For investors looking to double their money, look for healthcare stocks that are consistently increasing revenue and earnings per share (EPS).
Cigna Group (CI -0.13%), Danaher (DHR 0.54%), and IQVIA Holdings (IQV 0.67%) all have managed to generate double-digit (or higher) increases in either quarterly revenue and earnings per share, or both, over the past five years. Over the past year, all three of these growth stocks are faring better than the S&P 500. While none of these stocks is inexpensive, they are all excellent long-term buys. With $300, you have enough to buy a share of any of them.
Let's find out a bit more about these three growth stocks.
CI Revenue (Quarterly) data by YCharts
1. Cigna Group: New name, still plenty of growth
As of Feb. 13, health insurer Cigna operates as three separate brands. The Cigna Group is the overall global healthcare company, Cigna Healthcare offers health benefits, and Evernorth Health Services provides pharmacy, care, and benefit solutions.
Cigna is a healthcare giant with more than 70,000 employees across 30 countries. The company has grown quarterly revenue by 302%. It just reported fourth-quarter and full-year financials and notched another strong year. Cigna reported 2022 revenue of $180.5 billion, up 3.7% over 2021, while yearly EPS was $21.30, up 35.4%. Fourth-quarter revenue was listed at $45.8 billion, up less than 1% year over year, and EPS was reported as $3.83, up 13%.
What's driving Cigna's growth is its addition of healthcare services, which are more profitable than the company's health insurance business. The company also expects to see growth from its sales of biosimilar drugs, including a biosimilar of AbbVie's blockbuster immuno-oncology therapy Humira, which lost patent protection this year in the U.S.
Starting in 2024, the company's five-year contract to serve as the pharmacy benefits manager for the 20 million customers of health insurer Centene begins. The deal could be accretive to Cigna as soon as the first year of the contract, though there will be costs associated with implementing the plan this year.
Cigna's price-to-earnings ratio of 14 is less than half that of a typical insurance company's P/E and considering its forays into healthcare, inexpensive considering its potential growth. The stock has doubled in less than four years, so it's not unreasonable to see it doubling within the next five years.
2. Danaher focusing on profitability
Danaher is a group of 20 companies with a total of 80,000 employees that make and sell medical, industrial, professional, and commercial products and services. The company is in the process of spinning off its environmental and applied sciences platform as a separate public company. The platforms left after the spinoff will be life sciences, biotechnology, and diagnostics.
Danaher management said the spinoff will happen in the fourth quarter of 2023 and recently noted that the new company will be called Veralto, trading under the ticker VLTO. The division, which makes water-quality and product-identification equipment, was responsible for $4.8 billion in revenue in 2022, up 3% over 2021 totals. The move will allow the company to focus more on its other platforms, led by diagnostics, which reported annual revenue of $10.8 billion, up 10.2%. This segment's profit margin was 34.8%, compared to 19.10% for the environmental and applied sciences segment.
Over the past five years, the company has grown quarterly EPS by 273.8% and quarterly revenue by 78.24%. Danaher reported $31.5 billion in revenue for 2022, up 7%, with yearly EPS of $9.66, up 13% over 2021.
Dahaner's stock has quadrupled in price in less than four years, enough reason to think it could easily double an investor's money over the next five years. It has been able to maintain that growth through acquisitions. In 2020, Danaher bought GE's Biopharma business, now called Cytiva. In 2021, it completed its purchase of private biotech company Aldevron for $9.6 million. This year, Danaher is reportedly looking at adding contract drug manufacturer Catalent.
Danaher stock trades at roughly 26 times earnings, above some of its competitors, but its price-to-sales ratio of 6 is well below similar companies.
3. IQVIA Holdings: Making clinical trials better, faster, more diverse
IQVIA is a contract research organization (CRO) with 85,000 employees across 100 countries. It works to find cost savings and geographical reach for pharmaceutical companies through increased use of virtual clinical trials. The company helps healthcare companies, medical researchers, and government agencies better understand diseases and potential therapies to treat them.
It is focusing on virtual or decentralized clinical trials (DCTs) to speed up the expensive process of bringing a drug through clinical trials and to market. The use of DCTs increased by necessity during the peak of the COVID-19 pandemic and became a proof of concept for current DCTs.
IQVIA's DCTs cut the time needed to recruit patients for trials and give these experiments more diverse populations, in line with the Food and Drug Administration's Oncology Center of Excellence's Project Equity and Project Silver. Project Equity seeks to ensure that trials meet the demographic representation for whom oncology therapies are intended. Project Silver's goal is to bring better representation of adults 65 years and older in cancer clinical trials.
IQVIA just came off its 13th year of revenue growth, with a reported $14.4 billion in 2022 revenue, up 3.9% over 2021, while yearly EPS was $5.72, up 15.6%. The company also posted guidance of 2023 revenue of between $15.15 billion and $15.40 billion, a rise of between 5.1% and 6.8%. Management said it expected adjusted EPS to be between $10.26 and $10.56, up 1% to 3.9% over 2022.
The stock is priced at 38 times earnings and compared to other CROs is slightly above average, but the stock has doubled in price over the past two years and could easily double again over the next four years. Like the two stocks above, IQVIA has been active in mergers and acquisitions to find growth, buying 20 companies, including five in the past three years, including the purchase of medical data company Pharmaspectra from Inflexion last year for $100 million.
Over the past five years, IQVIA has increased quarterly revenue by 46% while becoming a whole lot more profitable, raising quarterly EPS by 275%.
