We recently compiled a list of the 7 Best Medical Technology Stocks To Buy According To Analysts. In this article, we are going to take a look at where Inspire Medical Systems, Inc. (NYSE:INSP) stands against the other medical technology stocks.

Growth and Drivers of the Global MedTech Market

The MedTech sector is crucial in healthcare, which concentrates on the creation of medical devices aimed at enhancing disease prevention, diagnosis, and treatment. Prominent products in this field include well-known devices like pacemakers, imaging equipment, dialysis machines, and a range of implants.

A study by Mordor Intelligence estimates that the medical equipment market will be worth $681.57 billion by 2025. The enormous industry is anticipated to reach a market value of $955.49 billion by the end of the forecast period, growing at a compound yearly growth rate of 6.99% between 2025 and 2030.

Numerous megatrends in the healthcare industry are to blame for this considerable expansion. One of the main elements influencing the sector is the aging of the global population. This is particularly true in wealthy nations like the US, where, as of 2023, 17% of the population is 65 years of age or older. The demand for medical equipment is ultimately being driven by the rise in the prevalence of chronic diseases.

In the ensuing decades, this need is expected to keep increasing. The United Nations estimates that by 2050, there will be more than 1.5 billion individuals worldwide who are 65 years of age or older, accounting for about 16% of the global population. In regions like Europe and North America, where the proportion of people 65 and older is predicted to reach 26.9% by 2050, this demographic change is likely to manifest particularly strongly.

Transformations and Growth Drivers in Healthcare IT and Medical Devices

Furthermore, the healthcare IT sector is undergoing a transformation due to technological developments including the growing application of AI, predictive analysis, and sophisticated algorithms. Asia-Pacific is the medical device market with the greatest rate of growth, although North America still holds the largest share.

According to a different Grand View Research analysis, the US medical device manufacturing market is expected to reach a value of approximately $256.2 billion by 2024. Between 2025 and 2030, it is anticipated to expand at a compound annual growth rate of 5.9%. The growing frequency of traffic and sports accidents, the aging population, the geographic expansion of the major market participants, and the increased use of minimally invasive procedures in the sector are the main causes of this growth.

McKinsey predicts that the growth dynamics of the healthcare sector will continue to change. Between 2023 and 2028, it is projected that revenue pools related to health services and technology (HST) would expand at a compound annual growth rate of 8%, driven by double-digit growth in software platforms and advanced data and analytics. This expansion is also being supported by the selling of cutting-edge technologies to payers and providers, such as generative AI.

Additionally, it is anticipated that pharmaceutical services—particularly those pertaining to specialty pharmacy—will continue to expand. Increased use and the introduction of novel treatments are anticipated to be the main forces behind this expansion. According to McKinsey, between 2023 and 2028, specialty pharmacy revenue is expected to increase at a compound annual growth rate of 8%, which will increase managed service providers’ and specialty pharmacies’ EBITDA.

Our Methodology 

For this list, we selected stocks with an analyst upside of 20%-50%, a market capitalization of over $2 billion, institutional ownership above 40%, and low short interest. We then ranked these stocks based on their analyst upside.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Inspire Medical Systems, Inc. (NYSE:INSP)

Price Target Upside: 29.04%

Inspire Medical Systems, Inc. (NYSE:INSP) develops and commercializes innovative solutions for obstructive sleep apnea (OSA), primarily through its implantable Inspire therapy system. This device, surgically implanted near the collarbone, keeps the airway open during sleep and includes a remote control and an app for tracking sleep data. Unlike traditional treatments like CPAP machines, Inspire offers a non-invasive, implantable solution that directly addresses the root cause of OSA.

Inspire Medical Systems, Inc. (NYSE:INSP) reported strong financial performance in Q4 2024, with revenue reaching $239.7 million, a 25% increase from the previous year. This growth was driven by the rising adoption of Inspire therapy in the US. The company also achieved net income of $35.2 million, a significant jump from $14.8 million in Q4 2023, translating to diluted net income of $1.15 per share. 2024 marked the corporation’s first full year of profitability, with diluted net income of $1.75 per share compared to a loss in 2023. Operating cash flow for the quarter was $69 million, totaling $130 million for the year, reinforcing their strong financial position.

As one of the best medical technology stocks, the company received FDA approval for the Inspire V neurostimulation system, which features internal respiratory sensing, eliminating the need for an additional lead. This approval is expected to simplify the procedure for physicians and reduce production costs. The growing demand for Inspire therapy, improved operational efficiency, and strong cash flow make the company well-positioned for continued growth in the large OSA market, presenting a promising investment opportunity.

Overall INSP ranks 4th on our list of the best medical technology stocks to buy according to analysts. While we acknowledge the potential of INSP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than INSP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.