The S&P 500 Index is up more than 8% so far this year. But some healthcare stocks haven't had such luck. They're lagging behind in spite of strong market share, innovation, and revenue and profit prospects. And that means it's the perfect time for long-term investors to pick up shares -- before everyone else jumps on board and sends these stocks soaring.
Here, I'll talk about three overlooked healthcare stocks to buy now for big reward potential well into the future.
Image source: Getty Images.
Intuitive Surgical
Intuitive Surgical (ISRG -0.86%) has slipped about 6% since the start of the year. This leader in robotic surgery holds more than 80% of the global market, a report from Informa Pharma Intelligence shows. Hospitals around the world have installed nearly 6,000 of its da Vinci robotic systems for use in general surgery, urological procedures, and other specialties. As a result, Intuitive Surgical's annual profit and revenue have been on the rise for most of the past five years.
ISRG revenue (annual) data by YCharts.
I'm not alarmed by the dip in earnings last year. Here's why: Hospitals worldwide postponed surgical procedures to dedicate resources to coronavirus patients. That trend continues in certain countries as they battle the pandemic.
The good news is this is a temporary situation. Intuitive Surgical should see a rebound after hospitals catch up on postponed procedures and schedule new ones in the coming months and years. The company generates revenue from system installations and sales of instruments and services.
And once the pandemic is truly behind us, the future is bright for Intuitive Surgical. The global robotic surgery market, at a 21% compound annual growth rate, is set to reach $6.9 billion by 2026, a Fortune Business Insights report shows. And Intuitive Surgical is likely to hold on to its position due to its products and distribution network, according to the report.
Abiomed
Shares of Abiomed (ABMD) are little changed so far this year. The company makes the Impella collection of heart pumps, which are used in procedures like open-heart surgery and to help patients whose hearts can't pump enough blood to organs.
The pandemic weighed on earnings over the past year as some procedures were postponed. But the Impella's use in coronavirus patients has compensated to a certain degree. The Food and Drug Administration granted the company two Emergency Use Authorizations for the use of its pumps in some coronavirus patients. In the most recent quarter, revenue from the Impella RP climbed 21% as doctors used it in patients with coronavirus complications such as a pulmonary embolism.
Abiomed reported record total revenue of $232 million in that quarter. And the company predicts 9% to 14% revenue growth in the current quarter, year over year. I expect more growth for Abiomed supported by innovation. The company has more than 1,000 Impella patents and 851 patents pending.
And I like the company's financial health: It has $788 million in cash and no debt.
Pfizer
My third overlooked stock is Pfizer (PFE -3.22%). Now, you're going to ask me: "How can Pfizer be 'overlooked'? It's all over the news these days thanks to its coronavirus vaccine." This is true. But let's have a look at share performance. The stock is little changed this year. And it's trading at only 11 times forward earnings estimates. That's compared to more than 15 late last year.
PFE PE ratio (forward) data by YCharts.
At the same time, Pfizer recently completed the spinoff of its Upjohn business, so that unit will no longer drag down earnings. Now Pfizer can fully benefit from its strengths in biopharmaceuticals, like heart drug Vyndaqel and anticoagulant Eliquis, which drove revenue growth last year. And total revenue reached nearly $42 billion.
This year is looking even better. The midpoint of Pfizer's guidance for annual 2021 revenue and earnings implies 44% and 42% gains, respectively, compared with 2020. This includes a forecast for $15 billion in revenue from the coronavirus vaccine. Pfizer splits coronavirus vaccine revenue with partner BioNTech. But even that leaves Pfizer with a blockbuster level of revenue from the product.
Pfizer's share price performance doesn't reflect the revenue and profit on the horizon. And that's why this is a great stock to add to your healthcare portfolio right now.
