Top 5 Medical Service Stocks to Buy (AHS, BEAT, HQY, INCR, PRAH)

The Medical sector is one of the top performing sectors for Q3 2015, and it is expected to be a top performer in Q4 2015 as well.

This superior growth is not contained to just large cap stocks either; both large and small cap companies have posted five consecutive quarters of double digit growth, and are expected to show solid growth over the next few quarters as well.

Currently the Medical Services Industry is ranked #13 out of 265 that Zacks ranks.  That is in the top 5% of all sectors.

Zacks Rank #1 (Strong Buy) Stocks To Consider

AMN Healthcare: (AHS)

AMN Healthcare Services (AHS) is a leader in healthcare workforce solutions and staffing services to healthcare facilities across the country.  AHS provides access to the largest network of healthcare professionals.  The Company’s professionals include RNs, surgical technologists, nurse practitioners, respiratory therapists, radiology technologists, rehab professionals, and therapy assistants.

In their most recent earnings announcement on November 4th, the company handedly beat both the Zacks Consensus Earnings and Revenue estimates.  Moreover, the company’s three major segments, Nurse and Allied Healthcare Staffing, Locum Tenens Staffing, and Physician Permanent Placement Services,  all posted big year over year revenue gains, +53%, +29%, and +29, respectively.  Further, management saw gross margins expand 250 basis points.

Also, management’s fourth quarter guidance shows that they believe these growth levels are going to continue throughout the year.  Management guided Q4 revenue growth of 38%-39%, and implies organic growth at or near 25%.

As you can see below, AHS has outperformed the S&P 500 for the past year.

BioTelemetry Inc. (BEAT)

BioTelemetry (BEAT), provides ambulatory outpatient management solutions for monitoring clinical information regarding an individual’s health. It is focused on the diagnosis and monitoring of cardiac arrhythmias, or heart rhythm disorders. BioTelemetry, Inc., formerly known as CardioNet, Inc.

Recently, management announced Q3 earnings where they easily beat the Zacks Consensus Earnings Estimate, but came in slightly below the Zacks Consensus Revenue Estimate.  The company has posted 13 consecutive quarters of revenue growth, and six consecutive quarters of EBITDA growth.  Further, management is expecting low double digit revenue growth, and EBITDA margins of around 20% for 2016.

Going into 2016 management is expanding their product and service offerings, and the company is looking at a possible contract with Anthem, which could add another $5-6 million in annual revenue for the company.

As you can see below, BEAT has outperformed the S&P 500 over the past year.

Healthequity (HQY)

Healthequity (HQY) is a technology-enabled services platforms that empower consumers to make healthcare saving and spending decisions. The Company’s platform provides an ecosystem where consumers can access their tax-advantaged healthcare savings, compare treatment options and pricing, evaluate and pay healthcare bills, receive personalized benefit and clinical information, earn wellness incentives, and make educated investment choices to grow their tax-advantaged healthcare savings.

The company recently acquired the HSA (Health Savings Account) of The Bancorp for $34.4 million, cash.  The acquisition adds about 170,000 new accounts valued at $400 million in deposits.  This was their first HSA acquisition since their IPO in 2014. The deal is expected to add 11% more accounts and 15% to AUM (Assets Under Management).  This brings their overall total to about 1.75 million accounts, and $3.1 billion in AUM.

Looking forward, management estimates that it has only penetrated about 5% of the total market, which leaves significant room for future growth.

As you can see HQY has outperformed the S&P 500 over the past year.

INC Research Holdings (INCR)

INC Research Holdings (INCR) is a global contract research organization. It provides the full range of Phase I to Phase IV clinical development services for the biopharmaceutical and medical device industries. Its services include clinical trial management services comprising patient recruitment and retention, project management, clinical monitoring, drug safety/pharmacovigilance, medical affairs, quality assurance, regulatory and medical writing, and functional service; and data services consisting of clinical data management, electronic data capture, and biostatistics.

In their most recent quarter, adjusted net service revenues increased +15.4% YoY, income from operations improved +95% YoY, net income rose +204% YoY, and diluted earnings per share was up +166% YoY.

Management also raised FY 15 guidance for net service revenue, GAAP diluted EPS, and Adjusted diluted EPS.  Net service revenues improved from a range of $900m-$910m to $910m-$914m, GAAP diluted EPS rose from a range of $1.44-$1.60 to $1.84-$1.93, and adjusted diluted EPS jumped from a range of $1.69-$1.80 to $1.91-$1.97.

As you can see INCR has outperformed the S&P 500 over the past year.

PRA Health Sciences (PRAH)

PRA Health Sciences (PRAH) operates as a global contract research organizations providing outsourced clinical development services to the biotechnology and pharmaceutical industries. It offers therapeutic services in the areas of cardio-metabolic, biosimilars, infectious diseases, immunology, neurology and psychiatry, oncology and hematology, rare diseases, and respiratory needs. The Company engages in bioanalytical laboratory, clinical pharmacology, clinical development, strategic solutions, post marketing research, clinical informatics, clinical diagnostics, and safety and risk management activities.

Recently, management announced Q3 earnings, where adjusted EBITDA improved +42% YoY, adjusted net income rose 134% YoY, and service revenues climbed up +12 YoY%.  The company was also able to decrease SG&A by 1.5% YoY.

Due to the strong performance, management updated 2015 adjusted net income per share guidance from a range of $1.75-$1.85 to $1.89-$1.92.

As you can see PRAH has outperformed the S&P 500 over the past year.

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