U.S. healthcare spending is higher than any other country. Annual health expenditures when the pandemic hit in 2020 stood at $4.1 trillion. The international healthcare market is expected to reach $665.37 billion by 2028, with U.S healthcare national expenditure expected to hit $6.2 trillion by 2028.
The sector is exhibiting favorable long-term attributes, such as cost-saving and care-improving advances, an aging global population, and a growing middle class in emerging economies.
With favorable policies and reimbursements, the skilled nursing facility market is forecasted to hit some $592.1 billion by 2030 and is poised to grow at a 7.2% CAGR. Given this, Wall Street analysts expect the medical care facility stocks Oak Street Health, Inc. (OSH) and Cano Health, Inc. (CANO) to double in price in the near term. So, these stocks might be ideal additions to one’s watchlist.
Click here to checkout our Healthcare Sector Report for 2022
Oak Street Health, Inc. (OSH)
Chicago-based OSH provides healthcare services to patients in the United States. The company operates primary care services for Medicare beneficiaries. It operates centers in several states, including Illinois, Indiana, Michigan, Mississippi, and New York.
On October 21, OSH announced that it had acquired RubiconMD, a specialist-expertise providing technology platform. The acquisition is expected to enable the company to integrate virtual specialty care into its existing care model, enhancing cost management and patient care.
On October 5, OSH announced its plans to open centers in Kansas City, Missouri, and Kansas City, Kansas, in 2022, marking its 21st state for operations. The company also expects to extend its presence in Illinois. The expansion should expand the company’s operative capability.
For its fiscal third quarter, ended September 30, OSH’s total revenues increased 78.4% year-over-year to $388.70 million. This can be attributed to a 77.9% rise in capitated revenue from the prior-year quarter i to $376.70 million. For the nine months ended September 30, the company’s net cash provided by financing activities came in at $780.40 million, up 63.4% from the same period the prior year.
The $503.79 million consensus revenue estimate for the quarter ending March 2022 indicates a 69.8% year-over-year increase.
The stock has declined 4.5% intra-day to close yesterday’s trading session at $16.05.
Among the 11 Wall Street analysts rating OSH, eight have rated it Buy, while three have rated it Hold. The 12-month median price target of $39.20 indicates a 144.2% potential upside. The price targets range from a low of $18.00 to a high of $50.00.
Cano Health, Inc. (CANO)
CANO in Miami, Fla., is a primary care medical services provider in the United States and Puerto Rico. The company is the owner and operator of medical centers enabled by CanoPanorama, a health management technology-powered platform.
On January 7, CANO reported its total membership for the fourth quarter of 2021 to be up 114% year-over-year to 227,000, which is above its prior year-end 2021 guidance of 218,000 members. The company said the rise in membership was completely organic.
On October 15, CANO announced the formation of an Advisory Board for Healthy Heart by Dr. Juan, its new initiative targeting the prevention of cardiovascular disease. The Board will include cardiovascular prevention experts. Dr. Marlow Hernandez, Founder and CEO of CANO, said, “It is an honor to partner with this outstanding group of medical professionals to predict and prevent cardiovascular disease, part of our broader effort to transform primary care in America.”
CANO’s total revenue increased 100.2% year-over-year to $526.80 million in its fiscal third quarter, ended September 30. This can be attributed to a 98.4% improvement from the prior-year period in capitated revenue to $501.78 million. Its adjusted EBITDA rose 52.7% from the same period the prior year to $35.16 million.
The Street’s EPS estimate for the fiscal year 2022 indicates a 40% year-over-year increase. And the Street’s $2.64 billion revenue estimate for the same year reflects a rise of 53% from the prior year.
CANO’s shares have gained 5.4% in price over the past five days and 3.1% intra-day to close yesterday’s trading session at $6.30.
Three of the four Wall Street analysts rating CANO have rated it Buy, while one has rated it Hold. The 12-month median price target of $13.75 indicates a 118.3% potential upside. The price targets range from a low of $12.00 to a high of $15.00.
Click here to checkout our Healthcare Sector Report for 2022
OSH shares were trading at $16.32 per share on Tuesday afternoon, up $0.27 (+1.68%). Year-to-date, OSH has declined -50.75%, versus a -5.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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