Healthcare is one of the world's largest industries. Total expenditures just in America were $4.5 trillion in 2022, nearly a fifth of the country's total economic output. Government studies suggest healthcare will continue to outgrow the broader economy in the coming years as well.
Investors would be wise to look for opportunities here. To help them out, I've looked at healthcare's hottest trends to find some companies poised to generate exceptional returns. These three stocks are all poised to double investors' money, and even a minimal investment of $1,000 could make long-term investors a sizeable sum over time.
Here is what investors need to know about these three healthcare stocks.
1. Novo Nordisk
Obesity runs rampant in America, where an estimated 73% of adults over 20 are overweight or obese. Novo Nordisk(NYSE: NVO) built its company on insulin products but has entered a new growth era thanks to its GLP-1 RA pharmaceutical drugs Ozempic and Wegovy. These products stimulate a hormone to reduce users' appetite, encouraging weight loss.
Intended to treat Type II diabetes, Ozempic went viral for its weight loss properties, including heavy usage among celebrities that garnished tons of media coverage. The company's Wegovy drug is very similar but is approved to treat chronic weight management. The prevalence of obesity gives Novo Nordisk a tremendous runway for growth, even with competitors like Eli Lillyreleasing their own GLP-1 RA products.
NVO Revenue (TTM) data by YCharts
Analysts believe Novo Nordisk can compound earnings at nearly 18% annually on average over the long term. At that rate, the earnings would double in just over three years. The stock's valuation also isn't too expensive today. A forward price-to-earnings ratio (P/E) of 32 means that it could take some time for the business to catch up to the stock, but there's enough growth here that investors should feel confident that five-year investment returns will be rewarding.
2. Hims & Hers Health
Telehealth caught on during the COVID-19 pandemic when patients could not travel to their doctors' offices. That trend has stuck around, which helped put Hims & Hers Health(NYSE: HIMS) into its strong position today. Patients can receive virtual consultations for a variety of health conditions, ranging from mental health to sexual health, and if prescribed, purchase and have pharmaceuticals delivered to their homes.
The company's outstanding growth demonstrates how much Hims & Hers' branding and products have resonated with patients. Its member count has grown from 554,000 in the fourth quarter of 2021 to 1.4 million as of the third quarter of 2023. Revenue has soared, and the business turned cash-flow positive in 2023 despite spending roughly half its revenue on marketing to drive that growth. Gross profit margins are over 80%.
HIMS Revenue (TTM) data by YCharts.
The business is preparing to turn a bottom-line profit, which CEO Andrew Dudum believes could come as soon as Q4 of 2023. This puts the stock in a great position to impress Wall Street in a market seemingly emphasizing profits since interest rates began rising in 2022. Given that revenue growth could end 2023 at 64% year over year, earnings growth should fly once profits turn positive. Still trading at a price-to-sales ratio under two, the stock seems due for an upward rerating.
3. UnitedHealth Group
You can't invest in U.S. healthcare without bringing up UnitedHealth Group(NYSE: UNH). It's one of the largest health insurance companies in America and provides various services and technology throughout the broader healthcare system. In all, it does a staggering $371 billion in annual revenue. It's also one of the best-performing stocks you'll find. Shares have returned a total of 438,000% over their lifetime.
There isn't much of a secret sauce to this recipe. UnitedHealth's dominance in the U.S. healthcare industry means it's grown with broader healthcare for decades. It boosts earnings growth by using profits to repurchase shares and puts money in shareholders' pockets with a dividend that management has increased for 14 consecutive years.
UNH Revenue (TTM) data by YCharts
Any diversified portfolio should consider holding UnitedHealth. Today, the company has a whopping $485 billion market cap, which can make growth harder to come by. Still, analysts believe earnings can compound at over 11% over the long term. The stock's forward P/E is 18, making its 1.6 price/earnings-to-growth ratio a reasonable price tag for its expected growth. Buy and hold, and investors should double their money within a decade if UnitedHealth continues doing what it's been for a long time.
Should you invest $1,000 in Novo Nordisk right now?
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Justin Pope has positions in Hims & Hers Health. The Motley Fool recommends Novo Nordisk and UnitedHealth Group. The Motley Fool has a disclosure policy.
