2 Healthcare Stocks That Could Help Set You Up for Life

As a sector, healthcare can be hit or miss for investors. Many companies end up going bust, but some go on to multibagger returns that could help set you up for life. Repligen (RGEN 8.76%) and ResMed (RMD 2.15%) are two stocks which could fit that bill with their proven track records and growing opportunities.

1. Repligen

Repligen offers a unique way to invest in the healthcare space. Its business is to support the industry with the materials necessary to develop and manufacture products. Operating in both the downstream and upstream processes of drug development, Repligen sells products in the areas of filtration, chromatography, process analytics, and proteins. 

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Drug manufacturing is a material-intensive business, and Repligen's recent results demonstrate the critical role it plays in this industry. 

Data source: Repligen.

Let's drill down a little further on these numbers. During the quarter, coronavirus-related sales grew 247% and accounted for 27% of total revenue. Further, management stated that it expects Q4 COVID-19-related revenue to remain consistent with Q3's results -- and that this segment should account for at least $200 million in 2022.

While coronavirus-related sales are certainly helping Repligen's results, the company's base (non-COVID-19) business also grew nicely -- with revenue up 49% over the year-ago period. Repligen also upped its 2021 fiscal-year guidance for total revenue, coronavirus revenue, and net income, indicating that management believes these positive results will continue.

Impressively, the company has achieved this growth even as it improves its business operations. As a percentage of overall revenue, its selling, general, and administrative expenses were 27%, down from 31% in the prior-year quarter.

Rather than being dependent on the success of a single customer, Repligen makes money from many companies, whether their drugs are successful or not. This is a company that gives investors exposure to the healthcare space without having to guess who the winners will be. And with a total addressable market at $3.7 billion, the company has plenty of room for further growth.

Image source: Getty Images.

2. ResMed

ResMed is a medical-device company that helps those with sleep and respiratory issues, such as sleep apnea, chronic obstructive pulmonary disease (COPD), and other chronic diseases. While this may seem perhaps like a niche area to address, the company believes the sleep and respiratory care markets are under-penetrated globally. Obstructive sleep apnea (OSA) -- when you stop breathing for periods of time while asleep -- is estimated to impact about one-quarter of adults aged 30 to 70. It is also estimated that fewer than 20% of those who suffer from OSA have been diagnosed.

The vast majority of ResMed's revenue comes from the sale of devices and supplies, such as masks and tubing, that get replaced over time. Despite supply chain and and other challenges, the company's latest quarter (ended Sept. 3) showed solid results. Revenue, operating income, and net income were up 19%, 21%, and 14%, respectively, over the year-ago period. It stands to reason that results could be even stronger once the current economic headwinds improve. 

The company also has a subscription service component of its business that grew 6% year over year but currently only constitutes 11% of overall revenue. However, management sees this segment as a competitive advantage and anticipates its growth will increase to the high single digits by the end of this fiscal year. If it can grow to be a larger portion of overall revenue, it will improve gross margins and profitability.

Lastly, ResMed pays a modest dividend, providing additional returns to shareholders and making the stock more enticing for long-term investors who are looking for investment income in retirement. While the yield of 0.6% isn't anything to write home about, the company has raised it consistently over the past several years. ResMed is the market leader in its growing healthcare niche and should make a great addition to any portfolio.