In this article, we will look at the 12 Best Diagnostics Stocks to Invest In Right Now.
Overview of the Clinical Diagnostics Market
According to a report by Mordor Intelligence, the clinical diagnostics market has a size of $88.79 billion as of 2025. It is expected to grow at a compound annual growth rate (CAGR) of 5.48% between 2025 and 2030, reaching $115.94 billion at the end of the forecast period. While North America is the largest market in the domain at present, Asia-Pacific takes the lead as the fastest growing.
As per Grand View Research, the growth in the global clinical diagnostics industry is attributed to the rising demand for lab automation and the development of specialized tests for disease management and early disease detection. In addition, the growing use of point-of-care diagnostics products has also driven a decentralization trend in the healthcare industry.
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AI in Diagnostics Healthcare: Is A New Trend Emerging?
One of the primary trends emerging in the sector is the growing use of artificial intelligence. AI-powered diagnostic tools are revolutionizing the interpretation of medical images with high accuracy, leading to increased adoption. These tools not only improve disease diagnostics but also allow medical professionals to develop more effective and personalized treatment plans, elevating the overall healthcare experience.
On February 24, GlobeNewswire reported that the US AI diagnostics market was worth around $655 million in 2024, as per estimates by Precedence Statistics. It is expected to grow at a CAGR of 20.7% between 2025 and 2034, reaching $4.29 billion by the end of the forecast period.
On February 4, Eric Lefkofsky, founder and CEO of Tempus AI, appeared on CNBC to talk about the impact of generative AI in diagnostics healthcare, among other things. He was of the view that generative AI and large language models aren’t more impactful in any other avenue as much as they are in healthcare. Diagnostics sit at the center of healthcare, as almost every other major decision a doctor makes is undertaken after ordering some kind of laboratory test. If we can make diagnostics more intelligent, it would be possible to route patients to the best possible and most optimal therapy.
Generative AI is thus allowing access to new tools that help structure and make sense of disparate information and use that information, whether it be physician progress notes, pathology reports, molecular data, CAT scans, MRIs, or others, to make sure that the patients are on the optimal therapy path. He further said that the promise of this technology is twofold: it is enormous in helping patients live better and longer lives while reducing the substantial waste in the US healthcare system. Generative AI is thus significantly impactful in healthcare diagnostics.
With these trends in view, let’s look at the 12 best diagnostics stocks to invest in right now.
A technician in a lab inspecting an ELISA test kit for use in biopharmaceutical diagnostics.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 diagnostics and research stocks. We then selected the top 12 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
12 Best Diagnostics Stocks to Invest In Right Now
12. Medpace Holdings, Inc. (NASDAQ:MEDP)
Number of Hedge Fund Holders: 42
Medpace Holdings, Inc. (NASDAQ:MEDP) is a scientifically driven contract research organization (CRO) that provides clinical development services to the medical device, pharmaceutical, and biotechnology industries. It partners with companies in these domains to develop and execute clinical trials, ranking it on our list of the best diagnostics stocks to invest in right now. The company’s services include clinical trial management, medical department, clinical monitoring, data-driven feasibility, laboratories, quality assurance, and various others. Medpace Holdings, Inc. (NASDAQ:MEDP) operates in the US, Europe, Asia-Pacific, Belgium, and Other geographical segments.
The company reported solid fiscal Q4 2024 results, with revenue growing 7.7% year over year to $536.6 million. Revenue for the full year 2024 also grew by 11.8%, totaling $2.11 billion. In addition, EBITDA for the quarter grew by 39.3% to $133.5 million, accompanied by an improvement in margins to 24.9%. Net income also surged by 49.5%, reflecting the company’s strong operational efficiency.
With a cash position of $669.4 million as of December 31, 2024, Medpace Holdings, Inc. (NASDAQ:MEDP) is well-capitalized to support its business strategy moving forward. In a report released on March 3, Charles Rhyee from TD Cowen maintained a Buy rating on the company with a price target of $370.00. Vulcan Value Partners also expressed bullish sentiments for Medpace Holdings, Inc. (NASDAQ:MEDP) in its Q4 2024 investor letter, saying that the company boasts an excellent operating record, a strong balance sheet, robust free cash flow, and capital allocation history.
