Thanks to the healthcare industry’s essential role in a thriving society, the best Canadian healthcare stocks are evergreen options to source your next investment.
The Canadian healthcare market reached more than C$340 billion in 2023 and boasts a track record of exponential growth going back five decades. This offers investors an established tailwind on which to base their due diligence, home in on operators worthy of long-term conviction and fortify their portfolios’ long-term returns.
All you need to get started is a definition for that unavoidably subjective term, “best,” that optimizes your chances of a successful outcome.
How we picked the best Canadian healthcare stocks
Our path to delineating the 10 best Canadian healthcare stocks focuses on balance sheet alignment with shareholder value creation. We’ve defined these balance sheets by:
- Short-term momentum in the form of year-over-year (YoY) earnings per share (EPS) growth in excess of 20 per cent to ensure we only look into companies on a path to profitability.
- Long-term momentum through net income, gross profit or operating income generation over the past five years.
- Revenue growth to ensure increasing market share.
- Market capitalization, with lower figures indicating higher risk-reward scenarios and higher figures favouring stability and safety over your holding period.
After setting up The Globe and Mail stock screener to isolate healthcare stocks under our definition, and diving into recent financials to weed out decreasing revenue and profitability, here are the companies we found listed in order of YoY EPS growth:
- Innovotech: 602.78 per cent.
- Vitalhub: 567.76 per cent.
- Extendicare: 518.18 per cent.
- Bausch Lomb: 222.70 per cent.
- Simply Solventless Concentrates: 104.36 per cent.
- Rubicon Organics: 49.28 per cent.
- Knight Therapeutics: 42.86 per cent.
- Biosyent: 39.63 per cent.
- Kneat.com: 23.08 per cent.
- Decibel Cannabis Company: 21.18 per cent.
The 10 best Canadian healthcare stocks
1. Innovotech
Innovotech, market cap C$5.08 million, is a Canadian biotechnology stock that offers a comprehensive range of antimicrobial and anti-biofilm testing to prepare healthcare products for the market.
Supported by applications across industries and a client roster of more than 100 companies since inception in 2003, Innovotech is an established player in the more than US$11 billion global anti-microbial coating market, whose compound annual growth rate (CAGR) is expected to clock in at a hefty 13.9 per cent through 2030.
The company has posted average annual gross profitability of about 70 per cent since 2019, including positive net income in 2020, 2021 and as recently as Q2 2023, though it has failed to register revenue growth over the period. That said, its recent acquisition of Keystone Labs is vying to change that by increasing its productive capacity for contract research.
Innovotech stock (TSXV:IOT) last traded at C$0.13. The stock has added 18.18 per cent year-over-year and 30 per cent since 2019.
2. Vitalhub
Toronto-based Vitalhub, market cap C$470.39 million, is a software company dedicated to optimizing outcomes for health and human services providers including hospitals, regional health authorities, mental health and addictions services providers, long-term care facilities, home health agencies, correctional services, and community and social services providers.
The company’s software-as-a-service suite covers electronic health records, case management, care coordination, compliance and optimization, having attracted more than 1,000 global clients thanks to its ability to improve care delivery in line with value creation.
Vitalhub has quintupled revenue from C$10.23 million in 2019 to C$52.51 million in 2023, while turning net income profitable over the past two fiscal years, including C$1.21 million in 2022 and C$4.55 million in 2023. Despite posting a small net loss in Q2 2024, the company’s efficient operational trajectory has earned investors a 220.07 per cent return year-over-year and a 444.12 per cent return since 2019.
Vitalhub stock (TSX:VHI) last traded at C$9.25 per share.
3. Extendicare
Next up on our list of best Canadian healthcare stocks is Extendicare, market cap C$768.73 million, a specialist in senior care founded in 1968 that operates 123 long-term care homes across Canada. The company also provides about 10.5 million hours of home health care services annually, as well as third-party group purchasing services representing over 140,900 beds across the country.
