Top Healthcare Stocks for October 2020

Healthcare, one of the largest and most complex sectors, is comprised of a broad range of companies that sell medical products and services. The healthcare sector includes companies that sell drugs, medical devices, and insurance, as well as hospitals and healthcare providers. Some of the largest healthcare companies in the world include UnitedHealth Group Inc. (UNH), Pfizer Inc. (PFE), and Abbvie Inc. (ABBV). Several healthcare companies have received U.S. Emergency Use Authorization (EUA) to develop either tests or treatments for COVID-19, helping to fuel optimism about their shares.

Healthcare stocks, represented by the Health Care Select Sector SPDR ETF (XLV), have slightly outperformed the broader market. XLV has provided a total return of 14.6% over the past 12 months, just above the Russell 1000’s total return of 13.7%, as of September 22, 2020. All statistics in the tables below are as of September 23.

Here are the top 3 healthcare stocks with the best value, the fastest earnings growth, and the most momentum.

Best Value Healthcare Stocks

These are the healthcare stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Source: YCharts

• Biogen Inc.: Biogen focuses on the discovery, development, and commercialization of drug treatments, with a strong focus on the fields of neurology, immunology, and oncology. The company reported net income growth of 7.5% on revenue growth of 1.8% in Q2 2020, which ended June 30, 2020.
• Bio-Rad Laboratories Inc.: Bio-Rad is a maker of life science research products and analytical instrumentation. These tools are used to separate and analyze complex chemical and biological materials.
• CVS Health Corp.: CVS Health is an integrated pharmacy healthcare provider. The company provides services including pharmacy benefit management, mail order delivery, and retail sales. It also operates disease management programs and retail clinics. CVS Health reported net income growth of 54.6% on revenue growth of 3.0% in Q2 2020, which ended June 30, 2020. The company said that revenue was negatively impacted by a decline in prescriptions due to lower patient visits to providers amid the COVID-19 pandemic. However, the sharp boost in net income was aided by lower benefit costs leading to higher operating income compared to the year-ago quarter.

Fastest Growing Healthcare Stocks

These are the healthcare stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Source: YCharts

• Quidel Corp.: Quidel develops and manufactures diagnostic healthcare products and solutions. The company offers diagnostic solutions that aid in the detection and diagnosis of critical diseases and other medical conditions. The company reported net income growth of 5,226.9% on revenue growth of 86.4% in Q2 2020, which ended June 30, 2020. Net income was boosted by lower cost of sales and operating expenses as a share of total sales compared to the same quarter a year ago. Quidel said that revenue growth was driven by strong demand for its newly launched Sofia® SARS Antigen and Lyra® SARS-CoV-2 tests, both of which are used in testing for COVID-19. Both tests received EUA approval during the quarter. 
• Insulet Corp.: Insulet is a medical device company. It develops and manufactures an insulin infusion system for people with insulin-dependent diabetes. The company reported net income growth of 928.6% on revenue growth of 27.8% in Q2 2020, which ended June 30, 2020. Net income was boosted by significantly lower operating expenses as a share of total sales compared to the year-ago quarter
• Perrigo Co. PLC: Perrigo is an Ireland-based healthcare company offering over-the-counter consumer goods and specialty pharmaceutical products. Its products include pharmaceuticals, infant formulas, nutritional products, active pharmaceutical ingredients, and pharmaceutical and medical diagnostic products.

Healthcare Stocks with the Most Momentum

These are the healthcare stocks that had the highest total return over the last 12 months.

Source: YCharts

• Livongo Health Inc.: Livongo Health is a biotechnology company. It operates a consumer digital health platform and develops applied health signals for the treatment of chronic health conditions. The company announced in mid-September that, in cooperation with Teladoc Health Inc. (TDOC), it has filed a definitive joint proxy statement with the Securities and Exchange Commission (SEC) regarding a proposed merger between the two companies. Both companies will hold respective shareholder votes on October 29, 2020. The boards of directors of each company is recommending their respective shareholders to approve the proposed merger.
• Immunomedics Inc.: Immunomedics develops and manufactures diagnostic imaging and therapeutic products used to detect and treat cancer and infectious diseases. Gilead Sciences Inc. (GILD) announced in mid-September that it has entered into a definitive agreement to acquire Immunomedics for approximately $21 billion. The transaction is expected to close sometime during Q4 2020.
• Moderna Inc.: Moderna is a clinical stage biotechnology company focused on the discovery and development of messenger RNA therapeutics and vaccines. It develops mRNA medicines for infectious, immuno-oncology, and cardiovascular diseases. Moderna announced in August that it will supply to the U.S. government an initial 100 million doses of mRNA-1273 to be used as a vaccine against COVID-19. As part of the agreement, the U.S. government has the option to purchase up to an additional 400 million doses of mRNA-1273 from Moderna. The company announced this week that the Canadian government also has confirmed an order for 20 million doses of mRNA-1273.