Here is what Vulcan Value Partners said about Medpace Holdings, Inc. (NASDAQ:MEDP) in its Q4 2024 investor letter:
“We purchased three new positions during the quarter: Everest Group Ltd., Medpace Holdings, Inc. (NASDAQ:MEDP), and Partners Group Holdings AG. Medpace Holdings Inc. is a top ten global clinical contract research organization (CRO) providing outsourced drug development services. Medpace provides a full-service model attractive to small- and mid-sized biotechnology firms who lack the infrastructure needed to navigate the development process. This customer base is typically less price-sensitive and relies on Medpace to perform end-to-end contract services for drug development. Medpace has an outstanding operating record and has grown revenues and profits at a solid double-digit rate over the last several years. The company produces robust free cash flow and has a strong balance sheet. In addition, Medpace has an excellent capital allocation history.”
11. Charles River Laboratories International, Inc. (NYSE:CRL)
Number of Hedge Fund Holders: 45
Charles River Laboratories International, Inc. (NYSE:CRL) offers essential services and products to biotechnology and pharmaceutical companies, academic institutions, and government agencies to support and augment their research, diagnostics, and drug development endeavors. It operates through the Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions segments.
The company reported a 7.4% growth in its non-GAAP net income for fiscal Q4 2024, reaching $136.6 million. Diluted EPS on a non-GAAP basis was $2.66, an increase of 8.1%. These growth trends were attributed to higher operating income and favorable below-the-line items, including reductions in the tax rate, interest expense, and diluted shares outstanding.
Charles River Laboratories International, Inc. (NYSE:CRL) has launched several initiatives to safeguard operating margin and shareholder value, including restructuring initiatives expected to yield annualized savings of approximately $225 million in 2026. Of these, over $175 million will be realized in 2025. Upslope Capital Management was bullish on Charles River Laboratories International, Inc. (NYSE:CRL) in their Q4 2024 investor letter, reflecting that the company holds a leading market share position in a number of its businesses. It has worked on around 80% of all the drugs approved in the last five years, which further sheds light on its large-scale operations.
Here is what Upslope Capital Management said about the company in its Q4 2024 investor letter:
“Charles River Laboratories International, Inc. (NYSE:CRL) is a pharmaceutical services business, whose key offerings include drug discovery support and safety testing, research models, and outsourced manufacturing. The company holds leading market share positions in several of its business lines and has worked on ~80% of all drugs approved over the last five years. Customers are mostly biotech (40% of revenue) and pharma (30%) businesses – largely located in North America (70%) and Europe (25%).
Like plenty of other healthcare businesses that boomed during the COVID era, Charles River has had a challenging few years. Just recently – yesterday to be exact – the Company disappointed the Street with soft guidance for 2025. In Upslope’s view, CRL is a cyclical compounder going through a…cyclical downturn. Today, shares trade in-line with where they did five years ago – despite revenue and FCF/share that are 50% and 30% higher (while being in the midst of a cyclical downturn – i.e. real earnings power should be materially higher). While the company relies on volatile end markets, over the long run its own free cash flow tends to march higher, driven by advances in and rising demand for drug development. Upslope’s key thesis points include:…” (Click here to read the full text)
10. ICON Public Limited Company (NASDAQ:ICLR)
Number of Hedge Fund Holders: 46
ICON Public Limited Company (NASDAQ:ICLR) is a clinical research organization that provides outsourced development services to the biotechnology, pharmaceutical, and medical device industries. It specializes in managing, developing, and analyzing programs that support clinical development. The company operates in Ireland, the Rest of Europe, the US, and Other geographical segments.
ICON Public Limited Company (NASDAQ:ICLR) showed improved performance from a business development perspective in fiscal Q4 2024, with gross bookings of $3.06 billion increasing 8% sequentially and 3% year-over-year. It also made substantial progress in awards in its biotech business, executing on the improved pipeline and opportunity flow in that division.
Despite a challenging backdrop, ICON Public Limited Company (NASDAQ:ICLR) delivered a 2% revenue growth for 2024, along with adjusted earnings per share of 9.5% both on a full year and year-over-year basis. The company also attained its target free cash flow of $1.1 billion for 2024, an increase of 10% over 2023. In its Q4 2024 investor letter, Diamond Hill Mid Cap Strategy said that ICON Public Limited Company’s (NASDAQ:ICLR) outlook over the long term is favorable. Analysts are also bullish on the stock, and its median price target of $184.87 implies an upside of 35.23% from current levels.
Diamond Hill Mid Cap Strategy stated the following regarding the company in its Q4 2024 investor letter:
“As valuations have continued rising and the economic cycle has gotten relatively long in the tooth, we’ve thought carefully about where and how we are exposed to more cyclical stocks. As such, we initiated a number of new positions in Q4, including ICON Public Limited Company (NASDAQ:ICLR), Informatica, Teledyne Technologies, LPL Financial Holdings, Teleflex Incorporated and Solventum Corporation.
