Many top stocks had a rough time last year. In some cases, their businesses suffered for reasons unrelated to the economy. In other cases, the economic environment pushed investors away. As a result, companies with track records of growth and strong potential saw their share prices tumble.
At some point, though, these stocks should bounce back. And that time may be soon. Why? Because they've reached attractive valuations and have shown strength -- or signs of strength -- in recent earnings reports. Let's take a look at three healthcare stocks that are ripe for a rebound.
1. Teladoc Health
Teladoc Health (TDOC 0.19%) shares are trading around their lowest ever in relation to sales. That's after the stock dropped 74% last year. Why has the valuation plunged? Last year, the company reported a couple of billion-dollar goodwill impairment charges linked to its purchase of chronic care specialist Livongo. That reinforced investors' worries about Teladoc's lack of profitability so far.
NYSE: TDOC
Key Data Points
But fears look overdone. In the most recent earnings report, Teladoc didn't report further impairment charges. The company's loss narrowed, and U.S. and international revenue climbed in the double digits. And it's important to remember that overall revenue and visits have steadily increased in the double digits -- a trend that started prior to the pandemic.
Teladoc serves more than half of the Fortune 500, so it already has a strong client base. But the company still has room to grow. Teladoc said in a presentation last year that of 298 million U.S. insured lives, about 92 million have access to a Teladoc product.
All this means that Teladoc -- at a record-low valuation -- looks like a screaming buy right now for long-term growth investors. A bit more progress toward narrowing the net loss or growing key areas like chronic care could quickly send the shares higher.
TDOC PS Ratio data by YCharts. PS Ratio = price-to-sales ratio.
2. Intuitive Surgical
During certain moments of the pandemic, the postponement of surgeries equaled the postponement of revenue for Intuitive Surgical (ISRG 2.64%). The company generates much of its revenue through selling instruments and accessories needed for procedures with its surgical robots. And last year, supply chain issues and higher materials costs also presented challenges.
But it's important to look at Intuitive through a long-term lens. The above headwinds are temporary. And Intuitive has the strength to get through difficult times and thrive later on. The company had more than $6.7 billion in cash at the end of the fourth quarter and repurchased more than $1 billion of its stock in the quarter -- a sure sign of confidence in its business.
Intuitive is the leader in robotic surgery, and it's likely to keep that position. Surgical robots are million-dollar investments, so hospitals tend to stick with what they've purchased.
Intuitive's recent earnings report showed that business is picking up. Procedures using Intuitive's flagship Da Vinci robot climbed 18%, and revenue increased 7% to more than $1.6 billion.
NASDAQ: ISRG
Key Data Points
Intuitive shares have lost 17% over the past year. Valuation has fallen to 45 times forward earnings estimates from about 60 a year ago. If the company continues to report progress in procedure growth and overall earnings, investors may soon pile back into this innovative healthcare stock.
3. Doximity
Doximity (DOCS 0.65%) is a digital platform where doctors can connect with each other, check on patients, and share medical reports and documents -- it's an online extension of their medical practice. How does Doximity generate revenue? Drugmakers and healthcare systems are the company's clients, advertising their products to the medical community.
In an environment of rising inflation, investors have worried about ad spending and its impact on Doximity. But so far, this high-growth company isn't slowing down. In fact, in the most recent quarter, its net revenue retention rate reached 127%. This is across its top 20 clients -- who all have worked with Doximity for about eight years. Doximity's clients include the top 20 pharma companies and the top 20 hospital systems.
This client loyalty is a reason to be confident about Doximity's ability to keep revenue climbing. And with 80% of U.S. doctors using Doximity, it's clear these clients have a real reason to continue advertising on the platform.
NYSE: DOCS
Key Data Points
Doximity is profitable -- annual revenue and net income have steadily been on the rise. And in the most recent quarter, revenue, operating cash flow, and free cash flow each advanced in the double digits.
Doximity shares have lost nearly 40% over the past year, leaving them at a very reasonable valuation.
DOCS PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio.
Considering the company's earnings strength -- even in a tough economic environment -- the stock has reason to rebound. And even better, Doximity has what it takes to excel over the long term.
