3 Companies That Could
Help You Look and Feel Younger...
and Make You Rich at the Same Time
A recent survey indicates that the rich expect to live to 100 and are making new plans for a long retirement.
9 out of 10 individuals surveyed by UBS Investor Watch, which compiles insights of over 5,000 people with at least $1 million in assets, stated that they are adjusting their spending and long-term investments in order to finance their anticipated longevity.
These wealthy individuals also realize that their wealth means nothing if they can’t enjoy it in great health.
We want the same for ourselves. Which is why we’ve been on the lookout
for stocks within the healthcare sector that could not only make us loads
of money, but also help us look and feel great at the same time.
Unfortunately, the Healthcare sector hasn’t exactly crushed it in 2021.
In particular, Healthcare Services & Providers and Healthcare Equipment &
Supplies are two industries within the overall Healthcare sector that most investors aren’t looking at.
The reason is not surprising
The sectors have barely, if even, outperformed the S&P 500 year-to-date.
The former is up 18.44% and the latter is up 24.58%, whereas the S&P 500 has logged 20.18% gains.
That said, there are individual stocks within these industries that are still well worth owning. We’re talking about three in particular that have stellar earnings, among a variety of great fundamentals and growth catalysts.
Since stock prices follow earnings over time, and earnings growth comes from great revenue growth, these stocks are set to move the markets.
Source: Fidelity
The Joint Chiropractic (JYNT)
“Our rank among many incredible brands on Entrepreneur’s first ever Top Growth Franchises list highlights The Joint Chiropractic’s continued development momentum and value proposition as a strong business model.”
- Peter D. Holt , President and CEO of The Joint Corp
The first healthcare stock we’re loving is The Joint Corp (JYNT).
The Joint is an owner of 600 medical care facilities that provide patients
with chiropractic treatments. The company is a franchiser of chiropractic
care in a space that is highly fragmented with most chiropractors in
private practice. The Joint provides management services to affiliated
professional chiropractic practices.
Based in Arizona, The Joint has expanded its network to operate across 35 states in the U.S. Chiropractic adjustments seek to restore spinal alignment and improve joint movement and nerve function and The Joint provides over 4 million adjustments per year.
Whereas visits to traditional chiropractic care offices are expensive and require insurance, The Joint offers simple and high quality chiropractic back adjustments at a fraction of the cost.
The Joint is cash-based with costs per visit averaging just $29, compared with traditional chiropractic visits that can cost hundreds of dollars without insurance.
This allows patients to sidestep the hassle of complicated insurance billing, including copays, deductibles, and declined reimbursements.
The adjustments provided by The Joint are simple and effective and the length of most of the sessions are under ten minutes. The Joint even accepts walk-ins, meaning that patients do not even need to schedule an appointment to receive an adjustment. The hours of operation are accommodating and include evenings and weekends.
Patients are able to browse for a nearby clinic location through the online website portal of The Joint. They can also sign up for a variety of chiropractic wellness plans and packages through The Joint website in order to receive discounts on multiple visits per month or visits spread across multiple months.
The Joint is able to offer unparalleled low prices because the offices do not have expensive equipment or excess administrative staff. Instead, each office location is minimal in a convenient retail setting and offers concierge-style service.
Each location has numerous licenced chiropractors who can provide treat-
ments to a large number of patients each day. The total startup cost of a
clinic through The Joint franchise was just $276,000 in 2020, whereas their
average clinic produced $489,000 in sales.
In May of 2021, The Joint (JYNT) was added to the S&P 600. That means it can now be placed in funds that track the index. While the stock has had a nice runup, it trades at a substantial volume of 79,808. Volume can indicate market strength, since increasing volume demonstrates the stock is viewed as strong and healthy.
JYNT has benefitted from a number of positive revisions of earnings estimates in 2020 and now 2021. This reflects an overall bullish sentiment around the stock. These upward revisions are in large part because of the company’s rapid increase in number of clinics and healthy operating performance in spite of the pandemic.
Stock Performance
Price: $108.54 Market Cap: $1.53B P/E Ratio: 93.11
Industry: Healthcare Services & Providers
The stock’s increased inclusion in hedge fund portfolios is also evidence of its popularity on Wall Street. 21 hedge fund portfolios hold the stock as of March, as opposed to a previous all time high of 17.
That makes JYNT more popular than the majority of its peers of similar valuation in the Health Care Providers & Services industry.
Among these funds, Bandera Partners holds the biggest stake of roughly
$81.4 million in shares at the end of the fourth quarter. SW Investment Management holds the second largest stake worth $42.8 million.