ICON is a leader in clinical trial outsourcing and commercial support and is a key player in the efficient and timely delivery of worldwide drug development for pharmaceutical clients. We believe the outlook over the long-term is favorable and initiated a position during the quarter at a valuation below our estimate of intrinsic value.”
9. Exact Sciences Corporation (NASDAQ:EXAS)
Number of Hedge Fund Holders: 49
Exact Sciences Corporation (NASDAQ:EXAS) is a diagnostics and screening company that focuses on the early detection and prevention of particular types of cancer. It offers Cologuard, a non-invasive screening test for the early detection of colorectal cancer, pre-cancer, and Oncotype DX.
On February 5, 2025, the company announced a partnership with Flatiron Health to use its research platform to analyze data from Exact Sciences Corporation’s (NASDAQ:EXAS) Oncodetect MRD test. The collaboration aims to collect real-world data from diverse patients in an attempt to integrate MRD testing into precision cancer care. The partnership began with a clinical study of 1,350 patients to track cancer recurrence across different solid tumors.
Exact Sciences Corporation (NASDAQ:EXAS) also has sound operations. It reported a 10% revenue growth in fiscal Q4 2024, with adjusted EBITDA increasing 52% to $75 million. Screening revenue also rose 14% to $553 million, primarily fueled by strong Cologuard adoption. In addition, the company strengthened its balance sheet in 2024, more than doubling free cash flow and ending the year with $1.04 billion in cash and securities. On March 18, BTIG analyst Mark Massaro reiterated a Buy rating on Exact Sciences Corporation (NASDAQ:EXAS) and set a price target of $65.00.
Parnassus Growth Equity Fund stated the following regarding Exact Sciences Corporation (NASDAQ:EXAS) in its Q4 2024 investor letter:
“We bought two new positions in biotechnology company Vertex Pharmaceuticals and genetic testing company Exact Sciences Corporation (NASDAQ:EXAS). Exact Sciences, a cancer diagnostic company, is approaching profitability and should be able to continue to grow its top and bottom line due to its leadership in non-invasive colorectal cancer tests and entry into new markets like cancer recurrence monitoring.”
8. Mettler-Toledo International Inc. (NYSE:MTD)
Number of Hedge Fund Holders: 50
Mettler-Toledo International Inc. (NYSE:MTD) supplies precision instruments and services for diagnostics and research. It manufactures a range of precision instruments, including industrial instruments, retail weighing solutions, and laboratory instruments. These precision laboratory instruments are used for sample preparation, material characterization, synthesis, analytical benchtop, and in-line measurement.
The company is turning a corner with its 2024 results after a period of unchanged stock price. It delivered two consecutive quarters of positive revenue growth. The company’s service revenue is a primary stabilizing factor for its operations, acting as a recurring and resilient revenue stream, supported by a $16 billion installed base of lab instruments and weighing systems that require regular maintenance.
Mettler-Toledo International Inc. (NYSE:MTD) is also undergoing consistent margin expansion, with Q4 2024 gross margins hitting a record 61.2%. A crucial driver of these gains is the company’s pricing power, which is supported by its mission-critical products, dominant market position, and highly regulated customer base. It operates in key defensible segments of the industry, and its management has continually highlighted the company’s potential to grow by expanding market share in fragmented categories. These factors reinforce its long-term growth trajectory. In a report released on February 11, Vijay Kumar from Evercore ISI maintained a Buy rating on Mettler-Toledo International Inc. (NYSE:MTD), with a price target of $1,475.00. The company takes the eighth spot on our list of the 12 best diagnostics stocks to invest in right now.
Mar Vista US Quality Strategy stated the following regarding Mettler-Toledo International Inc. (NYSE:MTD) in its Q4 2024 investor letter:
“Healthcare stocks in general, and Life Science tool businesses more specifically, ended 2024 on a downbeat as investor sentiment is still cautious on the market’s post-Covid recovery. Hopes for an above-average industry growth rebound in 2025 were muted by managements’ more cautious guidance. Investor concerns over the Trump administration’s healthcare leadership and policies further dampened optimism for a strong 2025. Tariff impacts, NIH funding and Biotech/pharma spending top the list of investor concerns. We believe Mettler-Toledo International Inc.’s (NYSE:MTD) and Danaher’s secular growth opportunities stay intact. Both businesses compete in key, defensible segments of the industry’s value chain and have strong pricing power and margin expansion opportunities. Long-term secular drivers for scientific research and commercialization of biologic therapeutics and molecular diagnostic should drive above-average growth for both businesses.”
