Demand for healthcare services has been tipped to grow strongly in the future. Could these shares benefit?
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With populations around the world ageing and technologies and treatments improving, demand for healthcare services is expected to grow strongly over the next few decades. In light of this, the healthcare sector could be a good place to consider investing with a long term view.
But which ASX healthcare shares should you buy? Two that are rated as buys right now are listed below. Here’s what you need to know about them:
Nanosonics Ltd (ASX: NAN)
Nanosonics could be a good option for investors in the healthcare sector. It is a leading infection control specialist which provides the industry-leading trophon EPR disinfection system for ultrasound probes.
If demand for healthcare services increases, there’s a likelihood that ultrasound usage will increase in line with this. This, combined with further market share gains, would bode well for Nanosonics’ growth over the next decade and beyond.
At present, management estimates that 80,000 patients are protected from the risk of cross contamination every day because the ultrasound probe has been high-level disinfected with trophon. This is driving strong recurring revenue growth from the consumable products the system requires.
Positively, management isn’t resting on its laurels and is aiming to launch several new technologies that are targeting unmet needs. These are believed to have similar addressable markets to the trophon product. If successful, this could provide Nanosonics with a significant runway for growth, especially in a post-pandemic world heavily focused on infection prevention.
Analysts at UBS are positive on the company. They currently have a buy rating and $7.20 price target on its shares.
Pro Medicus Limited (ASX: PME)
Another healthcare share to consider is Pro Medicus. It is a healthcare technology company that provides healthcare organisations with radiology information systems, picture archiving and communication systems, and advanced visualisation solutions.
Pro Medicus has been a positive performer again in FY 2021 despite the pandemic. In February, the company reported a 7.8% increase in revenue to $31.6 million and a 25.9% jump in underlying profit before tax to $18.76 million.
Since then, the company has won a number of lucrative long term contracts with major healthcare institutions. In addition to this, it still has a large pipeline of sales opportunities that could be converted in the near future.
And thanks to the quality of the company’s technology and the structural shift away from legacy systems, Pro Medicus appears very well positioned for growth over the long term. This could be bolstered by its recent collaboration with healthcare giant Mayo Clinic.
That agreement will serve as the framework for collaboration between the two parties to facilitate development and commercialisation in the field of artificial intelligence (AI), leveraging the company’s Visage AI Accelerator platform.
In response to the news, Goldman Sachs retained its buy rating and $53.80 price target on the company’s shares. It commented: “We believe the strategy of partnering with the leading academics helps to maximise the value and competitive advantage of PME’s technology proposition.”
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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Nanosonics Limited and Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.