The healthcare sector was hardly talked about in 2023 because it lagged the broader market for most of the year. However, for 2024, two companies are excellent choices for growth or dividend investing.
WELL Health Technologies’s (TSX: WELL) robust growth potential is undeniable with its growing network and adoption of artificial intelligence. Medical Facilities (TSX: DR) is enticing for its unique business model, strong financial performance, and competitive dividend yield. You can start small or with $100 to buy these healthcare stocks.
A game changer in healthcare
WELL Health is well-positioned for a break out, if not explosive growth, soon. The current share price is $3.73, and market analysts’ 12-month average price target is $7.69 (+106%). This $895.66 million digital healthcare company continues to expand its network through acquisitions and investments while focusing on artificial intelligence (AI).
In October 2023, WELL completed a strategic transaction with HEALWELL AI. “Investing in and developing AI-enabled tools and technologies for care providers is of core interest to WELL,” said Hamed Shahbazi, WELL’s founder and chief executive officer (CEO). Shabazi added that WELL commits to revolutionizing and positively impacting Canadian healthcare with secure and responsibly configured AI technologies.
HEALWELL recently acquired Intrahealth, a SaaS-based enterprise class multi-national EHR (electronic health record). It will deeply integrate its AI tools with Intrahealth to create a next-generation AI-Powered EHR. Moreover, through Intrahealth’s platform, HEALWELL can expand its client base from single doctor’s offices to multi-thousand-user health institutions.
Unique business model
Medical Facilities has four specialty surgical hospitals and one ambulatory surgical centre (ownership stakes in some others) in the United States. Management wants to be differentiated by its personalized approach to patient care.
This $238.7 million Canadian company partners with physicians, some of whom are owners themselves, and non-owner physicians can practice at the facilities. The volume in inpatient and outpatient bases where diagnostic, imaging, pain management, and non-emergency surgical procedures are performed is very high.
The case mix in each facility varies depending on physician specialty, medical staff, equipment and infrastructure at each facility. Orthopedic and neurosurgical procedures represent large case volumes at the hospitals. From an investment standpoint, the high-quality facilities and ever-growing outpatient services market are compelling reasons to invest in DR.
In the first three quarters of 2023, total revenue and facility service revenue increased 5.2% and 6% year over year to US$307.3 million and US$323.3 million. Notably, net income jumped 51.5% to US$23.7 million from a year ago. In the third quarter (Q3) of 2023, net income reached US$4.8 million compared to the US$5.5 million net loss in Q3 2022.
Its president and CEO, Jason Redman, said it was another quarter of solid performance, as evidenced by higher revenue, corporate savings, and profitability. “The divestiture of non-core assets not only strengthens our financial position but also allows MFC to better concentrate on supporting our physician partners in providing the best patient experience and hospital care,” Redman added.
Besides reducing corporate debt further, Redman said Medical Facilities will focus on maintaining a strong and sustainable financial structure and creating long-term shareholder value. At $6.54 per share (+6.94% year to date), the dividend yield is 3.38%.
Top sector picks
The healthcare stocks in focus are about to bring life to the underperforming sector. WELL Health could deliver outsized gains, while Medical Facilities is a lucrative option for income investors.
