SmileDirectClub (SDC 23.08%), Editas Medicine (EDIT -2.02%), and BioNTech (BNTX -0.45%) have made some investors very wealthy over the past year. Compared to the S&P 500's return of 16%, the three stocks are up anywhere between 32% and 164%. And I think they have even more potential to deliver big returns for their shareholders in 2021.
When it comes to investing at the start of a new bull market cycle, it pays to buy stocks with great growth potential. Today, let's look at why the dentistry company, gene-editing biotech, and coronavirus vaccine drugmaker are among the top healthcare stocks for investors to buy now.
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1. SmileDirectClub
With a 96% customer satisfaction rating from over 90,600 Google Reviews, SmileDirectClub is one of the nation's premier tele-orthodontics services. It operates over 6,800 locations across the country as well as a digital segment, and has served over 1 million patients with its 3D-printed teeth aligners since inception.
In the third quarter of 2020, the company's revenue decreased by 6.5% year over year to $165.8 million due to disruptions to its retail stores caused by the COVID-19 pandemic. However, its efficiency has increased remarkably. The company is now breaking even in terms of free cash flow, compared to a $122.3 million loss during the third quarter of 2019. A large driver behind the cost reduction is the broader adaption of telehealth since the pandemic started, as well as cost savings from the closure of several retail locations.
After the pandemic ends, the company predicts it can achieve 20% to 30% revenue growth year over year, improve its gross margins to 85%, and expand its noncash operating margin to 30%. These are great metrics, especially when we consider that the company has a valuation of only seven times revenue. Meanwhile, prominent telemedicine companies like Teladoc Health (TDOC -0.07%) and AmWell (AMWL -1.62%) are trading for between 20 and 26 times sales.
For investors who are looking for a top-quality digital orthodontics company at the right price, consider SmileDirect. As telemedicine and teledenistry become major players in patients' lives post-COVID, the stock is poised to double from where it currently sits.
2. Editas Medicine
Don't be dismayed at first sight of Editas' seemingly immovable $4.8 billion market cap. It is one of the hottest gene-editing stocks available right now. Over the past year, shares have already gained a stunning 147%.
Investors are rightfully optimistic about its future; the stock has made impressive gains even though it has only one early stage candidate in clinical trials. Preclinical data showed that the company's gene-editing methods were effective in combating hereditary blindness and a lack of oxygen carrier proteins in the blood. Over 100,000 patients are suffering from these conditions in the U.S. and E.U. Even though the study was only preliminary, it had some superb results. The genetic edits were successful in over 90% of an experimental mice population; the edited cells showed significant improvements over deformed cells.
Right now, Editas has eight or nine CRISPR therapeutic candidates in discovery or awaiting clinical trial clearance. It owns 70 patents to its technology, with an additional 600 applications pending.
It is essential to look at development-stage biotechs' ownership by institutional investors. These firms usually have teams of dedicated analysts and healthcare experts that already conducted due diligence on whether or not a company's candidates can succeed in clinical testing, saving investors from doing the work themselves. Editas easily passes that threshold. Nearly 88% of the company is controlled by large financial firms. If you are looking for a long-term bet on the CRISPR sector in general, Editas is a great choice.
3. BioNTech
Together with Pfizer (PFE -0.19%), BioNTech commercialized the world's first coronavirus vaccine after a mere 10 months of development and testing. In clinical studies, the vaccine exhibited 95% efficacy in preventing COVID-19. There were no severe side effects to the vaccine aside from minor cases of headache or fatigue during trials.
What's more, a study has found that the Pfizer-BioNTech vaccine effectively protects individuals against strains of the coronavirus that first appeared in the U.K. and South Africa. Right now, the company has over 1 billion orders for its coronavirus vaccine, plus customer options to purchase 400 million additional doses.
At a price of $14.70 to $19.50 per dose, BioNTech has approximately $7.4 billion to $9.8 billion in revenue in the bag after accounting for its 50-50 gross profit-sharing agreement with Pfizer. The amount is significant considering BioNTech IPO'd just last year and currently has a $26.1 billion market cap.
This year, the company has even more potential to grow. It's planning to scale its joint production capacity to 2 billion doses per year. Aside from the coronavirus vaccine, BioNTech also has 11 clinical-stage therapeutics in its immuno-oncology pipeline. For those looking for a fast-growing, emerging biotech stock, look no further than BioNTech.
