Watching shares of the companies you own drop considerably over a short period can be gut-wrenching. With equity markets so volatile lately, investors may want to look toward healthcare stocks that have been proven winners to anchor their portfolios.
Investing in solid companies does not necessarily mean old and stodgy without growth prospects. Omnicell (OMCL 2.02%), Orthopediatrics (KIDS 2.22%), and Penumbra (PEN -0.30%) have all demonstrated long-term revenue growth and rewarded shareholders in the process. And while substantially filling a much-needed niche in the healthcare system, this trio warrants consideration by investors.
Omnicell
Standing at the crossroads of labor shortages, a shift toward automation, and an ever-present push for better patient outcomes is Omnicell. Its pharmacy management systems are designed to reduce error-prone manual labor and reduce administrative tasks. Additionally, its equipment and software solutions increase productivity while at the same time reducing both medication errors and medication waste.
This healthcare solutions company closed fiscal 2021 with $1.2 billion in revenue and is projecting $1.37 to 1.43 billion in fiscal 2022, yet still has plenty of room for growth. Across all of its operations, the company believes the sum of its addressable markets to be $70 billion. Hospitals love its product too, considering that Omnicell enjoys over 99% customer retention. Plus, it has a whopping backlog of orders -- $1.25 billion to close out 2021, up from $924 million at the end of 2020.
Image source: Getty Images.
Healthcare systems are always looking for more efficient care management and delivery, and while the pandemic may have accelerated these trends, there is little reason to think these tailwinds will stop blowing for Omnicell. It's been a proven winner over the long term, gaining 220% over the last five years and nearly 750% over the last decade. With its sticky product lineup, a massive and growing backlog, plus a trend toward efficiency and automation, this $5.6 billion healthcare company is an obvious set-it-and-forget-it stock for the next 10 years.
Orthopediatrics
Parents as well as healthcare workers understand that the saying, "kids will be kids" can imply rambunctious playtime. And sometimes that can bring about injuries, like broken bones. Fortunately, Orthopediatrics provides solutions that are unique to this patient population. While orthopedic surgeons previously had to repurpose adult tools, this surgical supply company specializes in child-sized implants for pediatric orthopedic procedures.
Treating over 234,000 pediatric patients since its inception, this specialized surgical supplier has come to dominate its marketplace. Orthopediatrics conducts over 300 product training sessions annually and already serves 100% of the top U.S. children's hospitals. But that by no means is indicative of a saturated market. The company believes the addressable market to be $1.5 billion in the U.S. and $3.3 billion worldwide. That's a lot of runway for a company with $98 million in fiscal 2021 revenue.
Since its October 2017 IPO, shares have gained just shy of 200% compared to 78% for the S&P 500. Revenue growth has been steady ever since as well, with an annual revenue CAGR (compound annual growth rate) of just over 21%. As a first-mover with a solid foothold in its specialized market, Orthopediatrics is the sort of steady performer that you can set and forget. And down just under 25% from its 52-week high, this seems like as good a time as any to add it to your watch list.
Penumbra
Another specialist device maker, Penumbra, enables interventions to treat conditions such as strokes and blood clots in the lungs. It has continually pushed the boundaries of medicine, and its latest innovation, the REAL Immersive System, makes the company an even more intriguing investment.
The virtual reality-based platform for physical and occupational therapy has a lot of optionality to address various conditions, including stroke rehabilitation. While scant on the cash value of its addressable market, Penumbra claims there are 50 million patients in the U.S. alone that could benefit from the system. This leaves plenty of runway in the next decade for the company that began as an innovator in stroke care.
Your hard-earned savings is likely safe with company management too. They have been historically conservative and have beaten revenue guidance every year since its 2015 IPO except for 2020 due to the coronavirus pandemic. The company is also projecting 15%-17% revenue growth for fiscal 2022, which is remarkably consistent with its 17.5% five-year annual growth rate. Investors have fared well in the process as shares are up 178% in the last five years compared to an increase of 93% for the S&P 500.
With a history of successful innovation and savvy management, you should be able to rest easy owning shares of this innovator. Its C-suite understands the needs of its customers and has generated outsized gains for investors in the process. By essentially creating the VR rehabilitation market for itself, Penumbra should continue to make shareholders smile for years to come.
