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 LivaNova PLC (NASDAQ:LIVN) 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).
A close-up of a medical device used for therapeutic solutions in a world-class hospital.
LivaNova PLC (NASDAQ:LIVN)
Price Target Upside: 41.53%
LivaNova PLC (NASDAQ:LIVN) is a global medical technology company specializing in innovative devices for cardiovascular and neuromodulation therapies. Its product portfolio includes heart-lung machines, oxygenators, and neuromodulation devices, primarily sold to hospitals and healthcare providers. The company operates in two main segments: Cardiac Surgery, which offers a range of cardiopulmonary equipment, and Neuromodulation, focusing on devices like the VNS Therapy System for treating drug-resistant epilepsy and depression.
LivaNova PLC (NASDAQ:LIVN)’s Q4 2024 earnings showed solid growth despite some challenges. Overall revenue increased by 5%, with organic growth of 7% compared to Q4 2023. For the full year, organic revenue grew by 11%, marking two consecutive years of strong growth. The Cardiopulmonary segment led the way with an 11% increase in Q4 revenue, while revenue from epilepsy treatments in Europe and international markets declined by 9%.
LivaNova PLC (NASDAQ:LIVN)’s profitability improved, with an adjusted gross margin of 69% in Q4, up from 68% last year, and operating income rising to $56 million. However, adjusted diluted earnings per share dropped to $0.81 due to a higher tax rate. The corporation ended the year with a cash balance of $429 million, up significantly from $267 million at the end of 2023. Adjusted free cash flow also grew by 70% to $163 million.
As one of the best medical technology stocks, LivaNova PLC (NASDAQ:LIVN) is well-positioned for growth, with revenue growth expected to be between 5% and 6% in 2025. They also anticipate organic growth of 6% to 7%, adjusted EPS of $3.65 to $3.75, and adjusted free cash flow of $135 million to $155 million.
Overall LIVN ranks 3rd on our list of the best medical technology stocks to buy according to analysts. While we acknowledge the potential of LIVN 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 LIVN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.