditional healthcare settings.
In this regard, per a report by American Telemedicine Association, in December, a bipartisan and bicameral group of 49 lawmakers urged House and Senate to use end-of-year legislation to permanently expand Medicare coverage of telehealth services. If this materializes successfully, it is going to be a major breakthrough for telehealth and telemedicine players.
Earlier to that, the Centers for Medicare & Medicaid Services announced that many of the expanded telehealth services currently being covered due to COVID-19 will be permanently covered after the pandemic.
The progress of the telemedicine space aided companies like Allscripts Healthcare Solutions Inc. MDRX, which created a specialized plan for clients to swiftly implement telehealth at their organizations through its EHR-agnostic patient engagement platform, FollowMyHealth. Year to date, this stock has risen 41.9% compared with the industry’s 31.1% rise.
Telemedicine Stocks to Buy Ahead of 2021
Already, healthcare facilities increasingly prefer to attend patients via the digital mode to minimize the exposure risk. Added to this, given that the uncertainty regarding the new COVID-19 mutant and vaccine approvals, social distancing and minimizing exposure risk are here to stay at least for the better part of 2021. Also, with patients realizing the benefits of telemedicine, this space holds tremendous potential. Given this, companies from the telemedicine space are expected to register strong customer adoptions, thus boosting their performances.
3 Stocks to Buy
With the help of our Zacks Stock Screener, we have shortlisted three stocks from the prospering telemedicine sector which performed quite impressively through 2020 amid the pandemic-led market meltdown. We have narrowed our search to the following stocks based on a good Zacks Rank and other relevant metrics for 2021.
The first company that investors can consider is renowned designer, manufacturer and distributor of medical devices and cloud-based software solutions to manage respiratory disorders, ResMed Inc. RMD. This Zacks Rank #2 (Buy) company’s telehealth services enable physicians to access information on Air Solutions and AirView as well as directly interact with patients over video chat. Further, the company has been witnessing rapid adoption of digital health technology around the world over the past few months due to the pandemic.
The company’s prospects for fiscal 2021 (ending June 2021) and fiscal 2022 (ending June 2022) seem to be encouraging. Over the past 60 days, its earnings estimates for fiscal 2021 have moved 9.3% north. For fiscal 2022, earnings estimates have moved 5.9% north. The fiscal 2021 and fiscal 2020 earnings growth projections stand at 9% and 6.6% respectively. Year to date, the stock has gained 37.8% compared with the industry’s 2.8% rise. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our next pick is renowned well-known developer and marketer of healthcare information systems, NextGen Healthcare, Inc. NXGN, which is gradually adapting to this innovative solution. The Zacks Rank #3 (Hold) company announced Nevada Eye Physicians (a comprehensive eye care facility in the Las Vegas area) in June, which is utilizing NextGen Enterprise with integrated telehealth capability called NextGen Virtual Visits.
The company’s prospects for fiscal 2021 (ending March 2021) seem to be encouraging as over the past 60 days, 10 analysts have raised their 2021 estimates leading to a 12.7% rise in earnings estimate. For fiscal 2022 (ending March 2022), earnings estimates have moved 8.1% north over the past 60 days as five analysts upped their estimates. The fiscal 2021 and fiscal 2020 earnings growth projections stand at 7.2% and 4.5% respectively. Its long-term projected EPS growth stands at 7.5% versus the industry’s 3.7%. Further, its ROE stands at 11.3% against the industry’s negative returns. Year to date, the stock has gained 11.7% compared with the sector’s 5.3% rise.
The third company that investors can consider is renowned virtual care and expertise access provider, Teladoc Health, Inc. TDOC. The company is witnessing a rise in telehealth visits, outpacing its membership rise, which highlights the rapid adoption of telehealth services. The COVID-19 pandemic has driven demand for its telehealth services. Also, the inclusion of telehealth services in Medicare advantage is a long-term growth driver for the company.
This Zacks Rank #3 company’s prospects for 2021 seem to be encouraging as over the past 30 days, two analysts have raised their 2021 earnings estimates. For this period, 2021 earnings estimates have moved 21.3% north. Its estimated sales growth rate for 2021 stands at 80.6% whereas its estimated EPS growth is pegged at 52.3%. Its current ratio (current assets divided by current liabilities) stands at 6.5 versus the industry’s 1.5. Year to date, the stock has gained 138.6% compared with the industry’s 36.8% rise.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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