Extendicare’s dedication to quality service and responsible growth has resulted in solid revenue growth from C$1.1 billion in 2020 to C$1.3 billion in 2023, followed by more than C$700 million through Q1 and Q2 2024. The company has justified this growth by generating consistently positive, though volatile, net income, with profits of about C$39 million in 2024 already ahead of fiscal 2023’s C$33.98 million effort.
The company derives more than 95 per cent of its revenue from government contracts, sheltering it from the volatility of the economic cycle. This competitive advantage positions it to benefit from the Canadian population above 85 years of age growing at an estimated 4 per cent CAGR through 2051.
Extendicare stock (TSX:EXE) last traded at C$9.21. The stock is up by 59.07 per cent year-over-year but only by 2.45 per cent since 2019.
4. Bausch + Lomb
Bausch + Lomb, market cap C$10.17 billion, is a Canadian healthcare stock with a more than 170-year history in the eye care industry. The business serves millions of customers in almost 100 countries through a portfolio of approximately 400 products encompassing contact lenses, lens care products, ophthalmic pharmaceuticals and ophthalmic surgical devices and instruments.
Though high interest rates have weighed on Bausch + Lomb over the past few years, this has not stopped it from delivering on growth and innovating across its many revenue-generating brands (slide 23), setting an optimistic tone for a long-term investment.
The company has managed to grow revenue every year since its pandemic low of US$3.4 billion in 2020, while generating positive net income since 2021, including in 2023 and Q1–Q2 2024 on an adjusted basis accounting for costs associated with its initial public offering.
Bausch + Lomb Corp. (TSX:BLCO) stock has added only 13.25 per cent since listing in May 2022, last trading at C$28.88 per share, severely discounting the underlying business’ ability to grow in line with shareholder value.
5. Simply Solventless Concentrates
According to its official website, Simply Solventless Concentrates, market cap C$56.87 million, is on a mission to provide “pure, potent, terpene-rich ready-to-consume cannabis products to discerning cannabis consumers.”
The company has delivered on its credo with flair, executing numerous value-accretive acquisitions that have expanded its offerings from under 10 SKUs in 2023 to an expected 140 by year-end 2024.
Simply Solventless’ management and board (slide 17), equipped with extensive experience in cannabis and consumer packaged goods, has never let operations waver from profitability since listing on the TSXV in December 2023. Revenue for the full year came in at C$6.19 million, backed by C$1.04 million in net income. The company followed this up with C$5.2 million in revenue and C$1.72 million in net income through the first half of 2024, while the majority of its competitors are drowning in losses because of excessive growth, black market competition, margin compression and brand weakness.
Recent acquisitions include Lamplighter, CannMart and ANC Inc., with the latter expected to boost revenue and net income and make Simply Solventless one of the most profitable cannabis companies in Canada (slide 12).
Shares of Simply Solventless Concentrates (TSXV:HASH) last traded at C$0.64 per share. The stock has added 220 per cent since inception in December 2023.
6. Rubicon Organics
Delta, B.C.-based Rubicon Organics, market cap C$21.66 million, is the global leader in organic cannabis products. The vertically integrated company’s portfolio is highlighted by three flagship brands: Simply Bare Organic, 1964 Supply Co. and Wildflower.
Rubicon more than quadrupled revenue from C$9.39 million in 2020 to C$40.12 million in 2023, and has generated more than C$20 million through the first half of 2024. The company’s all-female executive team has guided its growing market share towards shareholder value, significantly reducing net losses from C$14.98 million in 2020 to C$1.82 million in 2023.
Record revenue in Q2 2024 and expected positive operating cash flow through the year position Rubicon for further growth, despite steep competition in the Canadian cannabis market favouring products with lower price points.
Rubicon Organics stock (TSXV:ROMJ) last traded at C$0.38 per share and has given back more than 88 per cent of its value since 2020.
7. Knight Therapeutics
Montreal-based Knight Therapeutics, market cap C$569.50 million, is a Canadian healthcare stock acquiring or in-licensing pharmaceutical products for Canada and Latin America. The company is active across 11 countries and a portfolio of more than 100 products covering oncology, hematology, neurology and infectious diseases.
