7 Best Healthcare Stocks In Canada to Buy In December 2023

A decent number of sources place Canada’s healthcare system among the top ten in the world. Most of the 1,200 hospitals in Canada are publicly funded, and only a tiny number are purely for-profit.

With this level of public funding and ownership, the healthcare industry landscape (from an investment perspective) is quite different from other countries, such as the U.S.

Canada has a decent number of publicly listed healthcare companies. Some of the best healthcare stocks in Canada are potentially excellent investment assets that investors should look into.

Healthcare Industry In Canada

Healthcare stocks in Canada are pretty diverse. Healthcare facilities and pharmacies are evergreen businesses, but there are almost no general healthcare facilities under publicly listed companies in Canada.

Additionally, most of the private pharmacy chains are consolidated under names like Metro.

Pharmaceutical companies are also neither as large nor as well known as their US counterparts.

Best Healthcare Stocks In Canada

There are plenty of fantastic healthcare stocks in Canada and a lot of variety to choose from.

I’ve excluded marijuana companies here, even though some can argue they are healthcare companies for the medicinal uses of the product.

1. Bausch + Lomb

You might be familiar with both Bausch and Lomb names separately but not together. The combined entity was spun off from Bausch Health Companies in 2020 and was listed on the TSX in 2022. Even though the original company still trades on the TSX, we chose Bausch Lomb for this list because it carries relatively little of Bausch’s “baggage,” i.e., debt.

Bausch + Lomb carries a debt of about $3.5 billion, less than half of its current market valuation, which is a massive improvement over Bausch Health. It’s also the largest supplier of contact lenses globally, a steadily growing market.

The financials of the new company look quite healthy. The revenues are growing steadily on a quarterly basis, and adjusted EBITDA is growing at an impressive rate. Even though Bausch Health owns about 88.5% of the company, Bausch + Lomb claims to have separated itself from the tainted healthcare giant that lost over 90% of its valuation due to legal and other troubles.

Unless Bausch Health’s demons come to haunt this new entity, you may consider Bausch + Lomb a solid pick for several reasons. It still dominates the contact lens market, and its financials are healthy. It has identified enormous untapped market segments, like millions of people in the US and Canada with Dry Eye Disease (DED), that one of its subsidiaries, i.e., Rx Pharmaceuticals, is perfectly positioned to cater to.

The stock is attractively valued and may offer decent growth potential in the long term. But you should also keep Bausch’s history in mind before making an investment decision. 

2. Andlauer Healthcare Group

If you are seeking a slightly different healthcare exposure, Andlauer Healthcare Group can be an option worth considering. It’s a logistics company that caters exclusively to the healthcare sector in Canada.

The company has a portfolio of 31 facilities with a total square footage of n 2.2 million sq. ft., which is quite significant for healthcare storage.

The US wing of Andlauer Healthcare, controlled through two US-based acquisitions, includes 180 trucks and 300 trailers providing services to 48 states.

If you invest in this company, you will be in an elite bunch, including Capital Group (US) and Manu Life, which own 9% and 7.3% of Andlauer Healthcare, respectively. You will also be betting on a financially stable company that has been cash positive for years, despite a cost-intensive business model.

Andlauer Healthcare rewards its investors through both capital appreciation and dividends, though you would immediately notice that one of the two is not like the other. It has risen over 111% between its Dec 2019 inception and July 2023, though the upward momentum is now waning. The yield, on the other hand, is less than 1%.

If you are looking for a good valuation bet or a stock that’s already exhibiting a powerful upward trend, Andlauer Healthcare may be an unappealing investment in Aug 2023. But if you are looking for a long-term healthcare pick, the fundamental strengths of the stock make it a worthy consideration.

3. Dentalcorp Holdings

Dentistry falls under the purview of healthcare, but as a practice, it typically stands apart from the rest of the sector. Dentalcorp Holdings is working on consolidating this segment of healthcare in Canada and already has over 536 locations in its network that receives over 5 million annual patient visits, over 2 million of which are active patients.

The network of professionals is just as impressive – over 1,850 dentists and 2,400 dental hygienists, with over 5,000 auxiliary dental health professionals. This represents over 7.2% of the country’s total licensed dentists and 7.7% of hygienists – the largest single network of dental professionals in the country.

About 39% of the company is owned by US-based equity firm L Catterton, and insiders own 6.6% of the company – decent, but not ground-breaking. You might notice that the stock itself and its financial metrics, especially revenue, gross profit, and EBITDA, are moving in two different directions.

The financials have gone up at a powerful rate in the last three years, and the stock has lost over 46% of its valuation between inception (May 2021) and July 2023. The debt is also neck-to-neck with the current valuations.

You shouldn’t disregard the performance and debt risk, but it’s only fair to evaluate it against the backdrop of its impressive financials and organic growth as the largest dental professional network in the country.

4. WELL Health Technologies

WELL Health is basically a technology company that supports healthcare providers/professionals in various care delivery steps and facets. It directly employs over 2,500 healthcare providers in both US and Canada, supports over 22,000 healthcare providers, and an additional 2,900 providers with back-office and billing services.

The company is the largest partner of gastroenterologists in 48 US states for Anaesthesia services. The gist of all these impressive numbers is that Well Health has already developed a massive network and cultivated relationships with healthcare providers in North America and may experience rapid growth through word of mouth and by bringing larger healthcare providers into the fold.

It’s also developing an ecosystem of digital health services and already has about 40 different apps.