7. IQVIA Holdings Inc. (NYSE:IQV)
Number of Hedge Fund Holders: 51
IQVIA Holdings Inc. (NYSE:IQV) provides advanced analytics, clinical research services, and technology solutions for the life sciences industry. Its operations are divided into Technology & Analytics Solutions, Research & Development Solutions, and Contract Sales & Medical Solutions segments.
The company delivered strong operational results in its full-year 2024 results, reporting revenue growth of 5.5% at constant currency with adjusted diluted earnings per share rising over 9%. Its free cash flow reached a record $2.1 billion, representing 41% growth versus last year and 104% of adjusted net income. On the clinical side, net new bookings for the quarter went over $2.5 billion.
In addition, IQVIA Holdings Inc. (NYSE:IQV) successfully renewed all of its large pharma strategic partnerships this past year, displaced incumbents, and expanded the scope of work in several partnerships, positively positioning its business for future growth. The company holds partnerships with 22 of the top 25 pharma companies. It also introduced 60 innovations in 2024, including 39 AI-enabled applications. For instance, IQVIA Holdings Inc. (NYSE:IQV) rolled out the IQVIA AI Assistant, its first-ever Gen AI interface that allows customers to interact with a growing number of its products and get answers to their questions almost instantly. In a report released on March 5, Charles Rhyee from TD Cowen maintained a Buy rating on the company, with a price target of $250.00.
6. Agilent Technologies, Inc. (NYSE:A)
Number of Hedge Fund Holders: 55
Agilent Technologies, Inc. (NYSE:A) provides application-focused solutions, including services, instruments, software, and consumables for the entire laboratory workflow. Its offerings allow customers to quantify, identify, and analyze the biological and physical properties of products and substances.
The company drove top-line year-over-year growth in fiscal Q1 2025, with macro market trends continually improving, such as CapEx spending. It reported revenue of $1.681 billion in fiscal Q1 2025, a 1.4% growth over the same quarter last year. This was attributed to the company capturing an outsized share of the China stimulus awards.
Agilent Technologies, Inc. (NYSE:A) plans to grow core revenue between 5% and 7% annually, expanding its operating margin by 50 to 100 plus basis points per year, and delivering double-digit EPS growth. Impax Global Environmental Markets Fund stated the following regarding Agilent Technologies, Inc. (NYSE:A) in its Q3 2024 investor letter:
“Agilent Technologies, Inc. (NYSE:A) (Environmental Testing & Monitoring, US) rebounded during the quarter driven by an encouraging earnings release, indicating improving end-market conditions. Q3 top- and bottom-line results exceeded expectations, driven by strength in their instruments business. Guidance was modestly raised, and the company’s book-to-bill ratio was greater than 1 for the second consecutive quarter.”
5. IDEXX Laboratories, Inc. (NASDAQ:IDXX)
Number of Hedge Fund Holders: 58
IDEXX Laboratories, Inc. (NASDAQ:IDXX) develops, manufactures, and distributes products and services for the livestock and poultry, animal veterinary, dairy, and water testing markets. It operates through the following segments: Companion Animal Group (CAG), Water Quality Products (Water), Livestock, Poultry, and Dairy (LPD), and Other.
The company’s revenue for fiscal Q4 2024 surpassed estimates of $935 million, reaching $954 million. EPS came in at $2.62, exceeding the anticipated $2.40. Its CAG diagnostics segment registered a 6% growth, driving the overall positive earnings performance.
IDEXX Laboratories, Inc. (NASDAQ:IDXX) is focusing on innovation, recently introducing the inVue Dx™ Cellular Analyzer to streamline veterinary workflows. It is continually expanding its diagnostics portfolio, supported by R&D investments and the anticipated launch of a canine lymphoma diagnostic tool. The company’s growth strategy is based on attaining success in international markets and emphasizing high-margin consumables.
Its 2025 guidance reflects optimism, as management anticipates a sales growth of 4% to 7%. EPS is expected to jump between 10% and 15%. IDEXX Laboratories, Inc. (NASDAQ:IDXX) also has considerable expansion opportunities, as North America currently drives 65% of its revenue, while Asia-Pacific and Europe represent untapped potential. On March 18, Mark Massaro from BTIG reiterated a buy rating for the company with a price target of $530.00. It ranks fifth on our list of the 12 best diagnostics stocks to buy now.
