Could healthcare stock Advanced Medical Solutions (LSE:AMS) be a shrewd addition to my holdings? Let’s take a closer look at the pros and cons to help me decide.
Wound-care products
As a quick reminder, Advanced designs, develops, and manufactures advanced wound-care products for the healthcare market. It has a series of branded and non-branded products. Some products are designed for general use, while it also develops speciality products for surgical use too.
So what’s happening with the Advanced share price currently? Well, as I write, the shares are trading for 280p. At this time last year, the stock was trading for 284p, which is a 1% decline over a 12-month period. It is worth noting that the healthcare stock has pulled back 17% since the turn of the year, from 338p to current levels.
To buy or not to buy?
So what are the pros and cons of buying Advanced shares?
FOR: I like the look of Advanced’s business model and growth prospects. With its branded and non-branded revenue streams, it is able to make money from both divisions. Furthermore, it has a huge profile and presence and sells its products in over 80 countries. Elective surgeries took a major hit during the pandemic period but things have returned to normal. Advanced’s position as a leading wound-care product provider should be able to assist growth, boost performance, and in turn, any returns I would hope to make as an investor.
AGAINST: Current macroeconomic headwinds pose real risks for Advanced’s growth prospects and performance. Soaring inflation, the rising cost of raw materials, as well as the global supply chain crisis could have a material impact on the healthcare stock. Profit margins could be squeezed by rising costs and operations and sales could be affected by supply chain problems. My belief is that these issues are shorter term, and I invest for the long term.
FOR: I am buoyed by Advanced’s performance track record. I do understand that past performance is not a guarantee of the future. Looking back, I can see it has recorded consistent revenue and profit in the past four years. Most tellingly, however, I note that its 2021 performance was higher than pre-pandemic levels. This supports my theory that elective surgeries have returned to normal and Advanced’s growth prospects ahead look attractive.
AGAINST: One concern is the current valuation of Advanced shares. On a price-to-earnings ratio of just over 30, the shares look a tad expensive. Future growth may already be priced in. Furthermore, any bad news could make the share price tumble. I will keep a keen eye on developments.
A healthcare stock I would buy
Weighing up the pros and cons, the positives outweigh the negatives for me. For that reason, I would be willing to add Advanced Medical Solutions shares to my holdings. The firm’s profile, presence, and growth prospects look attractive to me. As a bonus, it pays a dividend too, which would likely boost my passive income stream.
