In this piece, we’ll take a look at the 5 Best Medical Device Stocks To Buy Now. For more such companies, go to 13 Best Medical Device Stocks To Buy Now.
5. Baxter International Inc. (NYSE:BAX)
Forward P/E ratio as of December 10: 14.27
Number of Hedge Fund Holders: 42
Founded in 1931, Baxter International Inc. (NYSE:BAX) is a medical equipment company. After acquiring Hillrom in late 2021, the company has added more to its hospital-based products. Baxter International Inc. (NYSE:BAX) primarily focuses on products for the treatment of kidney disease and acute medical conditions.
On October 12, 2022, Matthew Taylor, an analyst at Jefferies, started covering Baxter International Inc. (NYSE:BAX) with a price target of $62 and a Hold rating on the stock. According to the analyst, the company is currently facing macro pressures that will stay for a while, although he believes that the conditions are improving with time.
As per Insider Monkey’s database, 42 hedge funds owned stakes in Baxter International Inc. (NYSE:BAX) at the end of the third quarter. Generation Investment Management remained the leading stakeholder of the company at the end of Q3 2022.
Here is what Cooper Investors has to say about Baxter International Inc. (NYSE:BAX) in its Q3 2021 investor letter:
During the quarter we exited our position in Baxter, having originally bought in 2017 as a Low Risk Turnaround with clear Stalwart attributes. In essence, the core businesses were highly durable, providing life sustaining or saving medical products such as IV medication or pumps and dialysis machines.
They had been mismanaged prior to the company spinning off its biopharmaceutical business in 2015 which had generated most of Baxter’s operating profit. With a new CEO in Joe Almeida, who came with a successful track record leading another medical device company (Covidien) we identified three sources of value latency for the new standalone Baxter.
Firstly, optimizing the cost structure. Baxter was successful here – they were able to effectively double operating margins from low single digits to mid-to-high teens over a relatively short four-year period. Secondly, accelerating sales growth through a more focused R&D effort. This is inherently more difficult than cost optimisation and on this front success has been muted with only moderate impact to revenues from new product introductions. Finally, capital deployment through Baxter’s significantly under-levered balance sheet. Several smaller bolt-on acquisitions were nicely complementary to the existing portfolio, but in early September the company announced the acquisition of Hil-Rom Holdings, a medical device company with leading positions in bed systems and patient monitoring. The deal is significant at US$12.5bn in size, and exhausts all balance sheet latency in one fell swoop.
Whilst it is “EPS accretive” we believe the high single digit ROIC management are targeting over five years is most reflective of the financial merits of the deal. Put another way, despite visions of providing digital and connected healthcare (think a Baxter IV pump combined with a Hil-Rom smart bed), ultimately the combined entity will likely remain a low-to-mid-single digit grower. Baxter looks like it is getting bigger but not necessarily better.
This combination of uncertainty around the merits of the Hil-Rom acquisition and the underwhelming performance on the product development side of the business led us to conclude that the investment proposition today is less attractive relative to other opportunities.
4. Medtronic plc (NYSE:MDT)
Forward P/E ratio as of December 10: 14.68
Number of Hedge Fund Holders: 55
Medtronic plc (NYSE:MDT) is among the largest technology companies that develop and manufacture medical devices for the healthcare sector. The product portfolio of the company comprises pacemakers, defibrillators, stents, heart valves, neurovascular products, spinal fixation devices, insulin pumps, advanced energy, and surgical tools.
On November 30, 2022, Larry Biegelsen, an analyst at Wells Fargo, reduced his price target on Medtronic plc (NYSE:MDT) to $77 from $82 while keeping an Equal Weight rating on the stock. The analyst revised his EPS forecast after adjusting for the company’s expected FX impact on earnings in 2024.
55 hedge funds are currently bullish on Medtronic plc (NYSE:MDT) as per Insider Monkey’s database.