Insiders at The Joint also have a large amount of skin in the game. They hold about $38 million worth of the stock, which indicates they have a strong conviction in their business strategy. That is a significant amount of capital invested despite being just 3.5% of the entire company.
If you like companies that have revenue, and even earn profits, look no further than The Joint.
The Joint announced its Q2 2021 earnings results on August 5. The com- pany reported that it pulled in $20.2 million in revenue during the quarter, which was 61% higher from $12.59 million in Q2 of 2020. Management is positive about its current-year progress and raised guidance after strong second quarter earnings.
They anticipate revenues growing between $77 million and $79 million, indicating 33% growth from the year-ago reported figure.
The company also showed some great highlights in Q2 2021 operations.
The company broke records in franchise licence sales in Q2. The company sold 63 franchise licences as opposed to 11 in Q2 of 2020.
Financials
The Joint has two significant strategies that it expects to propel its growth.
First, The Joint plans to continue emphasizing franchising as the key part of its growth. 89% of the company’s current clinics were started through its franchise model. The company plans to continue to use franchising to accelerate its expansion.
The company currently has about 600 clinics but the company now targets 1,000 opened clinics by the end of 2023. The company even believes that the U.S. could support as many as 1,800 clinics, which would be a
3x increase from the current footprint.
Second, The Joint will continue to build partnerships to expand the scope of its operations. The company recently formed a partnership with Vander- bilt Athletics. This is evidence of the company’s success in expanding into professional and amateur sports teams across the country in order to give athletes a competitive edge.
The company also reached an agreement with the Army & Air Force Exchange Service to offer chiropractic care to military members and their families.
At the moment, Americans spend almost $90 billion a year in search of relief from back and neck pain through surgery, doctor’s visits, X-rays, MRI scans, and medications.
An increasing amount of research has emerged stating that chiropractic supports overall wellness and advancing preventive care, which means that public interest in chiropractic will grow. At the moment, only 50% of the population even knows what chiropractic is. Google searches for
“chiropractor near me” are at an all-time high since tracking of the data began in 2004.
Growth Strategy
Total Addressable Market
This positions The Joint at the edge of a new trend in which it can increase awareness and build a brand name. Already, the business has proven its strong ability to attract customers who are new to chiropractic. Of the 584,000 new patients The Joint’s clinics provided care to in 2020, 27% of them had never seen a chiropractor before.
The Joint Corp. has the potential to grab a significant piece of the $16 billion domestic chiropractic market.
Right now, only 3% of the industry consists of multi-unit chains. That means the majority of chiropractic providers operate within independent offices. The Joint currently controls only 1% of the overall market and has lots of room for growth in the coming years. What The Joint is doing is reminiscent of how Uber consolidated a highly fragmented market.
Despite tremendous growth in The Joint, the price of the shares is one concern that investors have to stomach. The company has a price-to- earnings ratio of 79.63, which is by no means cheap. That said, the stock price recently pulled back and the company’s long-term growth trajectory is still intact. The company has great potential to expand by opening new clinics and capitalizing on trends. Right now, JYNT is a compelling buy on a pullback.
Risks
InMode (INMD)
“The holy grail of plastic and facial surgery is the ability to tighten skin without causing scars. And there’s no one that’s gone farther along that path. We’re not there yet, but we’re further along than anyone else.”
- Shakil Lakhani, InMode’s North American President
The second healthcare stock that we can’t resist is InMode (INMD).
InMode is a medical device company that sells plastic and facial surgery
products and services and has a record of breakthrough skin rejuvenation
treatments that began over two decades ago. InMode is based in Israel, a
country that stands at the forefront of medical device innovation and has
enabled very favorable tax treatment for this sector. The company focuses
its solutions on three categories within the global aesthetics market: face
and body contouring, medical aesthetics, and women’s health.
InMode’s solutions are thanks to its steadily improving technology that implements radioactive frequency (RF). RF is an innovative and energy- based surgical aesthetic solution that is medically accepted. The RF energy can penetrate deep into the subdermal fat and remodel tissues.
The company has demonstrated success in providing treatments for a variety of body parts, including the face, neck, abdomen, upper arms, thighs, and intimate feminine regions.
InMode’s radio frequency energy-based technology sidesteps a lot of the issues with traditional plastic surgery methods. These treatments are minimally invasive (small incisions). Invasive surgeries are the industry norm and involve cutting or puncturing the skin by inserting
instruments into the body.
By using RF, Inmode is able to overcome many of the drawbacks of other aesthetic treatment options. The technology can deliver surgical-grade results without the usual amount of scarring, downtime, and pain.
In addition to its minimally-invasive solutions, InMode also designs and manufactures market differentiated, non-invasive medical aesthetic products. These products provide solutions that are distinct from traditional laser technology that InMode’s competitors still rely on.
