• Home
  • /
  • Posts
  • /
  • Canadian Healthcare Stocks For Outsized Returns

February 13, 2020

Canadian Healthcare Stocks For Outsized Returns

Disclaimer: The writer of this article may have positions in the securities mentioned in this article. The fact they hold positions in securities has had no impact on the production of this article

By Dan Kent

February 13, 2020

As the population grows older in Canada and around the world, Canadian healthcare companies are going to be relied upon to supply medications and products to Canadians and customers worldwide.

The major benefit to this from an investing standpoint is the fact Canadian healthcare stocks will inevitably post higher revenues and, as current investors hope, more profits. New investors in the process of learning how to invest in stocks often flock to healthcare stocks, more than likely due to their potential to provide better than average returns.

According to the Government of Canada, in 2014 there was approximately 6 million Canadians that were aged 65 or older. This represented about 15.6% of the population. The article goes on to state that by 2030, less than two decades later, this number will balloon by over 50% to 9.5 million.

The average life expectancy of a Canadian woman is also expected to rise to a whopping 86.2 years old!

Rapid spending means good things for Canadian healthcare stocks

According to CIHI, Canadian healthcare spending reached a whopping $264 billion in 2019. Health expenditures are also expected to make up nearly 12% of the country’s GDP.

With considerable potential for spending bound to carry into the future, we thought it would be useful to bring to your attention 4 Canadian stocks in the healthcare sector we feel have the potential to provide out sized returns.

Of note, Sienna Senior Living used to be on this list, but we’ve removed it. In fact, we’d highly suggest avoiding the stock right now due to COVID-19 litigations against the company.

Our top Canadian healthcare stocks for 2020 and beyond

Knight Therapeutics (TSX:GUD)

Canadian Healthcare Stocks - Knight Therapeutics

 

Knight Therapeutics (TSX:GUD) is a specialty pharmaceutical company that has operations globally. The company develops, acquires, markets and distributes pharmaceutical products, but has a unique way of doing so.

Knight acquires drugs from larger pharmaceutical companies that don’t want to negotiate the approval process for smaller nations much like Canada. Most recently, the company spent nearly $370 million to purchase Grupo Biotoscana, a Latin American specialty pharma.

For a company to have the business model Knight does, they need a significant amount of cash and very little debt. Fortunately, that is the exact position Knight is in.

With more than $600 million in current assets ($319 million of that being cash and cash equivalents) and only $58.2 million in current liabilities, the company has a rock solid balance sheet. Which, as we said, is perfect for a serial acquirer.

An investment in Knight is ultimately an investment in Jonathan Goodman. Goodman has been involved in the pharmaceutical business his entire adult life, and developed Paladin Labs. He ran the company for two decades, earning investors over 27% a year.

Keep in mind however, investors in this Canadian healthcare stock will need to be extremely patient. Knight has slowed down its pace of acquisitions and it is clear the company is looking to prepare for large scale acquisitions in the future.

Analysts have a 1 year price target of $9.58 on the pharma company, which signals around 25% upside at the time of writing. Investors who believe in Goodman strongly believe that Knight is one of the best stocks in Canada right now.

Savaria (TSX:SIS)

TSX Healthcare Stocks - Savaria

 

Savaria Inc (TSX:SIS) is yet another Canadian healthcare stock that is in a prime position to take advantage of an aging economy. Most investors view healthcare stocks as primarily drug manufacturers.

And while those stocks typically provide your best chance to hit a home-run in terms of returns, arming your portfolio with different industries of the healthcare sector can be extremely useful. Savaria provides just that.

The company develops, markets and manufacturers products for those who have mobility issues. This can be anything from elevators to stair lifts to adapting customers vehicles to become more mobility friendly. The company also develops therapeutic products for long-term care markets (see Sienna living above.) These can include beds, overlays and pillows.

Savaria has had a rough go as of late. Over the last year, the stock has traded relatively sideways. In fact, it’s actually down around 7%. So why has a company who has nearly tripled revenue and doubled earnings over the last four years not creating value for shareholders?

The primary issue would be share dilution, and another would be missed expectations. Savaria has a history of making share offerings to generate growth. When this happens, the market digests the new shares and as a result the share price drops.

So why do they keep offering shares? Well, the company currently pays a pretty healthy dividend. A Canadian Dividend Aristocrat and a monthly payer, Savaria yields around 3.23% at the time of writing. But, its payout ratio is high at 90%, and it is currently using around 120% of free cash flows to fund the dividend.

When a company is paying this much capital in the form of a dividend, there isn’t any left to fund growth. So, in order to drive that growth the company has had to issue shares.

Savaria is a small cap Canadian healthcare stock that has some very strong potential. The company just needs to get itself sorted right now, which I’m sure they will.

**Writer Daniel Kent is long SIS.TO**

WELL Health Technologies (TSXV:WELL)

Canadian Healthcare Stocks To Buy - WELL Technologies

We’re not ones to take extensive risk here at Stocktrades, and we often focus on small-cap stocks that trade on the TSX at minimum. Well Health Technologies (TSXV:WELL) , recently graduating from the TSX Venture to the TSX, has finally met this criteria, and offers a ton of potential growth for those looking to enter the healthcare sector.

So what does WELL do? The company owns the largest single chain network of care clinics in British Columbia. Along with that, they provide EMR (Emergency Medical Records) services to hundreds of medical clinics. This means thousands of doctors, nurses and healthcare workers benefit from WELL’s products but more importantly, over 15 million patients.

This makes WELL the third largest EMR provider in Canada. And considering healthcare in North-America will no doubt be a trillion dollar industry, there is a ton of room for growth. The company plans to continue it’s aggressiveness in terms of acquisitions to drive growth.

WELL has been, to put it lightly, astonishing in terms of returns over the last four years. In fact, those who bought in for $0.11 in April of 2016 are now up a whopping 1681%. The primary issue with investors now is did this stock become a too much, too soon situation. While analysts have tempered expectations, they still feel the stock has quite a bit of room to run with a 1 year price target of $2.28, which signals nearly 25% upside.

Related Posts

Canadian Oil Stocks – the Best Oil & Pipeline Stocks Today

Best Canadian Tech Stocks to Look at for Outperformance

Top Canadian 5G Stocks to Be Looking at Right Now

The 10 Best Canadian Stocks You Need to Be Looking at Today

Dan Kent


An active dividend and growth investor, Dan has been involved with the website since its inception. Dan is primarily a researcher and writer here at Stocktrades.ca, and his pieces have numerous mentions on the Globe and Mail, Forbes, Winnipeg Free Press, and other high authority financial websites. He has become an authority figure in the Canadian finance niche, primarily due to his attention to detail and overall dedication to achieving the highest returns on his investments. Investing on his own since he was 19 years old, Dan has compiled the experience and knowledge needed to be successful in the world of self-directed investing, and is always happy to bring that knowledge to Stocktrades.ca readers and any other publications that give him the opportunity to write. Dan manages his TFSA, RRSPs and a LIRA at Questrade, and has compiled a real estate portfolio of his primary residence and 2 rental properties, all before his 30th birthday.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}