A hallmark of long-term investing is aligning your portfolio with high-potential stocks in essential industries, whose products and services lie at the foundation of human life.
A prospective way to upgrade your portfolio in this fashion is to invest in medical stocks with underlying operations solving unmet needs at an increasing profit. Numerous stocks listed on the Canadian market fit the bill.
How I picked the top 10 Canadian medical stocks
I started my search by defining the word “top”, settling on something like “stocks that have been punished despite noteworthy results evident on their income statements.”
Turning to The Globe & Mail’s stock screener, I expressed this definition as companies trading at a low price-to-cash-flow (p/cf) ratio under 10 while having experienced a year-to-year (YoY) drawdown, suggesting excessive pessimism and undervaluation. I then went through the entries, one by one, verifying attractive income statements going back to 2019. Here’s the list, ordered by YoY loss:
- Devonian Health Group, 11.76 per cent return YoY, 4.96 p/cf ratio.
- NeuPath Health, 8.82 per cent return YoY, 3.54 p/cf ratio.
- Rubicon Organics, 1.14 per cent loss YoY, 3.56 p/cf ratio.
- Cannara Biotech, 12.05 per cent loss YoY, 6.84 p/cf ratio.
- Evome Medical Technologies, 40 per cent loss YoY, 2.04 p/cf ratio.
- Quipt Home Medical, 49.78 per cent loss YoY, 2.92 p/cf ratio.
- Terrascend, 58.06 per cent loss YoY, 4.74 p/cf ratio.
- Curaleaf Holdings, 58.79 per cent loss YoY, 8.42 p/cf ratio.
- Avricore Health, 64.71 per cent loss YoY, 6.85 p/cf ratio.
- Premier Health of America, 64.77 per cent loss YoY, 1.31 p/cf ratio.
The top 10 Canadian medical stocks
10. Devonian Health Group
Devonian Health Group, market cap C$28.16 million, is a clinical-stage pharmaceutical company developing drugs for auto-immune inflammatory conditions, including ulcerative colitis and atopic dermatitis.
The Quebec-based company is also selling prescription pharmaceutical products in Canada through its Altius Healthcare subsidiary, as well as developing high-value cosmeceutical products.
Devonian Health Group’s revenue soared by over 650 per cent from C$2.35 million in fiscal 2023 to C$17.82 million in 2024 thanks to Altuius’ launch of Dexlansoprazole, the only authorized generic in the Canadian market to treat gastroesophageal reflux disease. Taking a broader view, operations have been gross profitable for three straight years.
The company’s accelerating path to profitability has been grossly underestimated by its stock’s 5.56 per cent return since 2019.
Devonian Health Group (TSXV:GSD) last traded at C$0.19.
9. NeuPath Health
NeuPath Health, market cap C$10.43 million, operates a network of multidisciplinary healthcare clinics and related businesses in Ontario and Alberta. Specializations include chronic pain, musculoskeletal/back injuries, sports-related injuries and concussions.
The Canadian medical stock also provides workplace health services and independent medical assessments to employers and disability insurers, as well as contract research services to pharmaceutical and biotechnology companies.
NeuPath grew revenue every year from a pandemic low of C$47.64 million in 2020 to C$66.10 million in 2023, while growing gross profitability from C$9.72 million to C$12.3 million, respectively. Revenue has already surpassed C$50 million through three quarters in 2024, with gross profits on track for a five-year record.
The stock, for its part, seems entirely disconnected from NeuPath’s financial trajectory, giving back about 75 per cent of its value since inception in 2020.
NeuPath Health stock (TSXV:NPTH) last traded at C$0.18.
8. Rubicon Organics
Rubicon Organics, market cap C$24.87 million, is a vertically integrated premium organic cannabis company based in Delta, British Columbia. Its flagship brands include Simply Bare, 1964 Supply Co., Wildflower and Homestead Cannabis Supply.
Management more than quadrupled revenue from C$9.39 million in 2020 to C$40.12 million in 2023, growing gross profitability from a C$4.03 million loss to a gain of C$25.38 million, respectively. Net loss over the period dwindled from C$14.98 million to C$1.82 million, with considerable improvements through 2024.
The broader market isn’t yet privy to Rubicon’s disciplined approach to increasing market share, having tanked shares by 86.94 per cent since 2019.
Rubicon Organics stock (TSXV:ROMJ) last traded at C$0.44 per share.
7. Cannara Biotech
Our next top Canadian medical stock is Cannara Biotech, market cap C$64.81 million, a vertically integrated producer of cannabis and cannabis-derivative products. Cannara owns two facilities in Quebec combining for over 1,650,000 square feet, enabling up to 100,000 kg of affordable cultivation per year thanks to the province’s low electricity costs.
The company grew revenue by over 30 times from C$2.58 million in fiscal 2020 to C$82.15 million in fiscal 2024, generating a net income profit in each of the past three years, including C$2.31 million in 2022, C$6.95 million in 2023 and C$6.44 million in 2024.
Despite scaling in line with shareholder value, investors have left Cannara for dead to the tune of a 55.76 per cent loss since 2019.
Cannara Biotech stock (TSXV:LOVE) last traded at C$0.73.
6. Evome Medical Technologies
Evome Medical Technologies, market cap C$10.33 million, is building a diversified global medical device company focused on human performance and rehabilitative solutions. The company’s Biodex subsidiary is a leader in orthopedic, sports medicine and neurorehabilitation needs with a presence in over 70 countries and partnerships with 52 distributors.