The products facilitate a wide variety of procedures on the body. InMode
markets and sells these products to plastic and facial surgeons, aesthetic
surgeons, dermatologists, gynecologists, and obstetricians.
InMode (INMD) could be a multi-bagger. Its returns on capital have jumped over the past 4 years to 37%. It has the potential to compound its returns by reinvesting capital at increasing rates of return. Given that the stock has shown a great pattern of performance over the past year, it should remain in the investor spotlight.
While INMD took a dip with the broader market during the COVID-19 crash, the stock rebounded quickly with few signs of slowing down. Now, almost exactly two years after InMode’s IPO, the share price is up over 8x to a price of nearly $140.
Stock Performance
Price: $137.43 Market Cap: $5.23B P/E Ratio: 45.37
Industry: Healthcare Services & Providers
All the hype around INMD comes as little surprise. The company has shown incremental top line growth since it was incorporated in 2008. We can attribute its share price performance to year over year profitability since 2018, which is unusual for newly public tech companies.
Finding a profitable mid-cap tech company like InMode is not always easy to come by when so much emphasis is placed on innovation. But InMode has demonstrated stunning financial results since listing in 2019.
That performance was confirmed in the company’s Q2 2021 earnings reported at the end of July. For the second quarter of 2021, InMode posted revenues of $87.3 million, an increase of 184% compared to the second quarter of 2020.
These revenues demonstrate that physicians are adopting InMode’s system and that demand for minimally and non-invasive surgical procedures is growing.
During Q2 2021, revenues were distributed in the following categories:
71% from minimally invasive and ablative procedures, 22% from hand-free devices, and 7% from its traditional laser and non-invasive RF platform.
89% of the company’s total revenue came from sales of capital equipment (the machines that generate the light for treatment), whereas the
remaining 11% came from services and consumables (items that need replacement like light bulbs, batteries, and parts).
Of note, InMode posted record numbers of consumables over the past year with sales of consumables more than doubling since Q2 of 2020.
Financials
InMode has three approaches to its growth strategy.
First, InMode plans to expand internationally in order to expand its cus- tomer base. While the company is based in Israel, the U.S. is currently its biggest contributor to its top line with the total sales hitting $56.4 million in Q2 2021 compared to $24.1 million in the same quarter last year. The company plans to apply the same strategy it used to expand into the U.S.
to other geographic markets. That will include Asia and Europe.
Second, InMode plans to continue its development of new products that utilize its RF technology. It hopes that these new products can improve other types of procedures. The company currently has new products in the pipeline that address cellulite, body skin tightening, and tightening of face and neck skin.
Third, InMode plans to increase cross-selling to its existing client base.
It want to ramp up selling of additional procedures to satisfied patients who’ve already been successfully treated by its devices.
The company has launched nine product platforms since 2010 in the aesthetic solutions market: BodyTite, Optimas, Votiva, Contoura, Triton, EmbraceRF, Evolve, Evoke, and Morpheus8.
One of their premier technologies, BodyTite, can tighten hard to reach facial areas without surgery. As for other areas of the body, it can reduce fat and contract skin in sensitive areas like the knees. Its hands-free products like Evolve and Evoke can save time for the medical operator and increase treatment time and efficiency for the patients seeking body and facial contouring.
Growth Strategy
Products
The market for medical aesthetics is ripe for disruption. Currently, most aesthetic treatments are concentrated in two areas. Non-invasive laser procedures account for 40 million treatments annually, whereas invasive surgical procedures account for 2.5 million treatments annually.
InMode plans to close the treatment gap by providing treatment that is more effective and requires less frequency than lasers, but also requires less financial and physical burden than surgery. Currently, InMode’s devices address over 8 million of the annual aesthetic treatments world- wide. The market for aesthetic procedures like liposuction is enormous.
Americans alone spend over $8 billion per year on these procedures and many pay without insurance.
The demand for minimally and non-invasive aesthetic procedures shows no signs of slowing. The non-invasive market is expected to expand into an $18.5 billion industry by 2028.
While InMode currently outperforms its competition, there is no guarantee that other companies can’t cut into its market share by offering lower prices or an innovative product alternative. Given that InMode generates such impressive revenues through its products, many copycats may be drawn to this area of the market. Investors should also keep an eye on intellectual property rights, product liabilities, and regulatory changes.
Regardless, InMode will likely continue to experience success if they continue their research and development and expand beyond their existing products into new areas of the market.
Total Addressable Market
Risks
Align (ALGN)
“We serve a huge under-penetrated market, and our share of more than 300 million people who want a better smile is less than 3%.”
- Joseph M. Hogan, Align’s president and CEO
