Although healthcare stocks could help hedge some market risks, not all stocks are worth owning. While Johnson & Johnson (JNJ) could be an ideal buy, fundamentally weak SNDL Inc. (SNDL) might be best avoided.
Pharmaceutical companies are adopting digital technologies to streamline important, labor-intensive procedures. They are widely applied in the pharmaceutical value chain in several areas, including drug discovery and development, drug production, smart process automation, maximizing predictive maintenance, and supply chain management.
The global pharmaceutical industry is expected to be worth $1.57 trillion by 2023, driven by aging and growing population, rising income levels, and emerging medical conditions and new diseases.
However, on the other hand, the effects of the COVID-19 pandemic, as well as ongoing pressure from Russia's invasion of Ukraine, dampened pharma investments.
Take a look at the stocks mentioned above:
Stock to Buy:
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide.
On April 18, JNJ announced an quarterly cash dividend of $1.19 per share. The dividend is payable on June 6.
JNJ pays a $4.76 per share dividend annually, which translates to a 3% yield on the current price. Its dividend payments have grown at a CAGR of 5.9% over the past three years. The company has a four-year average dividend yield of 2.61%.
Its trailing-12-month asset turnover ratio of 0.51x is 45.4% higher than the 0.35x industry average. Its trailing-12-month EBITDA margin of 34.39% is significantly higher than the 1.79% industry average.
During the fiscal first quarter ended March 31, 2023, JNJ’s reported sales increased 5.6% year-over-year to $24.75 billion. Its adjusted net earnings came to $7.07 billion. Its adjusted earnings per share increased marginally year-over-year to $2.68.
JNJ’s revenue is expected to increase 2.7% year-over-year to $24.67 billion for the fiscal second quarter ending June 2023. The company’s EPS for the same quarter is expected to increase 1.1% year-over-year to $2.62.
Shares of JNJ have gained marginally intraday to close the last trading session at $157.72.
JNJ’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It is ranked #6 out of 166 in the Medical - Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated JNJ for Momentum. Get all JNJ ratings here.
Stock to Sell:
SNDL Inc. (SNDL)
Headquartered in Calgary, Canada, SNDL engages in the production, distribution, and sale of cannabis products in Canada. The company operates through four segments: Liquor Retail; Cannabis Retail; Cannabis Operations; and Investments.
Its trailing-12-month gross profit margin of 19.71% is 64.7% lower than the 55.84% industry average. Its trailing-12-month Capex/Sales of 1.50% is 68.2% lower than the 4.70% industry average.
SDNL’s net revenue came to $240.41 million in the fiscal fourth quarter that ended December 31, 2023. Its net loss decreased 184.7% year-over-year to $161.57 million. Its adjusted EBITDA came in at negative $7.55 million, compared to $16.74 million in the previous-year quarter.
SNDL’s revenue is expected to come in at $733.04 million for the fiscal year ending December 2023. Also, it has failed to surpass EPS estimates in each of the trailing four quarters, which is disappointing.
The stock has declined 59.9% over the past year to close the last trading session at $1.76.
SNDL’s weak prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system.
SNDL has a D grade for Stability and an F in Momentum. It is ranked #115 in the same industry.
Click here to see the additional POWR Ratings for SNDL (Sentiment, Growth, Value, and Quality).
What To Do Next?
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JNJ shares were trading at $157.25 per share on Monday afternoon, down $1.66 (-1.04%). Year-to-date, JNJ has declined -10.34%, versus a 10.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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