The goal of this ecosystem (from which providers can pick and choose apps per their needs) and the company’s comprehensive platform for healthcare providers is to make healthcare delivery efficient by cutting out admin and other manual work.

The company relies on acquisitions to augment its organic growth and acquires complete businesses as well as relevant assets/business segments. It reported about 60 acquisition events in the three years, 2019, 2020, and 2021.

About 9.7% of the company is owned by insiders, especially the founder, and CEO, that owns over 6% of the company, reflecting a confident leadership.

You would also be encouraged to know that WELL Health is more than just a solid prospect. It has grown its revenues by over 10x between 2020 and 2022, and both net income and EBITDA are finally in the green.

The stock has already exhibited powerful growth potential, but you should consider the circumstances in which that growth happened, i.e., post-pandemic optimism and the fact that the company had one foot each in two of the highly sought-after sectors – healthcare and tech, resulting in over 550% post-pandemic growth in less than a year.

But a positive growth momentum now would be more realistic and reflective of the stock’s fundamental strengths.

5. Dialogue Health Technologies

Dialogue Health Technologies caters to corporations instead of primary healthcare stakeholders like patients or medical professionals. It helps companies streamline their health benefits through its integrated health platform.

The platform covers one aspect of primary care, i.e., consultation, through virtual healthcare. This way, more people can connect with physicians and specialists than physical visitation could ever accommodate, making early detection and care a possibility. The platform also leans heavily towards mental health and wellness.

But it’s more than just bells and whistles, and the platform’s performance is backed by solid numbers. Between Q1 2020 and Q1 2023, it has grown its members from 200,000 to 2.8 million (14x growth). The number of members that use multiple services has also grown to account for a third of the total member population.

These numbers and the growth seem quite impressive, but you should know that the revenues and the stock’s performance do not back these numbers. The revenues have actually shrunk over the period members grew by a significant margin, and the stock lost over 71% of its value between Apr 2021 and July 2023.

So if you are wondering why this stock is still on the list of top healthcare stocks in Canada, the reason is its potential. If it continues growing its corporate client list, members, and service portfolio, the financials might follow.

6. Kneat.com

Validation is an important part of the Life Science industry, which includes pharmaceuticals, biotech, medical devices, and other companies that prepare medicine and other products that directly impact the health of people. Validation is the documented evidence that life science products will be developed following the established, approved procedure and meet the established criteria.

Kneat is an e-validation software that facilitates a smooth and efficient validation process for a variety of life science companies, which is a massive industry worldwide, and Kneat is already selling to the best of the bunch. It has over 40,000 users globally, and its clients include eight of the ten largest pharmaceutical companies.

It’s a financially “light” company since its business revolves around a single software platform that doesn’t require a lot of human and financial resources to manage. It has almost minimal debt and more cash reserves.

About 9.8% of the shares are owned by insiders, which shows a strong level of confidence in people connected to the company. You should also consider the stock’s powerful growth between Jan 2017 and early Aug 2023 – over 480%.

The only potential risk you need to be aware of is the company’s revenue generation breakdown. A significant segment of its revenues comes from a one-time licensing fee, which is a relatively limited income pool. It may have to introduce a financial model that relies more on existing customers continuously using its services instead of the expansion of the customer base.

7. Cipher Pharmaceuticals

Cipher Pharmaceuticals is a Mississauga-based micro-cap with a diverse portfolio of healthcare products. Its current portfolio includes dermatology and pain management products. It also has an opioid analgesic in the product portfolio, which is a drug class that may experience exceptional growth once opioid pain management becomes more mainstream (a strong possibility).

The company has three products in the pipeline as well, two of which are in phase-3 trials. But this product portfolio and overall valuation of the company represents a stripped-down version of what Cipher used to be in 2014-2015. But the stock has been on the road to recovery, and its revenue growth between 2019 and 2022 is an indication of this positive trend.

The revenue sources have also taken a turn over this period. In 2016, a significant portion of the revenues came from its licensing activities, whereas in 2022, about 60% of the revenue came from its products, which indicates decent market penetration.

But the revenues are heavily reliant on the sales of one of its dermatology products – Epuris, that’s used for the treatment of severe acne. Its revenues made up about 90% of product revenue and 54% of total revenues. You should understand the risk that a strong Epuris alternative can severely hit the company’s revenues.

But you should also factor in its powerful growth momentum that started in Jan 2021, and by the start of Aug 2023, it pushed the value of the company up by 270%.

Telehealth and Digital Healthcare

One of the leading players in the Canadian telehealth industry is WELL Health Technologies (TSX: WELL). This company provides end-to-end software solutions for medical clinics and hospitals.

With its telehealth platform, WELL Health Technologies supports practitioners in delivering quality remote healthcare to patients across the country. WELL Health Technologies also owns 85 outpatient clinics, the largest number owned by any single company in Canada.

Carebook Technologies (TSXV) is a promising digital health stock that has caught the attention of many investors. Carebook Technologies specializes in developing personalized healthcare solutions with a focus on patient engagement and preventive care.

How To Buy Healthcare Stocks In Canada

The cheapest way to buy stocks is from discount brokers. My top choices in Canada are:

To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

Most healthcare stocks in Canada offer cyclical growth. Some offer linear growth always, and a few under the right circumstances.

The percentage of dividend stocks is low, but the few that offer dividends are worth considering, thanks to their yield.

The best healthcare stocks in Canada are a powerful asset pool that you should look into and pick the companies that match your investment goals and risk tolerance.

And if you want relatively more diversified exposure to healthcare, these Biotech ETFs may be worth looking into.