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2024 Strategies: Buy or Hold for 3 Medical Stocks?

While the unceasing need for healthcare services, pharmaceuticals, and medical innovations underscores the resilience of the medical industry, let us analyze whether to Buy or Hold renowned medical stocks LifeVantage (LFVN), FONAR (FONR), and Walgreens Boots Alliance (WBA) in the next year...

The medical sector has seen rapid growth over recent years, spurred by the aging population, rapid technological advancements, and the rise of digital health platforms. Hence, quality medical stocks LifeVantage Corporation (LFVN) and FONAR Corporation (FONR) could be ideal buys for the next year. However, waiting for a better entry point in Walgreens Boots Alliance, Inc. (WBA) could be prudent.

Throughout the past years, the medical industry has maintained a consistent and vital role, fueled by the persistent need for healthcare services and innovations.

Moreover, digitization has profoundly transformed the medical sector, bringing about numerous positive changes in terms of efficiency, accessibility, and patient care. Health apps and wearables are empowering individuals to monitor real-time health metrics, including heart rate, physical activity, and sleep patterns.

Additionally, AI has aroused significant interest in the medical industry, playing a pivotal role in accelerating drug discovery, enabling personalized medicine, and enhancing medical imaging interpretation. In addition, AI optimizes clinical trials, assists in robotic surgeries, enhances healthcare operations, and supports remote patient monitoring, sparking a transformative wave across various facets of healthcare.

According to Statista, AI in the healthcare market is expected to be worth $188 billion by 2030, growing at a CAGR of 37%.

Furthermore, the increasing prevalence of chronic diseases has spurred healthcare agencies to prioritize timely treatment, fostering heightened awareness through national and regional initiatives. This focus, particularly among the elderly, has expanded the patient pool, driving demand for medical devices in hospitals and clinics. Besides, to meet the growing need for advanced solutions, medical device companies are also investing in R&D, introducing innovative devices with AI intelligence and 3D imaging.

As a result, the U.S. medical devices market is anticipated to grow from $192.78 billion in 2023 to $291.04 billion by 2030, at a CAGR of 6.1%.

Stocks to Buy:

LifeVantage Corporation (LFVN)

LFVN engages in identifying, researching, developing, formulating, selling, and distributing nutrigenomic activators, dietary supplements, nootropics, pre- and pro-biotics, weight management, skin and hair care products, bath and body, and targeted relief products.

LFVN’s trailing-12-month gross profit margin of 79.52% is 134.6% higher than the 33.89% industry average. Its trailing-12-month asset turnover ratio of 3.17x is 280.1% higher than the 0.84x industry average.

The company pays an annual dividend of $0.14, which translates to a yield of 2.33%, higher than the four-year average yield of 1.34%.

During the fiscal year, which ended September 30, 2023, LFVN’s revenue and gross profit amounted to $51.36 million and $41.18 million, respectively. The company’s non-GAAP net income and EPS increased 139.7% and 116.7% from prior year values to $1.67 million and $0.13, respectively. Also, adjusted EBITDA increased 41.4% from the prior-year quarter to $3.99 million.

LFVN’s EPS and revenue are expected to rise 18.2% and 3.9% year-over-year to $0.65 and $226.32 million, respectively in the fiscal year ending June 2025.

Over the past nine months, the stock has gained 81.1% to close the last trading session at $6. It has also gained 70.4% year-to-date.

LFVN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.

It has an A grade for Value and Quality and a B for Sentiment. It is ranked #2 among nine stocks in the Medical –Consumer Goods industry.

To see additional LFVN ratings for Growth, Momentum, and Stability, click here.

FONAR Corporation (FONR)

FONR, together with its subsidiaries, engages in the research, development, production, and marketing of magnetic resonance imaging (MRI) scanners for the detection and diagnosis of human diseases in the United States.

FONR’s trailing-12-month EBIT and levered FCF margins of 17.23% and 8.02% are significantly higher than the industry averages of 0.90% and 0.29%.

In November, FONR announced its exclusive distribution agreement with AIRS Medical, Inc., a leading Artificial Intelligence (AI)-powered healthcare solution provider. FONR will distribute SwiftMR™, an FDA 510(k)-cleared AI-powered software product by AIRS Medical, for use on FONAR MRIs and other MRI scanners. SwiftMR™ aims to enhance MRI image quality and reduce scan times by up to 50%.

FONR’s total revenues for the first quarter ended September 30, 2023, came in at $25.84 million, up 11.4% year-over-year. Its adjusted EPS was $0.59, up 103.4% over the previous quarter. Additionally, its net income available to common stockholders rose 100.5% year on year to $3.86 million.

Shares of FONR have gained 27.8% over the past nine months and 24.2% over the past three months to close the last trading session at $19.68.

It is no surprise that FONR has an overall A rating, equating to a Strong Buy in our POWR Ratings system.

It has a B grade for Growth, Value, Stability, Sentiment, and Quality. It is ranked first among the 145 stocks in the Medical – Devices & Equipment industry.

Beyond what is stated above, we’ve also rated FONR for Momentum. Get all FONR ratings here.

Stock to Hold:

Walgreens Boots Alliance, Inc. (WBA)

WBA operates as a healthcare, pharmacy, and retail company in the United States, the United Kingdom, Germany, and internationally. It operates through three segments: U.S. Retail Pharmacy; International; and U.S. Healthcare.

While WBA’s trailing-12-month asset turnover ratio of 1.49x is 78.4% higher than the 0.84x industry average, its trailing-12-month EBIT margin of 1.59% is 81.1% higher than the industry average of 8.43%.

In November, WBA launched the new Rx Savings Finder, a simple-to-use digital tool designed to help customers save money on prescription medications.

Rx Savings Finder finds free, third-party discount cards, providing patients with a quick and easy way to find lower prices on their Walgreens medications.

WBA’s sales for the fourth quarter ended August 31, 2023, increased 9.2% year-over-year to $35.42 billion. Its gross profit increased 1% from the prior-year quarter to $6.48 billion.

However, the company’s adjusted net earnings and adjusted net earnings per common share came in at $575 million and $0.67, representing a decrease of 17.1% and 16.3% year-over-year, respectively.

Street anticipates a 44.7% year-over-year decline in WBA's EPS for the quarter ended November 2023, reaching $0.64. Conversely, the revenue projection for the same quarter indicates a 5% year-over-year increase, reaching $35.04 billion.

Over the past year, the stock has declined 29.2% to close the last trading session at $26.60. However, it has gained 27.3% over the past three months.

WBA’s mixed outlook is reflected in its overall rating of C, which translates to Neutral in our proprietary POWR Ratings system.

It has a C grade for Growth, Stability, and Quality. It is ranked last in the 3-stock Medical – Drug Stores industry.

Click here to see WBA’s ratings for Value, Momentum, and Sentiment.

What To Do Next?

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10 Stocks to SELL NOW! >

LFVN shares were trading at $5.96 per share on Friday morning, down $0.04 (-0.67%). Year-to-date, LFVN has gained 73.73%, versus a 26.15% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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