Medical Products Industry Outlook: Growth Prospects Radiant

The Zacks Medical – Products industry comprises companies that provide medical products and top-notch technologies for diagnosis, observation, consultation, treatment and other healthcare services. Focus on research and development is the primary area of focus for companies in the space.

The industry caters to important therapeutic areas like cardiovascular devices, nephrology and urology devices, ophthalmic devices, neurological devices, dermatological devices, respiratory devices, skin care devices, dental devices, orthopedic devices and gastrointestinal devices.

Let us take a look at the three major themes in the industry:

• AI, Medical Mechatronics & Robotics: The growing prevalence of minimally-invasive robot-assisted surgeries, self-automated home-based care, use of IT for quick and improved patient care, and shift of the payment system to a value-based model indicate the growing significance of AI in the Medical Products space. Mechatronics — a high-end technology incorporating electronics, machine learning and mechanical engineering — also characterizes the industry now. Intuitive Surgical (ISRG) deserves a mention with respect to AI, robotics and medical mechatronics. The company designs, manufactures and markets the da Vinci surgical system — an advanced robot-assisted surgical platform. This Mechatronic-based platform enables minimally-invasive surgery that helps reduce trauma associated with open surgery.
   
• Rampant M&As: In recent times, there has been a pickup in M&A activities in this space. This strategy has been aiding dominant Medical Products players to expand customer bases and gain leverage apart from lessening pricing pressure and competition. Of the recent ones, Aurora Cannabis Inc.’s (ACB) acquisition of Whistler Medical Marijuana Corporation deserves a mention. The buyout is expected to provide Aurora with an exceptional and differentiated organic certified product portfolio. This in turn will expand both its medical and consumer offerings, and fortify Aurora's presence in the already strong West Coast cannabis market.
   
• Emerging Markets Hold Promise: Given the rising medical awareness and economic prosperity, emerging economies have been witnessing solid demand for medical products. An aging population, relaxed regulations, cheap skilled labor, increasing wealth and government focus on healthcare infrastructure make these markets a happy hunting ground for global medical device players.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Medical Products industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #97, which places it in the top 38% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Before we present a few insurance broker stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry’s Stock Market Performance

The industry has outperformed both its sector and the Zacks S&P 500 composite in the past year.

The industry has increased 4.1% over this period compared with the S&P 500’s growth of 2.4%. However, the broader sector has declined 4.9%.

One Year Price Performance

Industry’s Current Valuation

On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 24.38X compared with the sector’s 20.14X and the S&P 500’s 16.70X.

Over the past five years, the industry has traded as high as 25.04X and as low as 16.77X, with the median being at 19.44X as the charts show below.

Price-to-Earnings Forward Twelve Months (F12M)

Price-to-Earnings Forward Twelve Months (F12M)