The global digital health industry is expected to grow at a CAGR of 27.7% over the next four years, driven by its rising market share. While hospitals and other health care centers have been focusing on dealing with the coronavirus pandemic, people have been accessing telehealth services for help with other ailments.
While the world is still struggling to control the spread of the virus (with a new second strain now making the task even more difficult) the telehealth industry is on the rise. Moreover, consumers are gradually getting accustomed to remote health care, particularly as digital health services are relatively time and resource efficient. So, we think that even after the pandemic is controlled, the demand for telehealth services will continue.
Companies such Nuance Communications, Inc. (NUAN) and iRhythm Technologies, Inc. (IRTC) have witnessed an surge in the demand for their services this year, which has helped their stocks climb. With the telehealth boom here to stay, we expect these two stocks to continue their upward trajectory in the coming months.
Nuance Communications, Inc. (NUAN)
NUAN is an artificial intelligence company that provides healthcare and productivity solutions through three segments – Healthcare, Enterprise and Other. NUAN’s algorithms are designed to read, analyze, and respond to human activities, thereby enhancing user productivity. The Burlington, Mass-based company’s premiere solutions are Dragon Medical One and Nuance Dragon Ambient eXperience.
On December 15, Industrial Bank of Korea announced the use of NUAN’s state-of-the-art biometrics technology for its video calls to minimize fraudulent activities. Earlier this month, NUAN’s Surgical Computer Assisted Physician Documentation solution was implemented by McLeod Healthcare network. These developments reflect NUAN’s popularity in the global markets and are expected to bolster the company’s position in the biometrics technology and healthcare sectors.
Though NUAN’s revenue and EPS has declined in the third quarter ended September 30, 2020, the company is expected to make a quick comeback given its surging popularity and recognition in the international markets. Moreover, NUAN has beaten the consensus EPS estimate by 12.5% in this quarter.
A consensus EPS estimate of $0.86 for the next year ending March 31, 2022 represents a 14.7% improvement year-over-year. NUAN has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. And the consensus revenue estimate of $1.46 billion for next year represents a 7.7% rise from the same period last year.
NUAN has gained more than 230% to hit its 52-week high of $44.93 in December since hitting its 52-week low of $13.51 in March.
How does NUAN stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating.
The stock is currently ranked #11 of 98 stocks in the Software – Application industry.
iRhythm Technologies, Inc. (IRTC)
IRTC is a digital health company that is developing solutions for electrocardiogram (ECG) and ambulatory cardiac monitoring. Its proprietary flagship solution, Zio Service, which is a cloud-based data analytic platform integrated to wearable biosensors, is designed to offer diagnosis to patients prone to arrhythmias.
Early this month, , the National Institute of Health and Care Excellence (NICE) positively recommended IRTC’s remote monitoring service Zio XT. The recommendation came following Zio healthcare solution’s cardiac detection upgrade on November 16.
IRTC’s revenue has increased 31.6% year-over-year to $71.90 million in the third quarter ended September 30, 2020. Gross profit has risen 31.4% from the same period last year to $53.71 million, while its EPS increased 76.4% from the same period last year.
Analysts expect IRTC’s EPS to rise 51.9% next year. The company has an impressive earnings surprise history; it beat the street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $350.85 million for the next year represents a 33.4% improvement year-over-year.
IRTC has gained more than 380% since hitting its 52-week low of $56.54 in March. The stock hit its 52-week high of $274.21 on November 16.
It is no surprise that IRTC is rated “Buy” in our POWR Ratings system, with an “A” for Trade Grade, and “B” for Buy & Hold Grade and Peer Grade. In the 59-stock Medical – Diagnostics/Research industry, it is currently ranked #26.
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NUAN shares were trading at $44.27 per share on Thursday afternoon, up $0.30 (+0.68%). Year-to-date, NUAN has gained 148.29%, versus a 17.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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