Here is what Artisan Partners specifically said about Medtronic plc (NYSE:MDT) in its Q2 2022 investor letter:
While Medtronic plc (NYSE:MDT)’s procedure volumes recovered to pre-COVID levels, foreign exchange headwinds overshadowed underlying business value growth, and supply chain issues, including those related to China’s lockdowns, impacted the surgical innovations business. The downdraft in the market during the quarter led to a pile-on. We are being patient with our investment in Medtronic because the company continues to be a strong free cash flow generator and is attractively priced, with a FCF yield of 5% on trailing one-year numbers and a dividend yield of 3%. Medtronic is under new management that is focused on growing the company’s top line, reinvesting in R&D, returning cash to shareholders and growing operating profits. We like new management’s strategy and believe new product launches, increased surgery visits, sound M&A transactions and a shareholder returns focus, should reinvigorate the business. We added to our positions in these health care names during the quarter.
3. InMode Ltd. (NASDAQ:INMD)
Forward P/E ratio as of December 10: 13.91
Number of Hedge Fund Holders: 30
Founded in 2008, InMode Ltd. (NASDAQ:INMD) provides energy-based, minimally invasive surgical and medical treatment solutions. The categories that are addressed by the products of InMode Ltd. (NASDAQ:INMD) are face and body contouring, women’s health, and medical aesthetics. The majority of the revenue of InMode Ltd. (NASDAQ:INMD) comes from the United States.
On October 12, 2022, Matthew Taylor, an analyst at Jefferies, started covering InMode Ltd. (NASDAQ:INMD) with a price target of $40 and a Buy rating on the shares. The analyst believes that InMode Ltd. (NASDAQ:INMD) is a market leader in the aesthetic market and will continue to grow owing to its best-in-class technologies.
As per Insider Monkey’s database, 30 hedge funds remained bullish on InMode Ltd. (NASDAQ:INMD) at the end of the third quarter. Renaissance Technologies had the biggest stake in the company at the end of the third quarter.
2. Pro-Dex, Inc. (NASDAQ:PDEX)
Forward P/E ratio as of December 10: 12.41
Number of Hedge Fund Holders: 1
Pro-Dex, Inc. (NASDAQ:PDEX) develops and manufactures devices for the medical and dental industry. The company’s powered rotary drive surgical and dental instruments are employed predominantly in the orthopedic, spine, and dental markets. Pro-Dex, Inc. (NASDAQ:PDEX)’s product portfolio also has multi-axis motion control systems that are used in scientific research and factory automation markets.
On November 03, 2022, Pro-Dex, Inc. (NASDAQ:PDEX) reported its Q1 fiscal 2023 result, reporting revenue of $11.1 million, beating expectations by $0.9 million. The company’s EPS was reported at $0.29, missing analyst estimates by $0.04. The CEO, while commenting on the quarter’s results, stated that the company would have more opportunities for revenue growth in Q4 as it has received authorization from FDA for their Franklin facility.
As per Insider Monkey’s database, 1 hedge fund had stakes in Pro-Dex, Inc. (NASDAQ:PDEX) at the end of the third quarter. Covalent Capital Partners remained the leading stakeholder in the company at the end of Q3 2022.
1. Sensus Healthcare, Inc. (NASDAQ:SRTS)
Forward P/E ratio as of December 10: 5.17
Number of Hedge Fund Holders: 13
Founded in 2010, Sensus Healthcare, Inc. (NASDAQ:SRTS) operates in the healthcare sector. The company specializes in manufacturing devices used to treat skin cancers such as squamous and basal cell skin cancer and other skin-related conditions like Keloids. The company’s operations are spread worldwide.
On November 4, 2022, Ben Haynor, an analyst at Alliance Global Partners, lowered his price target on Sensus Healthcare, Inc. (NASDAQ:SRTS) to $16.50 while keeping a Buy rating on the stock. The analyst believes the company will remain profitable, although the Q3 results sent mixed signals to investors.
According to Insider Monkey’s database, 13 hedge funds owned stakes in the company at the end of the September quarter. G2 Investment Partners Management held the biggest stake in Sensus Healthcare, Inc. (NASDAQ:SRTS) at the end of Q3 2022.
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