No matter what the economy is doing, healthcare stocks make a great long-term bet. That's because they offer you a certain sense of stability: People need their medical treatments regardless of the economic environment. And that fact generally supports earnings.
Meanwhile, some healthcare stocks offer you terrific growth prospects as well. They're usually companies with a cutting-edge technology or companies operating in a high-growth area. Three of these players would make great additions to your portfolio in June. Let's find out more.
1. Intuitive Surgical
Intuitive Surgical (ISRG -1.69%) is the global leader in robotic surgery. The company holds almost 80% of the global market thanks to its flagship da Vinci platform. Even better, Intuitive has a pretty solid moat. This means unseating this market giant would be a difficult task.
Here's why: First, more than 66,000 surgeons have been trained on the da Vinci system. So, it's unlikely they'll want to start the learning process from zero on a new system. Second, surgical robots are million-dollar purchases. Today, Intuitive has an installed base of more than 7,700. After big investments in the da Vinci, hospitals probably would aim to stick with the platform.
Finally, Intuitive continues to invest in research and development and improve on its technology. The company has made about 10 major fourth-generation operating-system releases to its multiport platform since initial launch. Intuitive also offers surgeons Intuitive Hub to automatically record procedures and My Intuitive to track their surgical data. Most recently, Intuitive licensed patents of struggling rival Titan Medical, which may further improve Intuitive's technology down the road.
Today, Intuitive shares are heading back toward their record high. And they're trading for 56 times forward earnings. That's not cheap. But I think Intuitive is worth the price considering its dominance in the market, its earnings growth so far, and future prospects.
ISRG Net Income (Annual) data by YCharts.
2. Doximity
Doximity (DOCS -0.77%) owes its earnings growth to doctors. More than 80% of them in the U.S. use this professional network. Through Doximity, doctors can almost operate their practice right from their phones -- from conducting telemedicine visits to sharing patient records with colleagues.
But doctors aren't the actual customers who generate revenue at Doximity. The company's customers are the pharmaceutical companies and healthcare systems that seek to advertise to doctors.
And here, Doximity has built up quite a client list. All of the top 20 pharma companies and the top 20 hospitals are customers. For the recent fiscal year, those with the biggest budgets continued to spend more. Doximity said 11 customers each contributed more than $10 million to revenue in the year.
Importantly, though, Doximity doesn't depend too much on one customer. Each customer represents less than 10% of the company's revenue. And each brand advertised represents less than 2% of total company revenue.
This is working well for Doximity. The company's revenue climbed in the double digits in the fiscal year. And Doximity reported a net-income margin of 27% and an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 44%. Free cash flow also has been on the rise.
The market hasn't yet rewarded Doximity. The stock trades for 40 times forward-earnings estimates, around its lowest level over the past year. This looks like a very reasonable price for the company's growth so far and its potential thanks to its solid customer base.
DOCS PE Ratio (Forward) data by YCharts.
3. CRISPR Therapeutics
CRISPR Therapeutics (CRSP -1.98%) may be at the start of an exciting story. The gene-editing company and big biotech partner Vertex Pharmaceuticals recently completed regulatory submissions of exa-cel.
Here's why this is particularly important for CRISPR. First, if approved, exa-cel would be CRISPR's first product. This represents revenue and a vote of confidence in the company's game-changing technology.
And revenue could be significant. Exa-cel is seeking approval for use in adults with blood disorders beta thalassemia and sickle cell disease. Today, treatment options are limited for these illnesses. And exa-cel is designed as a one-time curative treatment. It's easy to imagine doctors and patients rushing out to try such a product.
CRISPR and Vertex also are testing exa-cel in phase 3 trials in a pediatric population. If all goes well, this could result in an expanded indication and additional revenue down the road.
CRISPR isn't relying only on exa-cel though. The company has a pipeline full of other gene-editing candidates. And it has another close-to-market one. It recently launched a phase 2 trial of CTX110, an immuno-oncology candidate. This trial may be used to support a regulatory request.
So far this year, CRISPR shares have climbed 59%. Some may say positive exa-cel news is priced in at these levels. And it may be if we're looking at very short-term potential. But exa-cel and other potential gene-editing products could drive the shares much higher over time.
