We recently published a list of the 12 Best Diagnostics Stocks to Invest In Right Now. In this article, we are going to take a look at where Danaher Corporation (NYSE:DHR) stands against the other 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.
READ ALSO: 7 Most Undervalued Biotech Stocks To Invest In and 11 Best Pharma Stocks to Buy According to Hedge Funds.
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.
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).
A healthcare professional in a lab coat holding a microscope and looking at a slide under the lens.
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 1st on our list of the best diagnostics stocks to invest in right now. While we acknowledge the potential of DHR as an investment, 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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Disclosure: None. This article is originally published at Insider Monkey.
