The consumer healthcare market is a multi-trillion dollar industry worldwide that could double by 2028, according to Verified Market Research, which means there are opportunities to be had for patient investors. Companies delivering innovative products and services that improve patient treatment can generate life-changing returns if caught early.
It only takes a few home runs to make an investor's career, so here are three exciting healthcare stocks with the potential to 10x over the next decade.
1. InMode
Altering the human body is an industry that dates back at least to 800 BC. Fortunately, the techniques and equipment we use today are much better than in years past. InMode (INMD 0.40%) designs and builds non-invasive surgery machines that use proprietary radio frequency technology to melt fat tissue under the skin.
Image source: Getty Images.
The company is rapidly expanding, averaging nearly 57% revenue growth over the past three years. Management is guiding for full-year 2021 revenue of $347 million, a 68% year-over-year increase from 2020, and a sign that revenue growth continues to accelerate.
Meanwhile, the company is already profitable. For 2021, it expects non-GAAP (adjusted) income of $165 million to $167 million as well as an impressive net profit margin of 48%. In other words, InMode is a rapidly growing, healthy business that should keep generating cash as it grows, which it can use to create more shareholder value.
Investors should note that it remains a relatively small stock with a market cap of just over $4 billion. The global cosmetic surgery market alone is worth $49 billion today, so InMode's estimated $347 million in 2021 revenue leaves a lot of room for future growth. If the company's non-invasive devices continue replacing outdated medical procedures, the stock could have a shot at 10x returns over the next decade.
2. GoodRx
The pharmaceutical business is one of the most complicated aspects of healthcare in the United States. The moving parts range from manufacturers to distributors, insurance companies, pharmacies, and more. Complicated and bloated industries can be bad for consumers, and GoodRx Holdings (GDRX -0.59%) is trying to fix the problem. Its website and app enable consumers to compare drug prices online and receive discounts on their prescriptions.
GoodRx is rapidly attracting people to its platform. The company recently reported third-quarter 2021 results that showcased a 31% year-over-year increase in monthly active users and a 68% increase in subscription plans. This helped revenue grow 39% over the year-ago quarter. GoodRx is profitable too, earning $39.7 million on $195.1 million in revenue. That amounts to a 20% net income margin.
For the entire year, analysts forecast $750 million in revenue, a fraction of the $524 billion prescription drug market in the United States. GoodRx is only a $10 billion company by market cap, so there is room for a lot of growth moving forward. Management is also willing to expand the business into new markets, launching a telehealth platform that remains in its early stages. If GoodRx can become a must-have tool for healthcare consumers in the United States, the upside could make the stock appreciate immensely in the years ahead.
3. Teladoc
Telehealth was a big winner during the COVID-19 lockdowns of 2020, and telehealth platform Teladoc Health (TDOC -1.52%) benefited as a result. The company provides digital access to healthcare for patients; its business is primarily in the United States but it does also have a small and growing international presence. Patients can receive primary care, consult specialists, and access counseling and mental healthcare.
TDOC Revenue (Quarterly YoY Growth) data by YCharts
The above chart illustrates the boost that Teladoc received from the pandemic; telehealth visits grew 156% year over year in 2020 while revenue grew 98%. Revenue growth is beginning to slow back down without lockdowns in place. Still, Teladoc grew 30% to 40% per year before the pandemic, and management is projecting the company to grow revenue 25% to 30% per year for the next several years. The business isn't yet profitable but is investing heavily to grow, and investors will want to look for its net losses to shrink over the coming years.
Teladoc's stock has been sold heavily by investors following this post-lockdown slowing of growth as well as the company's $18.5 billion acquisition of Livongo, a health technology company, in late 2020. The stock's $13 billion market cap today is less than this deal itself, illustrating just how much it's fallen over the past year.
Yet, there are reasons for optimism. Teladoc has a global network and just launched Primary360, its integrated platform that gives patients full access to its digital services. If Primary360 succeeds and Teladoc can make progress toward profitability, the stock could be a big winner over the coming years.
