As Covid-19 floods hospitals in certain affected areas, doctor’s offices around the world are seeing their number of appointments spike as people come in to be tested for the virus.
In addition, some managers are demanding that their employees get “cleared” of the virus by their doctors before returning to work, even if they do not have any symptoms. Given how quickly the virus spreads, some doctors have even noted an unusually high number of clients with mild or no symptoms who want to be tested preemptively.
In response, family care doctors and general practitioners are increasingly moving online in order to “see” more patients and protect themselves and their staff in a time when medical facilities are becoming overloaded. The digital move is likely to stick around in the long term as well, as the aging population in the U.S. and the rest of the world increases the frequency at which the average person needs to consult their primary care physician.
Thus, investors may want to take a look at the following stocks since they represent strong players in the up-and-coming digital health industry.
Teladoc Health
Teladoc Health Inc. (TDOC, Financial) is a multinational telemedicine and virtual health care company based in Harrison, New York.
It allows users to connect with health care providers for online appointments, which can often be timelier and more convenient that going to see a doctor in person. For at-risk patients who do not want to be unnecessarily exposed to diseases, digital doctor visits provide an opportunity to go to the doctor from the safety of their home. In addition, the diagnoses, treatments and prescriptions for many conditions can often be provided just as easily online.
As of March 26, shares of Teladoc traded around $153.98 for a market cap of $11.07 billion. GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rating of 3 out of 10.
The cash-debt ratio of 1.1, current ratio of 6.52 and Altman Z-Score of 10.68 suggest that the company is financially stable in the short term and long term.
The operating margin of -13.34% and net losses in recent years indicate the company is not yet profitable, despite its three-year revenue growth rate of 38.3%.
Teladoc issued guidance along with its earnings results for the fourth quarter of fiscal 2019, which ended on Dec. 31. At the time, the company estimated that it would post a net loss for the full year of 2020, with the loss per share coming in around $1.19 to $1.06 compared to loss per share of $1.38 for 2019. It expected revenue to grow to between $695 million and $710 million compared to $553 million in 2019.
Veeva Systems
Veeva Systems Inc. (VEEV, Financial) is a cloud-based computer software company based in Pleasanton, California.
The company focuses on the pharmaceutical and life sciences industries, providing software-as-a-service to connect product developers to data, software, services and a network of partners. Customers include GlaxoSmithKline (GSK, Financial) and AstraZeneca (AZN, Financial).
As of March 26, Veeva shares traded around $145.25 for a market cap of $21.51 billion and a price-earnings ratio of 75.8. GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10.
The Peter Lynch chart shows that the company is trading above its intrinsic value, but that it is trading at a low valuation compared to its historical median price-earnings ratio.
The cash-debt ratio of 19.82 and current ratio of 2.78 are outperforming 81.30% of publicly traded health care providers and services. Revenue and net income have shown strong growth in recent years with an operating margin of 25.92%.
In the earnings results for its fourth quarter of fiscal 2020, which ended Jan. 31, Veeva reported strong growth and a positive outlook. “Our leadership is fueled by a track record of identifying and bringing great cloud solutions to large, underserved markets and a relentless focus on customer success,” CEO Peter Gassner said. For the next fiscal year, the company expects revenue of $1.4 billion to $1.5 billion and earnings per share of $2.50 compared to revenue of $1.1 billion and earnings of $1.90 per share for fiscal 2020.
Cerner
Based in North Kansas City, Missouri, Cerner Corp. (CERN, Financial) is a health information technology company that provides solutions, services, devices and hardware.
It is the maker of artificial intelligence-enabled workflow solution Chart Assist, which allows care providers to more easily and efficiently maintain patient records. The company has also partnered with GetWellNetwork to make communication easier between patients and providers.
On March 26, shares of Cerner traded around $60.43 for a market cap of $19.08 billion and a price-earnings ratio of 36.99. GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10.
According to the Peter Lynch chart, the stock trades above its intrinsic value but slightly below its historical median price-earnings ratio.
The cash-debt ratio of 0.52 is average for the industry, but the Altman Z-Score of 6.74 and the current ratio of 2.04 suggest that the company can meet its short-term and long-term debt obligations. The operating margin of 10.55% and net margin of 9.3% are outperforming 68.43% of competitors. Revenue continues to show strong growth, though net income has fallen slightly in recent years.
For the fourth quarter of fiscal 2019, which ended on Dec. 31, Cerner also provided guidance for 2020. It estimated that revenue would be around $5.85 billion with earnings of $3.14 per share, which represent increases of 5% and 17%, respectively, from 2019.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research or consult registered investment advisors before taking action in the stock market.
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