5 Small-Cap Health Care Stocks You Never Heard of But Should Consider for 2015

NEW YORK (TheStreet) -- The health care equipment and supplies may not seem like the sexiest of places to invest, but the sector has several contributors to its growth, affording it a positive outlook, according to TheStreet Ratings.

Baby boomers' shift into retirement age, Obamacare and people just living longer overall have "expanded demand for many products supplied by this industry ranging from medical devices for serious conditions that, more often than not, affect the older population (such as pacemakers and stents) to devices and surgeries that help improve the quality of life (such as joint replacements and laser eye surgery)," TheStreet Ratings says about the sector.

Over the past year, the Nasdaq Health Care Index is up 24.9% compared to the Nasdaq Composite Index 13.4%. In 2015, the Nasdaq Health Care Index is up 4.9% this year compared to the Nasdaq Composite Index which is down 2.69%.

Health Care Equipment & Supplies industry encompasses two main lines of business: supplying health care equipment to hospitals and patients in outpatient care; and creating new and more technologically advanced medical equipment to improve the efficiency and accuracy of patient care.

TheStreet analyzed which small-cap health care stocks present the best opportunity for investors looking for exposure to the sector.

TheStreet Ratings, TheStreet's proprietary stock rating tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

The five stocks on the list are all small-cap stocks (market capitalizations below $1 billion) and have a "buy" rating, with a B- or better grade from TheStreet Ratings.

 

5. Span-America Medical Systems SPAN
Rating: Buy, B-
2014 Return: -15%
YTD Return: -0.7%

Span-America Medical Systems, Inc. manufactures and distributes various therapeutic support surfaces and related products for the medical, consumer, and industrial markets in the United States and Canada. It operates through two segments, Medical and Custom Products.

"We rate SPAN-AMERICA MEDICAL SYS INC (SPAN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

You can view the full analysis from the report here: SPAN Ratings Report

 

4. Fonar Corp. FONR
Rating: Buy, B-
2014 Return: -40.64%
YTD Return: -10.87%

Fonar Corporation engages in the design, manufacture, sale, and servicing of magnetic resonance imaging (MRI) scanners for the detection and diagnosis of human diseases, abnormalities, and other medical conditions and injuries.

"We rate FONAR CORP (FONR) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

You can view the full analysis from the report here: FONR Ratings Report

3. Digirad Corp. (DRAD)
Rating: Buy, B
2014 Return: 19%
YTD Return: 4%

Digirad Corporation provides diagnostic imaging solutions in the United States. The company operates in two segments, Digirad Imaging Solutions and Diagnostic Imaging.

"We rate DIGIRAD CORP (DRAD) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

You can view the full analysis from the report here: DRAD Ratings Report

 

2. Iridex Corp. (IRIX)
Rating: Buy, B
2014 Return: -11%
YTD Return: 5.2%

IRIDEX Corporation develops, manufactures, markets, sells, and services medical laser systems and associated instrumentation for the treatment of the sight-threatening eye diseases worldwide.

"We rate IRIDEX CORP (IRIX) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

You can view the full analysis from the report here: IRIX Ratings Report

 

1. Kewaunee Scientific Corp. (KEQU)
Rating: Buy, B
2014 Return: 14.8%
YTD Return: -1.8%

Kewaunee Scientific Corporation designs, manufactures, and installs laboratory, healthcare, and technical furniture products. The company operates through two segments, Domestic Operations and International Operations.

"We rate KEWAUNEE SCIENTIFIC CORP (KEQU) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

You can view the full analysis from the report here: KEQU Ratings Report

 

 

More from Investing

Tesla: What Are Wall Street's Best Analysts Saying Now?

Tesla: What Are Wall Street's Best Analysts Saying Now?

60 Seconds: What Is a Closed-End Fund?

60 Seconds: What Is a Closed-End Fund?

Here's Why There Aren't More Women in Asset and Wealth Management

Here's Why There Aren't More Women in Asset and Wealth Management

Xiaomi Has Much to Prove After a Tepid IPO

Xiaomi Has Much to Prove After a Tepid IPO

Trump-Putin Showdown Is a Sideshow. It's All About Netflix Earnings

Trump-Putin Showdown Is a Sideshow. It's All About Netflix Earnings