3 Lesser-Known Healthcare Names With Major Upside in Store

Key Points

• Healthcare is a massive, growing sector, but finding suitable investment targets can be a challenge—many companies are established and past their high-growth days, or early and highly risky for investors.
• Sanuwave Health, Amneal Pharmaceuticals, and Belite Bio represent a category of healthcare stocks that may present a middle ground.
• These firms are established (to varying degrees) and have strong fundamentals, but still have ample growth trajectories.

The global healthcare market is growing rapidly—it is expected to climb at a 6.9% CAGR over the next eight years, reaching more than $22.3 trillion by 2033. Its appeal to investors in the current market environment may also lie in its non-cyclical nature, thanks to resilient demand that is more related to health needs and demographics than to external economic conditions.

However, finding healthcare names poised for major growth may be difficult, considering that many of the largest legacy firms in the space are well beyond their days of big gains, and many others will remain highly speculative until (or if) they experience a significant commercial development or research breakthrough. The companies below might find the sweet spot for investors—they are neither among the biggest names in healthcare nor the most speculative, but they do have strong fundamentals and considerable upside potential.

Growing Revenue, Strong Product Lineup and Margins for Sanuwave

Sanuwave Health Inc. NASDAQ: SNWV develops non-invasive acoustic wave therapies to aid in the treatment of sites of injury and a variety of other conditions. A small company at just under $300 million in market cap, Sanuwave has nonetheless put forward impressive financials in recent months. Its second-quarter report included a surprise earnings beat when analysts had predicted losses per share instead, as well as a modest revenue win on 42% year-over-year (YOY) improvement.

Sanuwave has a compelling product line-up, including its UltraMIST system that uses ultrasound technology to promote wound healing. UltraMIST has been a key driver of financial growth, with sales of the system up an impressive 61% YOY for the latest quarter. Further, Sanuwave's gross margin is high at 78.3%, and the company expects even better margins to come with lower manufacturing costs predicted for the upcoming months.

Unlike some medical product firms, Sanuwave's most popular items also offer a compelling model for investors: they include both a set of equipment representing a one-time purchase as well as a recurring, high-margin, single-use consumable component. This model fuels recurring revenue growth.

While SNWV shares have only been rated by three Wall Street analysts, each seems to view the company very positively. What's more, the consensus price target among these analysts is roughly 59% higher than the firm's current price, suggesting big gains could be in store.

Diversified Portfolio of Generics and More Drive Amneal's Appeal

A specialty firm focused on generic pharmaceuticals, Amneal Pharmaceuticals Inc. NASDAQ: AMRX benefits from a multi-segment business offering key affordable medicines, products for government distribution, and more. Amneal's pipeline is strong—earlier this year it received FDA approval for Brekiya, a treatment for migraines that can be self-administered and which doesn't require refrigeration.

Known as a generics company, Amneal provides both generic alternatives to expensive brand name medicines and, increasingly, their own line of biosimilar products that are poised for higher margins. This has led the company to improve its financials in recent quarters. In the second quarter, Amneal posted EPS of 23 cents, 6 cents higher than analysts expected. Revenue climbed by 3% YOY and adjusted EBITDA by 13%, prompting the company to raise full-year guidance, thanks to strong sales of products including Crexont and Rytary.

Amneal's debt remains a concern, but it refinanced $2.7 billion in debt in the latest quarter, cutting its annual interest expense by roughly $33 million in the process. Combine that with the company's broad and diversified portfolio of drugs, it's no surprise that all five analysts rating AMRX shares have called them a Buy. The company could have an estimated 22% in upside potential as well.

Clinical Stage Firm Targeting Unmet Needs

Clinical stage biotech firm Belite Bio Inc. NASDAQ: BLTE develops treatments for conditions such as nonalcoholic steatohepatitis (NASH) and obesity. Belite's advantage lies in its focus on unmet medical needs—one of its leading drug candidates,

Tinlarebant is designed as a treatment for certain types of macular degeneration that currently have limited or no approved treatment options for those suffering.

Belite may be the least-proven firm on this list, but its robust clinical trial activity is promising. Though it is pre-revenue, it ended the latest quarter with close to $150 million in cash on hand and has continued to see funding success. Analysts are optimistic: four out of five call it a Buy, seeing nearly 32% in upside possibility.