Evome’s growth is nothing short of exponential, taking revenue from C$40,000 in 2020 to C$62.63 million in 2023, with gross profits skyrocketing from C$380,000 to C$22.53 million over the period.
Should the company continue on its path of positive cash flow generation and debt reduction, as delineated in its Q3 2024 results, it will strengthen its case for a re-rating from an irrational over 87 per cent loss since 2021.
Evome Medical Technologies stock (TSXV:EVMT) last traded at C$0.12.
5. Quipt Home Medical
Quipt Home Medical, market cap C$148.23 million, provides in-home monitoring and disease management services, including end-to-end respiratory solutions, for patients in the United States healthcare market. The company is actively expanding into heart and pulmonary disease, sleep disorders, reduced mobility and other chronic health conditions.
Quipt delivered over 3x revenue growth from US$72.64 million in fiscal 2020 to US$245.92 million in fiscal 2024, while more than tripling gross profits from US$52.71 million to US$176.99 million, respectively, and generating operating income every year over the period except in 2021.
According to its fiscal 2024 news release, the company is confident about delivering “consistent, historical organic growth levels” in 2025 and executing on its long-term path to profitability, positioning investors to take advantage of a potential re-rating from the stock’s 49.78 per cent loss YoY and 8.51 per cent loss since 2019.
Quipt Home Medical stock (TSX:QIPT) last traded at C$3.44.
4. Terrascend
Terrascend, market cap C$323.76 million, holds interests across the North American cannabis sector, including:
- Vertically integrated operations in Pennsylvania, New Jersey, Maryland, Michigan and California through TerrAscend Growth.
- Retail operations in Canada through TerrAscend Canada, including The Apothecarium, Gage and other dispensary brands for both the medical and adult-use markets.
Management has more than quintupled revenue from US$60.57 million in 2019 to US$317.33 million in 2023, while growing gross profitability by over 26 times from US$5.94 million to US$159.70 million. Investors have shown little interest in the company being on track for six-year highs for these two metrics in 2024, causing the stock to plummet by over 60 per cent since 2019.
Terrascend (TSX:TSND) last traded at C$0.91 per share.
3. Curaleaf Holdings
My second runner-up for top Canadian medical stock is Curaleaf Holdings, market cap C$1.64 billion, a leading global provider of cannabis products for the medical and adult-use markets. The company’s brand portfolio includes Curaleaf, Select, Grassroots, JAMS, Find, The Hemp Company and Zero Proof. Also notable, its Curaleaf International division is currently Europe’s largest vertically integrated cannabis company.
Curaleaf grew revenue by over six times from US$221 million in 2019 to US$1.34 billion in 2023, backed up by a 14x jump in gross profits from US$43.88 million to US$614.45 million. The stock, for its part, has given back over 69 per cent over the period. This dynamic makes the company an attractive acquisition target for a larger name looking for efficient growth in the global cannabis market at a discount.
Curaleaf stock (TSX:CURA) last traded at C$2.22.
2. Avricore Health
Avricore Health, market cap C$6.08 million, is an acquirer and developer of early-stage technologies advancing pharmacy practice and patient care. The company’s HealthTab subsidiary is creating the world’s largest network of rapid testing devices in community pharmacies with help from high-profile partners like Abbott, Rexall and Shoppers Drug Mart.
Avricore’s growth trajectory is the most impressive among this article’s cohort, increasing revenue by over 116 times from C$30,000 in 2019 to C$3.49 million in 2023, supported by 120x growth in gross profitability from C$10,000 to C$1.2 million, respectively. Operations have recently reached net income profitability, generating C$60,000 in Q4 2023, C$170,000 in Q1 2024 and C$50,000 in Q2 2024.
Management’s focus on the bottom line of the income statement as the main driver of shareholder value is reflected in the stock’s 100 per cent return since 2019. However, investors are sitting on an almost 65 per cent loss year-over-year, indicating a significant price-value dislocation.
Avricore Health stock (TSXV:AVCR) last traded at C$0.06.
1. Premier Health of America
My number-one pick for top Canadian medical stock is Premier Health of America, market cap C$8.6 million, which offers a comprehensive range of healthcare staffing and software solutions to governments, corporations and individuals in Canada.
Revenue grew by almost 8x from C$20.74 million in fiscal 2020 to C$158.19 million in fiscal 2024, with gross profitability multiplying by almost five times from C$5.71 million to C$27.90 million. Operations have generated operating income in four out of the past five years, except in 2024 because of changes in Quebec legislation the company is actively pivoting to address, as detailed in its Q4 2024 news release.
The company’s reliable cash flow has granted management the flexibility to pursue inorganic growth at opportunistic prices, as evidenced by the acquisition of British Columbia’s healthcare-focused Solutions Staffing in November 2023.
Propelled by the government of Canada’s expected shortage of 78,000 doctors by 2031 and 117,600 nurses by 2030, Premier Health of America is positioned to play a key role in filling these unmet needs, scale towards increasing profitability and bounce back from shares’ almost 50 per cent loss since 2020.
Premier Health of America stock (TSXV:PHA) last traded at C$0.155.
Join the discussion: Find out what everybody’s saying about these top Canadian medical stocks on the Devonian Health Group Inc., NeuPath Health Inc., Rubicon Organics Inc., Cannara Biotech Inc., Evome Medical Technologies Inc., Quipt Home Medical Corp., Terrascend Corp., Curaleaf Holdings Inc., Avricore Health Inc. and Premier Health of America Inc. Bullboards and check out the rest of Stockhouse’s stock forums and message boards.
Data as of Dec. 23-24, 2024.
The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
(Top image: Adobe Stock)
