In the current market, it's more important than ever to be discerning about the stocks you pick for long-term additions to your portfolio. The market that investors are contending with right now presents its fair share of promising investment opportunities. However, it's always vital to look beyond share price and assess the strength of the underlying business to determine whether it makes sense for the composition of your individual portfolio.
On that note, if you're going bargain hunting for stocks to add to your portfolio before the year is out, here are three growth stocks you may want to consider adding to your buy list.
1. Teladoc
Despite the short-term impact that $10 billion worth of write-downs had on Teladoc Health's (TDOC -2.91%) balance sheet in the first half of 2022, the company remains an undefeated leader in the global telehealth market. While more companies are expanding into the telehealth space, few are doing so at Teladoc's scale. And considering the global telehealth market is set to witness a compound annual growth rate of 24% between now and 2030 to reach a $455 billion valuation, it's fair to say that there's room for more than one winner in this space.
In the most recent quarter, Teladoc's revenue surged 17% from the year-ago period to $611 million. The company was profitable on an adjusted EBITDA and free cash flow basis, with these metrics totaling $51 million and $20 million for the three-month period. Meanwhile, its net loss shrunk by more than 4,000% on a sequential basis, from $3 billion in the second quarter to $74 million in the third quarter.
From the rise of government funding for telehealth initiatives to an aging population to growing demand for solutions that close the gap on healthcare inequity, all of these factors should fuel further adoption of telehealth in the years ahead.
These also present protracted tailwinds from which Teladoc can continue to benefit over the long term, even as newer entrants break into the space. Given Teladoc stock's price-to-sales ratio of 2, investors may find it looks like an attractive growth opportunity in the current market for its long-term potential.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.76%) has made a name for itself as the presiding market share leader of the global cystic fibrosis therapeutics market. The company's most profitable drug, Trikafta, which generated more than $2 billion in revenue in the third quarter of 2022, on its own covers more than 90% of the entire cystic fibrosis patient population.
Trikafta, along with Vertex's three other approved CF medications -- Kalydeco, Orkambi, and Symdeko -- raked in revenue of $8 billion in 2021, representing a 22% increase over 2020.
Now, Vertex is looking to expand into other lucrative markets. Its current pipeline includes a rare blood disorder therapy called exa-cel with curative potential, for which it's in the process of undergoing regulatory submissions, as well as candidates targeting diseases like diabetes, Duchenne muscular dystrophy, and various pain conditions.
For example, COO Stuart Arbuckle said in the most recent earnings call that the company's pain disorder drug candidate, VX-548, could "play an important role across the pain spectrum, including an acute, neuropathic, and musculoskeletal pain," and that the acute pain space in the U.S. alone represents a $4 billion market opportunity.
Given its tremendous growth runway within the multibillion-dollar cystic fibrosis treatment space, which it dominates, coupled with its untold growth opportunity in sectors spanning the breadth of the rare disease drug market, Vertex's current P/S ratio of 9 looks more than palatable to contemplate a long-term addition to a profitable portfolio.
3. Intuitive Surgical
Intuitive Surgical (ISRG -0.50%) boasts a compelling, durable business model that has enabled the company to grow throughout many economic and market cycles. Over the past decade, it has delivered a total return of 330% for investors, while more than doubling its annual revenue and earnings in that same period.
The company develops, manufactures, and sells surgical systems for minimally invasive medical procedures. Its flagship product is the da Vinci surgical system, which has been featured in millions of procedures around the world since it was first approved roughly two decades ago. The company also sells a surgical system called the Ion, designed specifically to facilitate minimally invasive lung biopsies.
A single da Vinci surgical system runs for about $2 million, while the Ion carries a price tag upwards of $600,000. Intuitive Surgical doesn't just make money from selling the systems but also from the accessories, as well as parts that require regular maintenance and replacement. This lends itself to a very sticky, profitable business model.
Recently, Intuitive Surgical has had to contend with the impact of foreign-currency pressures, supply chain disruptions, and changes in procedure volumes in certain markets that have experienced COVID-19 case resurgences. Even so, revenue rose 15% year over year on a constant-currency basis in the most recent quarter to $1.6 billion.
Its pro forma net income for the three-month period totaled $429 million, while the company ended the period with $7.4 billion in cash and investments on its balance sheet. Management also noted that strong procedure demand catapulted its installed base of da Vinci systems 13% higher than one year ago, while Ion placements jumped 80% year over year.
Currently, Intuitive Surgical trades at a P/S ratio of 16, while its price-to-book multiple is right around 8, a veritable bargain for a stock with the tremendous potential this healthcare giant poses for long-term investors.
