Chicago, IL – October 29, 2024 – Today, Zacks Equity Research like Inspire Medical Systems INSP, 10x Genomics TXG and Omnicell, Inc. OMCL.
Link: https://www.zacks.com/commentary/2358816/3-medical-info-systems-stocks-to-gain-from-healthcare-digitization
Starting from healthcare resource management to efficient handling of medical records and patient data, the Medical Info Systems industry is rapidly expanding its boundaries with each passing day. Banking on quick-moving technological advancements and exponentially growing worldwide demand for new-generation products, the industry has vastly improved patient care and also enhanced the network between healthcare providers and insurance plans. Added to this is the latest GenAI wave, which has significantly sped up the acceptance and usage of advanced digital healthcare and telemedicine on a global scale.
Per a Market Research report, the use of artificial intelligence (AI) in the medical device market is expected to witness a CAGR of 44.4% during 2024-2028. The market’s growth will be propelled by the growing demand for healthcare systems to reduce time and costs and improve detection capabilities, particularly when diagnosing a growing number of patients with complex profiles. As much as 80% of health systems claimed to have plans to increase their investment levels in digital health over the next five years (a HIMSS report).
The growing demand for all kinds of digital healthcare support, including telehealth, cloud computing, artificial intelligence, robotics and analytics, chatbots and virtual assistants and 3D printing, has created a unique opportunity for companies like Inspire Medical Systems, 10x Genomics and Omnicell, Inc. However, the healthcare system’s excessive dependence on IT comes with its share of risks. Any data disruption in the cloud-based service might result in a massive loss of information, thereby leading to a breakdown of the system.
The Zacks Medical Info Systems industry comprises companies that develop and market healthcare information systems. These companies offer software and hardware solutions to healthcare providers with secure access to real-time clinical, administrative and financial data in a time-efficient manner.
Focus on patient satisfaction, security of patient data and administrative cost control has increased the need for big data, 3D printing, blockchain and AI. Industry players like Omnicell and Allscripts are raking in millions from the sale of software and related hardware, professional services and IT outsourcing services, and recurring service contracts for software maintenance and transaction processing services.
Growing Demand for Remote Healthcare: Within the medical information systems space, remote patient monitoring segments continue to grow at a fast rate, courtesy of the rapid increase in usage of wearable devices and telehealth services. The major driver behind this growth is the increasing awareness about the usefulness of continuous patient monitoring devices. This has proved to be a game-changer in increasing the standard and efficiency of medical care.
Health tech products are also accelerating the diagnosis process and automating hospital workflows through robotics, AI-driven chatbots and so on. Going by a Custom Market Insights report, the global Smart Healthcare Products market was valued at $145.9 billion in 2023 and is expected to reach $485.71 billion by 2032, at a CAGR of 12.78%.
AI and Health: The medical sector is one of the major adopters of AI, which is currently being used to synthesize new compounds for drugs and create devices for more precise measurement and faster and more accurate diagnosis. Starting from generative AI to surgical robotics, one common application of these has been in diagnostic settings, where it quickly and precisely detects image abnormalities that might be challenging for the human eye to spot.
Further, electronic health records, electronic medical records, predictive analytics and real-time alerting have been gaining prominence. Going by a Tedisel Medical report, 2024 is seeing advances in machine and deep learning techniques, as well as real-time monitoring of health conditions and proactive interventions directing to a future full of smart hospitals.
Wearable devices, too, are fast gaining market, supporting the rise of telemedicine as remote patient care. AI systems have been successful in multiple medical imaging use cases, such as detecting mitosis in breast cancer histology images, classifying skin cancer with dermatologist-level accuracy, diagnosing diabetic retinopathy from retinal fundus photographs and predicting cardiovascular risk factors from retinal fundus photographs.
Rising Instances of Cyber Attacks: As healthcare becomes more wired and interconnected, cybersecurity is the primary concern of hospitals. In fact, security flaws are being increasingly found in electronic medical device operating systems or other devices like ECG machines, imaging scanners, infusion pumps and telemetry systems.
Indeed, the pandemic has resulted in growing cyber dependency, which has made the space vulnerable to cyber-attacks. Between October and December 2023, Henry Schein became the victim of consecutive cyberattacks. Further, in February 2024, Change Healthcare — a unit of UnitedHealth Group — was impacted by a cybersecurity incident.
The Zacks Medical Info Systems industry falls within the broader Zacks Medicalsector. It carries a Zacks Industry Rank #75, which places it in the top 30% 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 outperform the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks with the potential to outperform the market based on a strong earnings outlook. However, it’s worth considering the industry’s shareholder returns and current valuation first.
The industry has underperformed the Zacks S&P 500 composite as well as the sector over the past year.
The industry has gained 13.7% in the past year compared with the Zacks Medical sector’s growth of 15.5% and the S&P 500’s rise of 39.4%.
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing medical stocks, the industry is currently trading at 1.52X compared with the S&P 500’s 5.12X and the sector’s 3.02X.
Over the last five years, the industry has traded as high as 12.62X, as low as 1.11X, and at the median of 2.78X.
10x Genomics is a life science technology company building products to accelerate the mastery of biology and advance human health. The company develops and sells instruments, consumables, and software for analyzing biological systems in America, Europe, the Middle East, Africa, China, and the Asia Pacific. 10x Genomics’ integrated solutions include instruments, consumables and software for single-cell and spatial biology, which help academic and translational researchers and biopharmaceutical companies understand biological systems at a resolution and scale that matches the complexity of biology.
10x Genomics currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2024 earnings indicates an 18.7% improvement from the 2023 level. For 2025, the company is expected to report earnings growth of 32.3%.
Omnicell develops and markets end-to-end automation solutions for the medication-use process. Omnicell is positioning itself for long-term growth by addressing the healthcare challenges with enhanced medication management solutions. The introduction of the XT Amplify program is advancing the company’s goal of delivering outcome-centric innovations, having gained market traction with its initial offerings. In terms of its financial roadmap, Omnicell is targeting to reach $1.9 billion-$2 billion of revenue by 2025, representing a CAGR of 14%-15% in the 2021-2025 period.
Omnicell currently holds a Zacks Rank #1. The Zacks Consensus Estimate for 2025 earnings indicates 9.1% growth from the 2024 projected level. For 2025, the company is expected to report revenue growth of 4.5%.
MN-based Inspire Medical is a medical technology company focused on the development and commercialization of innovative, minimally invasive solutions for patients with obstructive sleep apnea. The company continues to make significant investments to build its sales and marketing organization by increasing the number of U.S. and European sales representatives and continuing its direct-to-consumer marketing efforts in existing and new markets throughout the United States and in Europe. INSP currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2024 earnings indicates a stupendous 204.2% improvement from the 2023 level. For the same period, the company is expected to report sales growth of 27.4%.
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