Healthcare stocks have become increasingly popular with investors since the onset of the COVID-19 pandemic. Before 2020, few would have expected that investing in vaccine developers, telehealth providers, or online pharmacy chains would be all the rage. Now, companies in those niches have become staples in the portfolios of those hunting for growth stocks in the broader healthcare sector.
Three top stocks that enjoyed (and deserved) all the attention are Pfizer (PFE -0.06%), Hims & Hers Health (HIMS 4.95%), and 111 (YI 1.89%). Here's why they are positioned to enrich investors in 2021 and beyond.
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1. Pfizer
By 2022, Pfizer expects to generate more than $15 billion from sales of its coronavirus vaccine, which has been dubbed Comirnaty.
In a recent follow-up study, Comirnaty was found to prevent 100% of severe COVID-19 cases and had showed 100% efficacy in a South African study, where a more deadly strain is prevalent. The vaccine's protection has been shown to hold up for at least six months after a second dose. Pfizer promises to deliver 2 billion doses by the end of the year.
Its coronavirus vaccine could not have come at a better time for the drugmaker. Last year, Pfizer spun off its generic drug business, Upjohn, due to poor sector performance. While that decision removed a drag on its growth, it also took approximately $10 billion out of Pfizer's annual sales. Fortunately, the company expects 6% annualized growth in its core biopharma business up until 2025 without accounting for Comirnaty.
This year, the company expects to generate $60.4 billion in sales and $3.15 in earnings per share (EPS). Those are remarkable improvements over the $51.8 billion in sales and $2.95 in EPS Pfizer had in 2020. In addition, the company has 24 clinical programs in phase 3 trials and nine pending regulatory approval across the areas of oncology, rare diseases, and inflammation, among others. With a 21% success rate of bringing drugs to market, the company has far outperformed the average clinical success rate of 8% among its peers.
Pfizer stock is only trading at 21 times earnings, which is pretty cheap for a company on track to grow its EPS by 6.8% this year. As icing on the cake for investors, the stock also boasts a solid dividend that at current share prices yields over 4%.
2. Hims & Hers Health
Hims & Hers is a tech firm that seeks to personalize the healthcare experience for patients. It offers many over-the-counter and generic remedies treating conditions such as anxiety, depression, and hair loss. It also charges its customers $39 per visit on its telehealth platform, which hosts more than 220 doctors.
So far, patients seem to like the service, based on its reported 94% customer satisfaction rate. Last year, its subscription count grew by 64% to 312,000. And recently, the company rolled out Hims & Hers enterprise solutions, which offers employers primary care plans. It also includes a digital pharmacy with more than 100 specialty meds and 500 affordable medications for distribution across all 50 states.
In 2020, the company grew its revenue by 80% to $149 million. Simultaneously, its net loss narrowed from $72 million in 2019 to $18 million. This year, the company expects to expand its revenues to $200 million.
A valuation of 12 times sales for a company with a growth rate of 34% sounds expensive. However, I believe the company may be undervalued compared to its potential. Its subscription based-model is easily scalable, and its moves into telepharmacy and telehealth should add more heft to its value proposition. This is definitely an innovative healthcare company that you don't want to miss.
3. 111
111 is currently the largest online pharmacy in China. It offers a vast product selection, including over-the-counter remedies, branded medications, dietary supplements, medical equipment (including masks), contact lenses, beauty products, reproductive health products, and maternity care items. The company offers 24-hour delivery to 300 cities in China and 72-hour delivery nationwide. It also has partnerships with 330 pharmaceutical developers across the world.
Last year, 111's revenue increased by 107.6% to $1.26 billion. At the same time, its net loss narrowed to 4.6% of revenue compared to 11% in 2019. This year, 111 expects to maintain its momentum with guidance for revenue growth in the 61% to 65% range in Q1 2021.
For all it provides, you may be surprised to hear that 111 is trading at just 0.7 times revenue. What's more, 111 has more than $248 million in cash and equivalents on its balance sheet, compared to just $35 million in debt. This gives the company an enterprise value (EV) of just $750.6 million and an EV-to-sales ratio of 0.6. 111 is definitely a telehealth company with high-performance growth, and it's trading at bargain levels.
