Top Healthcare Stocks for June 2023

TBPH, RDY, and VKTX lead for value, growth, and momentum, respectively

Close up of vials of the AstraZeneca COVID-19 booster vaccine.

Ulet Ifansasti / Getty Images

Top healthcare stocks this month include Viking Therapeutics Inc., Cabaletta Bio Inc., and Prometheus Biosciences Inc., shares of which have soared more than 600% in the last year on promising early data for new therapeutic products or acquisition offers.

Healthcare stocks—represented by the Health Care Select Sector SPDR ETF (XLV), an exchange-traded fund (ETF)—fell 2% over the past year, compared with a 2% increase for the Russell 1000.

Here are the top three healthcare stocks in the following categories: best value, fastest growth, and most momentum. Benchmark data are as of June 7, while company data below are as of May 5.

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 that you're paying less for each dollar of profit generated.

Best Value Healthcare Stocks
  Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/E Ratio
Theravance Biopharma Inc. (TBPH) 11.14 0.6 1.0
Intercept Pharmaceuticals Inc. (ICPT)  11.19 0.5 1.8
Zymeworks Inc. (ZYME) 8.94 0.6 3.5

Source: YCharts

  • Theravance Biopharma Inc.: Theravance is a biopharmaceutical company in the Cayman Islands that develops and manufactures respiratory medicines such as Yupelri and Trelergy to treat COPD.
  • Intercept Pharmaceuticals Inc.: Intercept is a biopharmaceutical company that develops and sells products to treat chronic liver diseases. Intercept shares have lost almost 18% of their value in the last year amid relatively modest revenue gains.
  • Zymeworks Inc.: Zymeworks is a Canadian clinical-stage biotech company that develops therapeutics for the treatment of cancers. The company's revenue skyrocketed by more than 1,700% in the latest quarter as it received support from its collaborator Jazz Pharmaceuticals PLC (JAZZ) to develop and commercialize zanidatamab, a drug candidate for the treatment of gastroesophageal adenocarcinoma.

Fastest-Growing Healthcare Stocks

These are the top healthcare stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.

Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.

Fastest-Growing Healthcare Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Dr Reddy's Laboratories Ltd. (RDY) 56.41 9.4 904.0 6.0
Royalty Pharma PLC (RPRX) 33.31 14.9 533.3 21.7
AstraZeneca PLC (AZN) 73.20 226.9 364.0 -4.5

Source: YCharts

  • Dr Reddy's Laboratories Ltd.: Dr Reddy's is an Indian pharmaceutical company that produces generics and biosimilars for gastrointestinal and cardiovascular disorders, pain management, and other therapeutic needs. Particularly strong growth in both the company's India and North America segments contributed to significant EPS growth in the most recent quarter.
  • Royalty Pharma PLC: Royalty Pharma is a biopharmaceuticals royalties company that partners with companies to fund late-stage clinical trials and also purchases existing royalties for therapeutics. Royalty's financial performance in the latest quarter was driven by momentum from the FDA's approval of Pfizer's migraine treatment Zavzpret, in which the company maintains a royalty interest.
  • AstraZeneca PLC: AstraZeneca is a British-Swedish healthcare holding company that, through subsidiaries, researches, manufactures, and markets pharmaceutical products for gastrointestinal, central nervous system, and cardiovascular disorders, among others. AstraZeneca's revenue declined in the first quarter of 2023 as sales of its COVID-19 products fell. Nonetheless, EPS quadrupled on reductions in operating costs and foreign exchange benefits.

Healthcare Stocks With the Most Momentum

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

Healthcare Stocks With the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Viking Therapeutics Inc. (VKTX) 23.07 2.3 885.9
Cabaletta Bio Inc. (CABA) 11.94 0.5 840.2
Prometheus Biosciences Inc. (RXDX) 198.80 9.5 614.9
Russell 1000 Index N/A N/A 2.3
Health Care Select Sector SPDR ETF (XLV) N/A N/A -1.7

Source: YCharts

  • Viking Therapeutics Inc.: Viking is a biopharmaceuticals company that develops products for patients with metabolic and endocrine disorders. The stock jumped 69% in a day in late March after the company reported promising early trial data for an obesity drug.
  • Cabaletta Bio Inc.: Cabaletta is a biotech company that discovers and develops therapies for autoimmune diseases. Shares have risen steadily since October the company said it was pursuing clinical trials of CABA-201 for use in treating autoimmune disorders.
  • Prometheus Biosciences Inc.: Prometheus is a biosciences company that develops diagnostics and therapeutics for inflammatory bowel disease. The stock has surged since Merck & Co. Inc. (MRK) announced in late April plans to acquire Prometheus for about $11 billion.