Conestoga Capital Advisors stated the following regarding IDEXX Laboratories, Inc. (NASDAQ:IDXX) in its Q4 2024 investor letter:
“IDEXX Laboratories, Inc. (NASDAQ:IDXX) is the industry leader in providing instruments (and consumables) used in diagnostics, detection, and information systems for veterinary, food, and water testing applications. Earnings for the quarter were mixed, and forward guidance was lowered. Shares were pressured as clinical visits across the industry remain weak, with an unprecedented 10 of 11 recent quarters seeing negative US same-store vet visits. These recent trends should normalize over time as the secular demand remains robust.”
4. Illumina, Inc. (NASDAQ:ILMN)
Number of Hedge Fund Holders: 61
Illumina, Inc. (NASDAQ:ILMN) develops, manufactures, and markets life science tools and integrated systems for large-scale genetic variation and function analysis. It operates through the Core Illumina segment, which indulges in the research, clinical, and applied markets fields and allows the adoption of a range of genomic solutions. The company’s products include kits, reagents, instruments, software, selection tools, and more. Illumina, Inc. (NASDAQ:ILMN) also offers services such as proactive instrument monitoring, sequencing and microarray services, and instrument services, training, and consulting.
The company’s fiscal Q4 2024 results reflect growth potential and resilience, with core revenue reaching $1.1 billion and reflecting a 1% growth from fiscal Q4 2023. Illumina, Inc. (NASDAQ:ILMN) also improved its operating margins, with GAAP operating margin at 15.8% and non-GAAP at 19.7%. In a report released on March 12, Mason Carrico from Stephens maintained a Buy rating on the company with a price target of $156.00.
Baron Fifth Avenue Growth Fund also expressed bullish sentiments regarding the company in their fiscal Q4 2024 investor letter, saying that Illumina, Inc. (NASDAQ:ILMN) is well-positioned to benefit from the rising adoption of DNA sequencing. The field represents untapped potential, as less than 1% of the people had their DNA sequenced. Here is what Baron Fifth Avenue Growth Fund said about Illumina, Inc. (NASDAQ:ILMN) in its Q4 2024 investor letter:
“We also increased several of our other existing positions including the next-generation sequencing platform Illumina, Inc. (NASDAQ:ILMN) – as we believe the company remains well positioned to benefit from the growing adoption of DNA sequencing as still less than 1% of people had their DNA sequenced. We also believe that as the adoption of the most recent technology matures over the next several years, growth rates which are currently masked (due to the lower price of the new technology), will become more evident.”
3. Natera, Inc. (NASDAQ:NTRA)
Number of Hedge Fund Holders: 77
Natera, Inc. (NASDAQ:NTRA) is a diagnostics company that develops and commercializes molecular testing services, applying its technological services in oncology, women’s health, and organ health. The company provides various diagnostic tests, including Panorama non-invasive prenatal test (NIPT), Vistara, horizon carrier screening (HCS), spectrum pre-implantation genetic screening and spectrum pre-implantation genetic diagnosis, Anora products of conception (POC), and non-invasive paternity testing (PAT).
2024 was a transformational year for the company, as it ended fiscal Q4 2024 with significant momentum going into 2025. Revenues in the quarter reached $476 million, reflecting a sound 53% year-on-year growth and $4 million above its January pre-announcement of $472 million. Volumes were up 26% compared to fiscal Q4 2023. In addition, gross margins in fiscal Q4 2024 were 63%, significantly higher than the 51% it posted a year ago.
Natera, Inc. (NASDAQ:NTRA) generated around $46 million of cash flow in fiscal Q4 2024, wrapping up the full year with about $86 million in total cash flow generation. It plans to continue this momentum, reinvesting its cash flows in its business in 2025. Management is confident that this approach holds the potential to enhance the company’s growth profile in 2026 and beyond. In addition, the company’s growing market penetration in oncology is expected to support price and volume growth.
Parnassus Growth Equity Fund stated the following regarding Natera, Inc. (NASDAQ:NTRA) in its Q4 2024 investor letter:
“Natera, Inc. (NASDAQ:NTRA), an industry leader in genetic testing for women’s health and cancer recurrence monitoring, reported robust financial results for the third quarter of 2024. The company’s increasing market penetration in oncology and reimbursement by insurance should support continued volume and price growth.
Natera shares rose throughout the year, as the genetic testing company gained market share, improved reimbursement and continued to publish data and gain traction for its cancer recurrence monitoring tests.”
2. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 100
Thermo Fisher Scientific Inc. (NYSE:TMO) provides analytical instruments, reagents, equipment, software, and other services for analysis, research, diagnostics, and discovery. It operates through the Analytical Instruments, Life Sciences Solutions, Laboratory Products and Services, and Specialty Diagnostics segments.
The company is on a solid growth trajectory and reported $11.4 billion in revenue in fiscal Q4 2024, reflecting a 5% year-over-year growth. Its strong cash position further bolsters its standing, as it generated over $7.3 billion in free cash flow in fiscal 2024. Thermo Fisher Scientific Inc. (NYSE:TMO) also has a strong dividend yield, with seven consecutive years of growth. It outperformed the sector median of two years by 250%, reflecting its ability to return value to its shareholders.
Thermo Fisher Scientific Inc. (NYSE:TMO) holds a competitive market position due to its leadership in life sciences, long-term customer relationships, and high switching expenses. Its consumables and equipment are especially useful in drug development. The company expects to continue its consistent growth, and management forecasts high-single-digit revenue growth in the coming years.
Analysts are bullish on the stock due to its recent strategic acquisition of SOLV’s Purification and Filtration business, valued at $4.1 billion. The acquisition is anticipated to boost Thermo Fisher Scientific Inc.’s (NYSE:TMO) standing in the bioprocessing sector, especially in filtration, aligning with its long-term growth strategy. Leerink Partners analyst Puneet Souda has maintained his bullish stance on the company, giving it a Buy rating on February 27. He has given Thermo Fisher Scientific Inc. (NYSE:TMO) this rating due to a combination of factors surrounding its acquisition of SOLV’s Purification and Filtration business. The deal is anticipated to become accretive over time, with a high return on invested capital expected by the fifth year, as per the analyst.
Polen Focus Growth Strategy also expressed bullish sentiments for the stock, stating the following in its Q4 2024 investor letter:
“Thermo Fisher Scientific Inc. (NYSE:TMO) appears to continue to move past COVID-related headwinds that hampered growth in recent years. While the backdrop around big pharma budget cuts and a weaker biotech funding environment have weighed on the stock over the past year, Q4 underperformance seems more related to concerns over increased regulatory scrutiny under the new administration, given RFK Jr.’s appointment as the Trump administration’s head of US. Health and Human Services, and his vocal pronouncements against pharmaceutical industry drug pricing. In tough times, pharma and biotech companies lean on suppliers that can deliver the best value. We believe Thermo has a vast offering of products and services bundled at prices that competitors have a hard time matching, allowing them to take significant market share. We maintain our long-term conviction in Thermo as among the most durable compounders in the world, with the ability to drive consistent growth through good and bad macro environments.”
1. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 101
Danaher Corporation (NYSE:DHR) designs, manufactures, and markets professional, medical, industrial, and commercial products and services, making it a significant diagnostics stock. It operates through Diagnostics, Biotechnology, Life Sciences, and Environmental and Applied Solutions. Its Biotechnology segment offers a range of equipment and consumables for biological medicines, while the Life Diagnostics segment offers clinical instruments, devices, consumables, and other services for the diagnosis and treatment of diseases.
Strong free cash flow generation is a competitive point for the company, as it generated $5.3 billion of free cash flow in fiscal 2024. This resulted in a free cash flow to net income conversion ratio of around 135%. Danaher Corporation (NYSE:DHR) is also active in the M&A domain, completing several strategic acquisitions throughout fiscal 2024 that brought innovative solutions to the company.
Danaher Corporation’s (NYSE:DHR) focus on high-margin bioprocessing in its life sciences sector is central to its growth strategy. The anticipated recovery in bioprocessing is expected to significantly increase the company’s earnings per share (EPS) in the coming years.
On March 21, Goldman Sachs upgraded Danaher Corporation (NYSE:DHR) to Buy from Neutral with a $260 price target. Madison Sustainable Equity Fund was also bullish on the company, and stated the following regarding Danaher Corporation (NYSE:DHR) in its Q3 2024 investor letter:
“Danaher Corporation (NYSE:DHR) released its 2024 Corporate Sustainability Report. It highlighted several milestones across its three pillars of sustainability (building the best team, innovating products that improve lives and the planet, and protecting the environment). The company has committed to setting greenhouse gas emission reduction targets in line with the Science Based Targets initiatives (SBTi), including reaching net-zero value chain emissions by 2050.”
Overall, DHR ranks first among the 12 best diagnostics stocks to invest in right now. While we acknowledge the potential of diagnostics stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DHR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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