We recently compiled a list of the Best Medical Stocks To Buy Under $20. In this article, we are going to take a look at where Sotera Health Company (NASDAQ:SHC) stands against the other best medical stocks under $20.

The medical industry plays a crucial role in ensuring the health and safety of populations. Driven by advancements in medical technology and an aging population, the medical and healthcare industry is expected to grow significantly in the coming years.

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According to Deloitte’s 2024 Global Healthcare Sector Outlook, the use of technologies like artificial intelligence (AI) is rising in the healthcare sector. Healthcare providers and technology companies are introducing various kinds of AI tools that can help improve clinical outcomes. These technological advancements can streamline various administrative tasks while also enhancing the quality of care provided to patients.

Healthcare in the US

In the US, healthcare costs and spending have been rising. As reported by the Centers for Medicare & Medicaid Services, healthcare spending in the United States reached $4.9 trillion in 2023, reflecting a 7.5% increase from 2022. In 2023, the healthcare sector accounted for 17.6% of the US economy in 2023, up from 17.4% in 2022. Rise in private health insurance and Medicare were the two main drivers of this growth.

Donald Trump nominated Robert F. Kennedy Jr. to serve as the next Secretary of Health and Human Services, a role that covers various aspects of public health, including medical research and food safety. If confirmed, Kennedy would oversee key agencies like the US Food and Drug Administration (FDA) and Centers for Disease Control and Prevention (CDC) and the head of the Centers for Medicare and Medicaid Services (CMS). In an NPR interview in November, Kennedy said that Trump had tasked him with eliminating corruption in health agencies, restoring evidence-based practices, and addressing the chronic disease epidemic. It’s not clear how Kennedy’s nomination could impact the healthcare sector as his specific policies are not yet clear and he has yet to receive confirmation by the US Senate.

Chris Schott, JPMorgan’s healthcare analyst, pointed out in a note to clients that the industry is currently experiencing “a period of max uncertainty” until the position is filled. However, Schott noted that this situation also means that the large-cap stocks are currently trading at a 35% discount to the S&P 500, presenting a significant opportunity for growth.

Jared Holz, Mizuho’s healthcare expert, said in a note to clients that he acknowledges some of Kennedy’s concerns, such as America’s obesity epidemic and the risks associated with ultra-processed foods. Holz noted that this is a complicated topic but emphasized that there is substantial room for improvement in public health.

However, Kennedy is known as an anti-vaxxer and this has concerned some Wall Street analysts about his possible effect on the vaccine industry. He has also expressed skepticism about GLP-1s, which he believes are not the solution to the obesity problem. Additionally, Kennedy has advocated for stricter regulations on ultra-processed foods, which are linked to rising obesity rates in the country.

Methodology

To compile our list of the 12 best medical stocks to buy under $20, we used the Finviz stock screener. We sorted our results based on market capitalization and picked the top 30 medical companies with a share price of under $20 as of January 8, 2024. Next, we focused on the top 12 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 12 best medical stocks to invest in were then ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.

Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Sotera Health Company (NASDAQ:SHC)

Share Price as of January 8: $13.39

Number of Hedge Fund Holders: 31

Sotera Health Company (NASDAQ:SHC) is a leading global provider of sterilization solutions, lab testing, and advisory services for the healthcare and medical industry. The company operates through three main businesses: Sterigenics, Nordion, and Nelson Labs. As one of the best medical stocks to buy, Sotera Health Company (NASDAQ:SHC) offers essential services to ensure the safety and efficacy of medical products and healthcare services.

All 3 of the company’s businesses have been performing well. In the third quarter of 2024, Sotera Health Company (NASDAQ:SHC) reported net revenues of $285 million, an increase of 8.5% year-over-year. Sotera Health Company (NASDAQ:SHC) also achieved a net income of $17 million, a significant turnaround from a net loss of $14 million in Q3 2023. This growth was driven by strong performance across all three business segments. Sotera Health Company’s (NASDAQ:SHC) management has outlined ambitious financial goals for 2025-2027, targeting an organic revenue growth rate of 5% to 7% and an adjusted EBITDA margin expansion of at least 50 basis points. The company also aims to generate over $500 million in cumulative free cash flow during this period.

During the third quarter, Sterigenics completed a significant capacity expansion project, which is expected to enhance its service capabilities. This strategic investment is expected to support the company’s goal of meeting the increasing demand for sterilization services in the healthcare sector.

Overall, SHC ranks 11th on our list of the best medical stocks to buy under $20. While we acknowledge the potential of SHC as an investment, our conviction lies in the belief that some 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 SHC 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.