Advantages of Healthcare Stocks

An aging baby boomer population is creating additional demand for medical products and services, underpinning growth expectations for the healthcare sector. According to the Centers for Medicare and Medicaid Services, U.S. national healthcare expenditure is expected to reach $6.8 trillion by 2030.

A key advantage of the healthcare sector is consistent demand. The overall demand for healthcare products and services is likely to remain steady and to even increase as populations age. This makes healthcare stocks a potential defensive play.

At the same time, rapidly developing technologies also provide opportunities for both short- and long-term growth potential in the industry. It is also not uncommon for individual healthcare companies to see massive surges in stock price upon the announcement of promising clinical trials or the release of a new therapeutic with strong potential.

Key Trends in Healthcare

The pandemic and technological advances have accelerated several key trends across the healthcare sector that provide potential opportunities for investors, among them telehealth and healthcare wearables.

Telehealth: Telehealth connects patients with health professionals using video calls and health apps. Such services allow people in less-served regional areas or those who can't easily travel to access medical advice in their homes or workplaces.

A survey conducted by the Bipartisan Policy Center showed that 63% of respondents had used telehealth as a preventative service, for a prescription refill, or for a routine visit for a chronic illness. Moreover, eight in 10 surveyed said their primary health issue was resolved and that they would likely use telehealth in the future.

Investors can gain exposure to telehealth through stocks including Teladoc Health Inc. (TDOC), Doximity Inc. (DOCS), and American Well Corp. (AMWL).

Healthcare Wearables: Wearable electronic devices allow consumers or patients to wear technology that collects their personal health and fitness data. Healthcare wearables can send a user's health information in real-time to a doctor or other health professional for regular monitoring. 

Some of the more popular healthcare wearable devices are smart health watches, electrocardiogram (ECG) monitors, blood pressure monitors, and biosensors. A survey conducted by Insider Intelligence found U.S. consumers' use of healthcare wearables increased to 33% in 2022 from 9% four years earlier.

Key stocks involved in healthcare wearables include Garmin Ltd. (GRMN), Wearable Health Solutions Inc. (WHSI), and Apple Inc. (AAPL).

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above stocks.

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Article Sources
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  1. YCharts. "Financial Data."

  2. Yahoo! Finance. "Intercept Pharmaceuticals, Inc.'s (NASDAQ:ICPT) Low P/S No Reason For Excitement."

  3. Jazz Pharmaceuticals PLC. "Jazz Pharmaceuticals and Zymeworks Announce 84% Overall Survival at 18 Months from Phase 2 Trial Evaluating Zanidatamab in HER2-Expressing Metastatic Gastroesophageal Adenocarcinoma."

  4. Zymeworks Inc. "Zymeworks Provides Corporate Update and Reports First Quarter 2023 Financial Results."

  5. Dr Reddy's Laboratories Inc. "Q4 & FY23 Financial Results," Pages 1, 4, 5, 13.

  6. Royalty Pharma PLC. "Royalty Pharma Reports First Quarter 2023 Results."

  7. AstraZeneca PLC. "Q1 2023 Results," Pages 1, 2, 7, 22, 33.

  8. Reuters. "Viking joins obesity drug race after promising early trial data."

  9. Cabaletta Bio Inc. "Cabaletta Bio Receives FDA Fast Track Designation for CABA-201."

  10. Cabaletta Bio. "Cabaletta Bio Announces CABA-201, a Newly Designed CD19 Targeting CAR T Cell Therapy Engineered to Address a Broad Range of Autoimmune Diseases."

  11. Reuters. "Merck to buy Prometheus Biosciences for about $11 billion."

  12. Centers for Medicare and Medicaid Services. "NHE Projections."

  13. Fidelity. "Opportunities abound in health care stocks."

  14. Insider Intelligence. "US Healthcare Industry in 2022: Analysis of the Health Sector, Healthcare Trends, and Future of Digital Health."

  15. Bipartisan Policy Center. "New Survey: Virtual Care Could Keep Low-Acuity Cases Out of Emergency Department."

  16. Insider Intelligence. "The Top Medical Monitoring and Healthcare Wearable Device Trends of 2022."

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