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Binge Watching Dopesick? Here Are 3 Stocks That Involve an Opioid-Free Recovery

By Patrick Bafuma – Nov 3, 2021 at 7:10AM

Key Points

  • U.S. Physical Therapy has steady growth and pays a dividend.
  • Online therapist Talkspace is growing fast and may soon be profitable.
  • Nevro offers a promising implantable device for diabetic neuropathy.

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Check out these companies utilizing non-pharmaceutical means to optimize America's health.

Like many Americans, you may be shaking your fist at Purdue Pharmaceuticals after watching the first few episodes of Hulu's hit series Dopesick. As the show indicates, medicine although flawed can seem to be the best and easiest treatment for pain management. However, there are a number of non-narcotic therapies that can benefit those with chronic painful conditions. These 3 stocks are here to help America's physical and mental recovery.

1. U.S. Physical Therapy: Improving movement and managing pain

U.S. Physical Therapy (USPH -0.38%) keeps America moving. An operator of outpatient physical therapy clinics and provider of industrial injury prevention services, this $1.4 billion healthcare company operates over 550 outpatient physical therapy clinics in 39 states. Its offices provided care to just under 1.1 million patients in the most recent quarter. Ranging from rehab for knee replacements to chronic back pain and work-related injuries, services available at U.S. Physical Therapy aim to get patients back on their feet.

A physical therapy session with therapists helping patients walk with the use of support rails.

image source: Getty Images.

The physical therapy market is highly fragmented with no company having greater than a 10% market share. Thus, the addressable market of over $30 billion in annual revenue is ripe for disruption and consolidation. Then there is the fact that approximately half of Americans over the age of 18 develop a musculoskeletal injury that lasts more than 3 months. But, with only 10% of people in this age group utilizing outpatient physical therapy, there is no shortage of market opportunities.

COVID-19 took its toll on the business, with the company seeing about 45% of its usual volume in April 2020, and ultimately U.S. Physical Therapy closed a total of 48 clinics (of which 14 were sold) in 2020. Yet, the company has seemingly emerged stronger, with net revenue of $126.9 million for the second quarter of 2021 compared to $126.4 million in 2019, despite having 21 fewer clinics open on average in the 2021 second quarter. Things are looking up though as the number of patient visits grew at an 8.5% compounded annual growth rate from 2012 to 2019. Plus with a 1.04% dividend yield and plenty of addressable markets ahead, this healthcare company could provide reliable and steady growth for your portfolio.

2. Talkspace: Let's talk about it

We can all use some therapy on occasion, and fortunately, the online therapy company Talkspace (TALK -3.39%) can help. As a mobile behavioral healthcare company, Talkspace offers affordable and timely access to therapy for couples as well as teens.

With over 60,000 active members last quarter, Talkspace has demonstrated effectiveness. Eighty percent of its users believe its initial approach of asynchronous text-based therapy is as effective as traditional, face-to-face therapy. By the eight-week mark, 44% of clients experience clinically significant change compared to 25% of clients meeting in person with their therapists. By three months, 59% of clients experience improvement compared to 50% of clients in traditional therapeutic settings. A whopping 98% of Talkspace users find the platform more convenient than face-to-face visits. 

This digital mental healthcare solution is guiding for $125 million in net revenue for fiscal year 2021, representing about 69% year-over-year revenue growth with 64% gross margins. With numbers like these and a market cap of just over $550 million, the stock looks quite undervalued. Even better, management believes it can turn profitable in 2022 while still continuing its impressive growth.

3. Nevro: Implantable solutions for diabetic pain

A patient with diabetes whose condition is untreated or poorly managed can develop diabetic neuropathy, a form of nerve damage that often results in numbness in the legs and feet. Just over five million U.S. citizens have this condition, with 45% of them having refractory to routine management with medications. Medical device maker Nevro (NVRO 1.92%) offers an implantable solution for diabetic neuropathy. 

The company has the only spinal cord stimulation system with an FDA-approved indication for treating this condition. It may have another competitive advantage as well. The system can be remotely optimized by patients over the phone, enabling them to tailor therapy without the physical presence of a device representative. This individualized approach may explain why 85% of patients experience 75% pain relief -- an impressive benchmark when you consider that these patients did not respond well to medical therapy.

Nevro reported non-GAAP adjusted EBITDA for the second quarter of 2021 at $3.0 million, compared to a negative $11.1 million in the second quarter of 2019. Having an annual addressable market of $3.5 billion to $5 billion, Nevro has room to grow, since this upgraded device just hit the market in April 2021. Given that it just crossed into non-GAAP profitability in the most recent quarter, meaningful growth in device sales could spell big profits for investors.  

Focus on the mobile solution

The three of these companies offer investors different ways to tackle the chronic pain market. U.S. Physical Therapy is a more mature company with a dividend that is unlikely to experience explosive growth. Compared to Talkspace which is in its infancy and growing revenues over 50% annually. And yet Nevro offers a combination of growth with its new indications for diabetic neuropathy and has the stability of a medical device maker.

Of these three, I think Talkspace deserves a closer look. Yes, there are larger competitors like TelaDoc (TDOC -5.33%) entering the space, and shares of the mobile mental health company have underperformed -- down over 60% since it went public after merging with a special-purpose acquisition company (SPAC) in late June. Despite this, Talkspace continues posting impressive growth. The company has the potential to be profitable by the end of 2022. As it has reported gross margins above 60%, and revenue growth near 70% year over year, it may only be a matter of time before investors who listen to Talkspace start to see their portfolios heal.

Patrick Bafuma has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Teladoc Health. The Motley Fool has a disclosure policy.

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