By David StermanNEW YORK ( StreetAuthority) -- The health care industry has been on a steady growth path for nearly two decades. That's been good news for investors who have enjoyed almost non-stop gains from the sector. But now, cost pressures are putting heat on the sector and gains have been much harder to come by. In contrast, the party's just beginning for China. Chinese health care is far earlier on the growth curve and appears to have a long growth path ahead. Chinese per-capita spending on health care is the lowest of any of the 20 largest global economies. Off that low base, key companies look set to grow at a double-digit clip for a number of years to come and offer investors the same consistent gains once offered by American health care stocks. Here are three companies I've found that appear nicely positioned to capitalize on that trend. American Oriental Bioengineering
Concord MedicalHere's a sobering stat: Nearly 3 million people in China are diagnosed with cancer every year, and nearly 2 million people die from the disease annually. Early detection remains the key factor behind whether someone can survive cancer and Concord Medical ( CCM) aims to play a big role. Concord operates more than 100 radiotherapy and diagnostic centers throughout China, with plans to open another 100 during the next five years. Analysts at Brean Murray expect the diagnostic industry to double in size by 2015, driven by wider medical insurance coverage for many middle-class Chinese citizens. Shares look to have 15% to 20% upside if you examine current trends. But shares likely have significantly more upside for patient investors wanting to ride out the company's five-year growth plan. This $7.50 stock could hit $9 in a year, but I look for it to move past $12 in a few years as EPS rises up to $1 by 2013.
China Jo-Jo DrugstoresThis is a micro-cap stock and may not appeal to everyone. China Jo-Jo Drugstores ( CJJD) aims to become the "CVS of China," though it currently operates less than 50 retail pharmacies, with plans to grow the base to 75 by 2012. The company sells both traditional herbal remedies and modern pharmaceuticals, along with other wares typically found at a drugstore. Each store has a licensed physician on-site, paving the way for China Jo-Jo to start bolting urgent care facilities onto each of its drug stores. Despite high levels of staffing, it's a very profitable business, with gross margins exceeding 50% and operating margins exceeding 20%. Each of those metrics is roughly twice as high as what U.S.-based drug stores typically post. That said, as the company grows margins are likely to come down to a moderate extent as the company opens stores in more competitive areas. Shares, which trade for less than half of the 52-week high, look quite cheap at around four times projected fiscal 2012 profit forecasts. Action to Take: Each of these three stocks represents a unique growth and risk profile, so the most appealing name for you depends on your risk tolerance. Concord Medical appears to be the most solid business model, though it will likely take several years for shares to rise by a significant amount. American Oriental Bioengineering and China Jo-Jo Drugs are more speculative, but look significantly undervalued. This article originally appeared on StreetAuthority. At the time of publication, Sterman owned no positions in the stocks mentioned.