Healthcare is generally touted as a recession-resistant industry since people can't choose when they get sick or otherwise need a doctor's care. Still, just because the industry is resilient doesn't mean that every stock within it is worth buying. We asked three Foolish contributors which healthcare stocks look like buys today. They selected Align Technology (ALGN -1.51%), Celldex Theraputics (CLDX -8.22%), and Laboratory Corporation of America (LH -0.99%).
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It's not too late to buy this high-flying stock
Keith Speights (Align Technology): Don't make the mistake I did with Align Technology. I have liked the stock for a long time, but I didn't buy it until a few months ago. Because of my procrastination, I missed out on much of Align's 131% gain last year. That performance made Align Technology the top S&P 500 stock of 2017. The good news is that it wasn't too late for me to buy Align -- and it's not to late to buy now.
Align is best known for its Invisalign clear dental aligners. Invisalign can be used in many cases of malocclusion (misalignment of teeth) instead of wire-and-metal braces. Because the Invisalign aligners are clear, they're practically invisible to others.
As you might imagine, the option to have straight teeth without wearing unsightly braces has a lot of appeal for many people. Align Technology reported record Invisalign sales in each quarter of 2017. Expect even higher sales this year.
What's really great is that Align currently has only 11% of the total addressable market. Its market share of the teen market, the largest segment, is only 4.5%. There's plenty of room for growth. Even better, Align thinks that it can expand its addressable market significantly by developing new technology to treat more serious types of malocclusion.
Align Technology stock isn't cheap, with shares trading at 44 times expected earnings. However, in my view, the growth prospects for the company continue to look really good. I think Align will keep up its winning ways.
Nearing the moment of truth
George Budwell (Celldex Therapeutics): Celldex Therapeutics, a clinical-stage cancer company, is one healthcare stock definitely worth checking out this month. The biotech's stock is already starting to heat up in anticipation of the top-line data release for its experimental triple-negative breast cancer (TNBC) treatment, glembatumumab vedotin, in patients that express the integral membrane protein called glycoprotein NMB (gpNMB).
The backstory is that gpNMB expression is, unfortunately, associated with more aggressive and deadly forms of the disease. And as a further downside, there are currently no FDA-approved treatments for this specific variation of TNBC. So, glemba could end up being a major new treatment option for women afflicted with gpNMB positive TNBC.
While it's hard to say whether glemba will hit the mark in this ongoing pivotal trial known as METRIC, there's no denying the drug's staggering commercial potential. As the first FDA-approved treatment for this underserved breast cancer population, industry insiders think glemba could generate upwards of half a billion dollars in peak sales within just a few years.
Assuming a positive readout, this noteworthy commercial opportunity should help drive a lucrative licensing deal for Celldex down the road. That's key because Celldex doesn't have the financial resources necessary to both undertake a commercial launch and continue to build out its broader pipeline of anti-cancer meds.
Summing up, Celldex is still a high-risk play because of the uncertainty surrounding glemba's upcoming data release. But the biotech's upside potential is high enough to warrant a deeper dive by risk-tolerant investors.
What most doctors rely on for diagnosing what ails you
Chuck Saletta (Laboratory Corporation of America): If you visit your doctor for an annual physical, chances are you'll have blood work done. If you're sick, you may need additional tests. Apply for a job, and a drug screening may be part of the process. All those activities require testing and diagnostic tools and services, and Laboratory Corporation of America can handle them all.
Billing itself as "the world's leading heath care diagnostics company," Laboratory Corporation of America has grown through acquisitions to become one of the largest diagnostics businesses around. But recent Medicare reimbursement rate reductions have put a damper on its shares. That bad news, however, might actually provide investors an opportunity to profit over time.
Laboratory Corporation of America stock currently trades at about 14 times trailing and expected earnings. With those earnings anticipated to grow around 11.3% annualized over the next five or so years, the company's shares are available at a relative bargain price right now. That's especially true if you have the patience to wait for the Medicare reimbursement reductions to anniversary and become part of the company's base -- instead of a current year headwind.
Supporting that reasonable valuation is a balance sheet with over $300 million in cash and cash equivalents and a debt-to-equity ratio below 1. That should provide some comfort for investors concerned about the potential for future reimbursement reductions as the solid balance sheet gives the company the opportunity to be flexible when dealing with surprises.
