We recently compiled a list of the 10 High Growth Healthcare Stocks to Invest in Now. In this article, we are going to take a look at where Natera, Inc. (NASDAQ:NTRA) stands against the other high growth healthcare stocks.
Global Healthcare Spending Trends and Investment Opportunities
During lean economic times, investing in healthcare stocks is generally regarded as defensive. This is due to the fact that people typically do not cut back on their use of prescription medications or other essential healthcare services, even during difficult financial times. According to the Centers for Medicare and Medicaid Services (CMS), national healthcare spending is projected to reach an estimated $4.8 trillion in 2023 and grow at an annual rate of 5.6% between 2027 and 2032.
Global healthcare spending hit a record high in 2021 at $9.8 trillion, or 10.3% of global gross domestic product (GDP), according to a World Health Organization report released in December 2023. Public health spending, however, continued to rise globally, except for low-income nations, where government health spending fell due to their heavy reliance on foreign assistance. In 2021, high-income countries spent almost $4,000 per capita on health care, while 11% of the world’s population resided in nations that spent less than $50 per person annually. Furthermore, only 0.24% of global health spending went to low-income nations, although making up 8% of the world’s population. According to the report, public spending on health increased significantly during the height of the COVID-19 pandemic, but this growth is unlikely to continue in the long run as nations now prioritize economic issues like high inflation, slowing growth, and rising debt servicing. WHO Assistant Director-General for Universal Health Coverage, Life Course, Dr. Bruce Aylward, stated:
“Sustained public financing on health is urgently needed to progress towards universal health coverage. It is especially critical at this time when the world is confronted by the climate crisis, conflicts and other complex emergencies. People’s health and well-being need to be protected by resilient health systems that can also withstand these shocks.”
This year, the pharmaceutical, medical equipment and supplies, robotics, biotechnology, and neurodegenerative illnesses sub-spaces are the primary ones to watch in the healthcare industry. The emergence and development of glucagon-like Peptide-1 agonists (GLP-1s) is the primary trend of interest in the pharmaceutical industry. These treatments have had a substantial impact on weight loss medications and have completely altered the competitive landscape in this field. Pharmaceutical companies that sell weight-loss medications have also benefited from higher prescription volumes and sales as a result of the development of GLP-1s. For example, BlackRock reported that from 2019 to August 2023, GLP-1 prescription volumes increased at a compound annual growth rate of 45%. The development of Ozempic and Mounjaro, respectively, by top pharmaceutical manufacturers was a major factor in this expansion. Additionally, this has led to a recent increase in the popularity of weight loss medication stocks.
Our Methodology
For this article, we screened on stocks with a minimum market capitalization of $10 billion and a 5-year average revenue growth of approximately 30%. These stocks were then ranked according to their revenue growth performance.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A laboratory environment with technicians in lab coats conducting molecular testing services.
Natera, Inc. (NASDAQ:NTRA)
Revenue Growth: 39.88%
Natera, Inc. (NASDAQ:NTRA) is a leading genetic testing company that specializes in non-invasive prenatal testing, cancer screening, and organ transplant monitoring.
The company reported exceptional financial results in Q3 2024, with revenue reaching $439.8 million, representing a remarkable 64% year-over-year growth. This significant increase was driven by strong volume growth across its product lines, particularly in oncology testing, which saw a 54% year-over-year increase to 137,000 tests. Natera, Inc. (NASDAQ:NTRA)’s gross margins reached a record 62% in Q3 2024, reflecting improved operational efficiency and a favorable product mix shift towards higher-margin offerings like Signatera. This margin expansion, coupled with strong revenue growth, has positioned the corporation to generate positive cash flow, with $34.5 million in cash generated in Q3 2024.
Natera, Inc. (NASDAQ:NTRA) recently published groundbreaking data from the GALAXY study in Nature Medicine, demonstrating Signatera’s ability to predict overall survival in colorectal cancer patients. This clinical validation strengthens Signatera’s position as a leading MRD test and supports its potential for wider adoption in cancer care. Based on its strong performance, the corporation has raised its full-year 2024 revenue guidance from $1.61 billion to $1.64 billion, implying approximately 50% year-over-year growth.
As of Q3 2024, 62 hedge funds held stakes in the company, according to the Insider Monkey database. Analysts have a consensus Strong Buy rating on the stock, with a 12-month price target averaging $173.00, ranging between $135.00 and $209.00. This indicates a modest potential upside of 3.43% from its current price of $167.26, reflecting positive expectations for the stock’s near-term performance.
Overall NTRA ranks 7th on our list of the high growth healthcare stocks to invest in now. While we acknowledge the potential of NTRA 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 timeframe. If you are looking for an AI stock that is more promising than NTRA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
