1 Seriously Overlooked Healthcare Stock That Could Soar

Sometimes the seemingly most boring companies in the world produced the most extraordinary returns. One healthcare firm that hasn’t shot up – yet – but which has attracted the attention of a multi-billion dollar fund with a pristine track record may be set to do so.

Better yet, it’s trading close to the estimated price paid by the fund, meaning the upside opportunity appears to be still fully in tact.

So what stock is it that has the potential to pop?

Key Points

• BD is advancing in biosciences, molecular diagnostics, and robotics, attracting attention from major investors like Generation Investment Management.
• BD is well-placed to ride the growth wave in areas like automated medication systems and surgical robotics, driving future revenue and margin growth.
• Despite a high P/E ratio, BD’s strong earnings growth forecast suggests long-term upside, making it an attractive investment for funds like Generation.

Healthcare Stock Set To Pop

Becton Dickinson is traditionally seen as a healthcare stalwart rather than a disruptive force but it’s got some hidden factors that most investors may be overlooking.

BD is making a push into biosciences and molecular diagnostics as well as robotics. For example, BD’s acquisition of C.R. Bard in 2017 fostered entry into advanced medical technologies so it can capitalize on the growing demand for precision and efficiency in medical procedures.

So too its recent advancements in robotic surgery tools and automated drug delivery systems are expected to significantly enhance patient outcomes while reducing costs for hospitals.

And with the global surgical robotics market set to grow at a compound annual growth rate of over 20% through 2030, BD has many tailwinds to support long-term growth, so is it a buy?

BD Sailing Fast On Tailwinds

The global market for automated medication dispensing systems is forecast to grow to $3.5 billion by 2028, at a CAGR of 8.7%. That’s probably one primary reason that Generation was willing to allocate so much to it that it now represents the fund’s third largest stake.

The shift toward automation in surgery, diagnostics, and medication management will not only drive revenue growth but also improve operating margins, resulting in a strong competitive edge in the years ahead.

This focus on next-gen healthcare technologies is likely a major factor in why Generation is betting big on BD’s future growth.

What Are Investors Overlooking?

Becton Dickinson trades at a price-to-earnings ratio of roughly 47x, which seems very high but notably net income is forecast to grow at a compound annual growth rate of around 27.5% over the next five years.

If that comes to fruition, BD’s P/E ratio, based on future earnings, is likely to compress massively to under 15x.

For long-term investors like Generation, this implies an opportunity to buy into BD at a higher valuation today with the expectation that its strong earnings growth will drive substantial returns over the long run.

Is Becton Dickinson a Buy?

If earnings do in fact grow anywhere close to the projected rates, BD appears undervalued at this time. It should be noted that debt levels of $18 billion are not to be overlooked and do pose balance sheet risk.

Still, the company generates close to $20 billion a year in revenues so it’s not unmanagable, particularly given the balance sheet liquidity eclipsing $5 billion.

The bottom line is Generation Investment Management’s big bet on Becton Dickinson is no throw of the dice. The company’s focus on robotics, strong position in high-growth medical technology sectors, and improving financials make it an attractive play for long-term investors.