3 Top Rated Healthcare Stocks to Add to Your Watchlist

The healthcare sector came to renewed prominence during the height of the pandemic, but even after society headed back to normalcy, healthcare in almost every form is in high demand. We have an aging baby boomer population that will continue to require more and more medication, hospital stays, and other types of services.

Generation X is also aging, and the Millennials are at a point in their life when they also need to start making sure they're staying healthy. All this leads to continued growth in healthcare stocks. But which stocks should investors consider now? I would advise taking a diversified approach and looking for top companies in industries beyond just pharmaceuticals and biotech.

I did just that and ran a search for some of the top-rated healthcare stocks in our POWR Ratings database. NextGen Healthcare, Inc. (NXGN), McKesson Corporation (MCK), and West Pharmaceutical Services, Inc. (WST) are certainly worth adding to your watchlist.

NextGen Healthcare, Inc. (NXGN)

NXGN is a United States-based company that provides healthcare solutions. The company offers technology and services platform support for ambulatory and specialty practices of all sizes. It provides software, services, and analytics solutions to medical and dental group practices.

In the most recent quarter, both earnings and revenue beat estimates. Plus, NXGN saw its gross and operating margins expand. The company's strong performance in the third quarter was driven by higher demand for its offerings. At the beginning of the year, more than a quarter of its bookings came from new clients. This trend continued in the third quarter.

In fact, the company has become the top-rated electronic health record provider in telehealth. Its next-gen electronic health record behavioral suite is also gaining traction. NXGN has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. The company had a Value Grade of B, which isn't surprising, with a forward P/E of 18.15.

NXGN also has a Quality Grade of B due to solid fundamentals. For instance, the firm has a current ratio of 1.2 and a debt-to-equity ratio of 0.1. We also provide Growth, Momentum, Stability, and Sentiment grades for NXGN, which you can find here. NXGN is the #5 ranked stock in the Medical – Services industry. For more top stocks in this industry, click here.

Click here to check out our Healthcare Sector Report for 2021

McKesson Corporation (MCK)

MCK is a leading wholesaler of branded, generic, and specialty pharmaceutical products to pharmacies, hospitals networks, and healthcare providers. Outside the U.S. market, the company engages in pharmaceutical wholesale and distribution in Europe and Canada. Plus, the company supplies medical-surgical products and equipment to healthcare facilities and provides various technology solutions for pharmacies.

Like NXGN, MCK also had a solid recent quarter. In its first-quarter fiscal 2022 report, earnings jumped 101% year over year to $5.56. The company saw an increase in revenues in its U.S. Pharmaceutical and Specialty Solutions segment due to market growth and increasing volumes from retail national account customers.

Sales at its Medical-Surgical Solutions segment rose 40.4% year over year due to higher demand for COVID-19 tests. The company has an overall grade of A and a Strong Buy rating in our POWR Ratings system. The company has a Stability Grade of B as the company has shown consistent growth and price performance.

For instance, the stock has a beta of 0.87. MCK also has a Sentiment Grade A, as it's like by the "Smart Crowd." Twelve out of fifteen Wall Street analysts hold a Strong Buy or Buy rating on the stock. For the rest of MCK's grades (Growth, Value, Momentum, and Quality), click here. MCK is ranked #1 in the Medical – Services industry.

West Pharmaceutical Services, Inc. (WST)

WST is a Pennsylvania-based medical supplies company that operates as a critical supplier to firms in the pharmaceutical, biotechnology, and generic drug industries. The company develops, manufactures, and distributes elastomer-based supplies for the containment and administration of injectable drugs. This includes equipment such as syringes, stoppers, and plungers.

The company recently reported its second-quarter 2021 results with earnings per share of $2.46, which beat the consensus Estimate rose 96.8% year over year. Revenues came in at $723.6 million, up 37.3% from the same quarter last year. Strong customer demand for its FluroTec, Westar, Daikyo, NovaPure, and Envision offerings helped drive sales.

WST also expanded its gross and operating margins in the quarter. WST has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B as Wall Street analysts expect sales and earnings to rise 30.9% and 78.4% for the year. WST also has a Quality Grade of B due to a solid balance sheet.

Its cash balance rose sequentially to $688 million in the most recent quarter. This is significantly higher than its short-term debt of $44 million. To access all of WST's grades, including Value, Momentum, Stability, and Sentiment, click here. WST is ranked #26 in the Medical – Devices & Equipment industry. For more top-ranked stocks in this industry, make sure to visit this link.

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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.

If you would like to see more of his best value stock ideas, then click the link below.

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NXGN shares were unchanged in premarket trading Tuesday. Year-to-date, NXGN has declined -8.94%, versus a 26.71% rise in the benchmark S&P 500 index during the same period.

David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.

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