The company’s management team has translated its experience with drug approvals, tier-1 healthcare brands and billions in M&A transactions into a compelling case for owning the stock. Here are three main drivers:
- 7x revenue growth from C$47.46 million in 2019 to C$328.20 million in 2023, plus more than C$180 million through Q1 and Q2 2024.
- 5.8x growth in gross profitability from C$26.92 million in 2019 to C$152.65 million in 2023, plus more than C$80 million in 2024.
- 18 products in its pipeline (slide 9) to be launched between 2024 and 2028, as well as C$152.7 million in cash as of Q2 2024 to capitalize on undervalued assets.
Shares of Knight Therapeutics (TSX:GUD) last traded at C$5.64, despite management calculating net asset value at C$7.53 per share as of Q2 2024. The stock has added 24.50 per cent year-over-year, but remains down by 32.78 per cent since 2019 because operations have yet to scale to the point of generating consistently positive net income.
8. Biosyent
Our next candidate for best Canadian healthcare stock is Biosyent, market cap C$134.96 million, a pharmaceutical company that, much like Knight Therapeutics above, is focused on in-licensing or acquiring innovative healthcare products with a proven track record of improving patient outcomes.
Biosyent’s product line includes FeraMAX iron supplements, Tibella for menopause symptom relief, inofolic for polycystic ovarian syndrome relief and Combogesic, the first combination acetaminophen and ibuprofen tablet in Canada.
The pharmaceutical aggregator has been profitable for an astounding 56 consecutive quarters extending from 2010 to Q2 2024. Unsurprisingly, the stock has reflected this value generation over time, rewarding high-conviction investors with an over 18,800 per cent return since 2010.
Biosyent stock (TSXV:RX) last traded at C$11.44 and is poised to the upside thanks to revenue and net income being on pace for new five-year highs in 2024.
9. Kneat.com
Kneat.com, market cap C$446.51 million, operates its Kneat Gx digital validation platform for clients in highly regulated industries with a focus on life sciences. Multiple independent studies have shown the platform to offer an over 40 per cent reduction in validation cycle times, a nearly 20 per cent faster speed to market and an 80 per cent reduction in changeover time.
Kneat Gx’s differentiated performance has attracted most of the top 20 global pharmaceutical companies as customers, positioning the company to maximize its growth into an estimated US$15 billion long-term total addressable market (slide 8).
As evidenced by the company’s balance sheet, this growth is well on its way, with revenue growing by 8.6 times from C$3.95 million in 2019 to C$34.22 million in 2023 – including an over thirteenfold increase in gross profitability – followed by over C$22 million in the first half of 2024.
Even though Kneat.com has failed to produce net income this decade, shareholders have shown conviction in its founder-led management team, leadership position in validation technology, and the company’s ability to convert gross margin growth (slide 13) into bottom-line profits.
Kneat.com stock (TSX:KSI) last traded at C$4.77. The stock has added 74.73 per cent year-over-year and 180.59 per cent since 2019.
10. Decibel Cannabis Company
Last on our list of best Canadian healthcare stocks is Decibel Cannabis Company, market cap C$24.54 million, a mostly consumer-focused cannabis provider with a portfolio of leading brands including General Admission, Qwest and Vox.
The company operates a processing and manufacturing facility in Calgary, Alberta, and two cultivation facilities in Creston, British Columbia and Battleford, Saskatchewan, and is in the midst of international expansion.
Decibel currently commands 5.6 per cent of the Canadian cannabis market as of Q2 2024, making it the 4th-largest licensed producer in the country. Its trajectory to this leadership position involved 18.5x revenue growth from C$6.24 million in 2019 to C$115.96 million in 2023 justified by positive operating income in two out of the past three years and in four out of the past five quarters.
Decibel Cannabis Company stock (TSXV:DB) last traded at C$0.06 per share. The stock has given back 57.14 per cent year-over-year.
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EPS data as of Oct. 21, 2024. All other data as of Oct. 29.
(Top photo, generated by AI: Adobe Stock)