The healthcare business is essential to the world because its items and services enhance patients’ quality of life. With an increasing global population, rising worldwide economic production, and the fundamental function of healthcare, the sector should flourish in the coming decades.
Here are two healthcare stocks that appear poised to make investors richer over time.
1. CVS Health
CVS Health should be the first healthcare stock that investors should consider buying to help them build their wealth over time. It is the world’s second-largest health insurer with a market capitalization of $138 billion and is one of the largest pharmacy chains in the United States.
Chronic illnesses are on the rise, and treatment costs are increasing. This is why Fortune Business Insights predicts that the worldwide health insurance market will expand at a 5.5% annual rate from $2.1 trillion in 2021 to over $3 trillion by 2028.
As a result, Aetna’s current base of 39 million customers should grow in the years ahead. That also explains why analysts anticipate CVS Health’s non-GAAP (adjusted) diluted EPS to grow at 6% annually over the next five years.
Based on CVS Health’s earnings guidance for 2022, the payout ratio will be quite stable at 26.8 percent. This leaves room for the payout to rise somewhat ahead of earnings in the future years. CVS Health’s high-single-digit dividend growth potential and 2.1 percent dividend yield are a good combination of growth prospects and Yield.
Finally, investors may acquire shares of the stock at an P/E ratio of 11.6, which is better than the healthcare insurance industry average of 16.6. This is far cheaper than the healthcare insurance sector average of 16.6, making it a wonderful bargain for value investors.
The second healthcare firm that investors should consider buying is Merck (MRK -0.27%). The market capitalization of the stock is $218 billion, making it the sixth-largest pharmaceutical company in the world.
You’d think Merck’s size and scope would suggest a strong portfolio of commercialized medicines and a pipeline that is just as deep. You’d be correct.
Merck is a pharmaceutical and biotech conglomerate based in the United States that sells medicines, vaccines, diagnostics, animal health products, and biologic therapies. Merck owns six blockbuster drugs and a quickly growing animal health business. As a result of this, year-over-year revenue rose 17.3% to $48.7 billion in 2021. Merck’s unadjusted diluted EPS increased 32.9% to $6.02 in 2021.
The firm also has 75 clinical trials in phase 2 and 28 clinical trials in phase 3. As a result, Wall Street analysts expect Merck to develop at an annual rate of 9% for the next five years.
Merck has a bright future ahead of it, thanks to its lucrative prospects in the pharmaceutical sector. Merck possesses more than solid fundamentals; it is also brimming with potential. The worldwide pharmaceutical industry is anticipated to expand from under $1.3 trillion in 2020 to over $1.6 trillion by 2025 as a result of an aging global population and new drug launches.
Merck’s advantages for investors include a forward P/E ratio of 12.1, which is just above the average in the pharmaceutical industry. Its high quality and above-average growth potential make Merck a hot prospect as a dividend investment.