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
Healthcare expenditures make up a double digit percentage of our GDP here in Canada. In 2019, healthcare spending hit a whopping $264B. In 2021 this number is expected to exceed $308B.
Although this revenue certainly isn't the total addressable market for the stocks on this list, there is no doubt they're going to benefit from an increase in spending and overall an increase in the older population here in Canada.
The pandemic also brought to light numerous deficiencies in our healthcare system, ones the government might look to alleviate as we move forward.
So, how can you take advantage of an aging population, a rising population and new medical technology making our lives easier? Well, you can invest in the top Canadian healthcare stocks! Lets have a look at 3 of the best in this article.
The top Canadian healthcare stocks to buy right now
By definition, Savaria Inc (TSX:SIS) is an industrial stock. However make no mistake about it, they are a healthcare play that is in a prime position to take advantage of an aging population. 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.
Up until the past year, Savaria had been somewhat of an underperformer. It was plagued with inconsistencies in terms of results and also frustrated shareholders with constant share dilution. However, the company has turned itself around and is now a company you should be adding to your watchlist if you're looking for healthcare plays.
In early 2021, the company made a transformational acquisition of Handicare, a European company that specializes in mobility products. Handicare is responsible for the production of over 45,000 stairlifts annually, and the mega-merger will make Savaria a true global leader when it comes to mobility products.
Considering the average age here in Canada and even globally is expected to rise considerably over the next 20-30 years, more and more consumers will be needing the exact products that Savaria offers.
The company is expected to double revenue over the next few years thanks to the Handicare acquisition, and earnings are expected to grow at a mid double digit pace as well.
It seems like after years of underperformance, Savaria has finally turned the page and is putting up some strong results. As an added bonus to its growth, the company pays out a mid 2% monthly paying dividend, one that is well covered by cash flows.
Well Health Technologies (TSE:WELL)
If you're looking for a company with explosive growth potential, then Well Health Technologies (TSE:WELL) will certainly appeal to you.
So what does Well Health 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.
The company has 74 clinics here in Canada and two in the United States. In terms of staffing, the company deploys over 1000 healthcare providers and over 200 doctors.
The company is primarily a digital health company, or telehealth as many like to call it. Instead of going into the doctor, patients have the ability to be diagnosed right from home. This type of medical care was amplified during COVID-19 shutdowns, and caused Well Health's popularity to soar.
The company is backed by one of the richest men on the planet, Sir Li Ka-shing, who has been known to invest in other strong companies like Spotify and Facebook.
The company is very acquisition heavy and has completed some transformational acquisitions over the years, including CRH Medical in mid 2021. Not only did the acquisition of CRH significantly boost Well Health's revenue, but it also gave them deep access to the U.S. healthcare system.
This is a very young company, capable of significant growth, yet significant volatility. Revenue growth is skewed by acquisitions, expected to increase tenfold over the next year. But, adjusted EBITDA is expected to rise at a 25% clip and analysts figure the company will be able to consistently post positive EBITDA heading into next year.
A small cap Canadian digital healthcare company, CloudMD (TSE:DOC.V) hasn't quite made the jump from the TSX Venture to the TSX. However, this is a stock with plenty of potential if you dig a little deeper.
With a market cap of less than $350M at the time of writing, it's not nearly the size of a company like Well Health or Savaria, but if you believe that the digital health sector does have explosive potential, you'll want to add CloudMD to your watchlist at the very minimum.
CloudMD is a SaaS healthcare company that delivers technology solutions to medical clinics across the country via primary care clinics, telemedicine and artificial intelligence.
The bulk of the company's revenue comes from its Enterprise Health Solutions, which includes virtual care, assessments and rehabilitation, Employee Assistance Programs and more. Its Digital Services and Clinics/Pharmacies segment make up the other portions of revenue, around 25% each.
The company is diversifying outside of Canada as well, with over 25% of its revenue located in the United States. This provides significantly more growth potential as populations are larger. In fact, CloudMD states it is positioned very well to take advantage of a $3.5T healthcare industry.
It's always wise to take these total addressable market numbers stated by the companies with a grain of salt. But, even a small fraction of this would represent significant growth on CloudMD's end.
The company made one of the largest acquisitions of its existence in MindBeacon, which traded under the ticker MBCN on the TSX Index. The company paid $116M in cash and shares, and it expects immediate synergies of $2M.
The acquisition will boost CloudMD's forward revenue run rate to $185M, which from a valuation standpoint at the time of writing puts it at around 1.8 times forward sales. Important to keep in mind, that the purchase price of MindBeacon also came with $54M in cash on its balance sheet.
Share dilution has been a large issue for investors and prospective investors of CloudMD. But, this is something that young companies go through very often.
CloudMD will need to prove itself over the next few years, and prove that the MindBeacon acquisition was worth the hefty price tag. If it does, we could see upside here as a small cap digital health play.
Overall, this article should give you a nice roundup of top Canadian healthcare stocks
While most of the options on this list are small to mid cap players, we don't really have any large scale healthcare stocks here in Canada. If you want something like that, you'll have to head south of the border where you'll find plenty.
But, I wouldn't be shying away from looking at these 3 options just because they're small in stature. All 3 are in explosive industries growth wise, and should be able to provide long standing returns to investors in the future.