What Is The Future Prospect For Healthcare And Vocera Communications Inc (NYSE:VCRA)?

Vocera Communications Inc (NYSE:VCRA), a USD$882.94M small-cap, operates in the healthcare industry, which has experienced tailwinds from issues such as higher demand driven by an aging population and the increasing prevalence of diseases and comorbidities. The healthcare tech industry, in particular, is presented with an array of technology to progress innovation clinically and cost-effectively. Advancements such as implantable devices and treatment, robotic surgery and 3D printing will be key drivers of growth in the industry. Healthcare analysts are forecasting for the entire industry, a positive double-digit growth of 16.17% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the healthcare tech sector right now. Today, I will analyse the industry outlook, as well as evaluate whether Vocera Communications is lagging or leading its competitors in the industry. Check out our latest analysis for Vocera Communications

What’s the catalyst for Vocera Communications's sector growth?

New R&D methods and big data analytics are creating opportunities for innovations, however, stakeholders have been challenged to keep abreast of this structural shift while under pressure to cut costs. Over the past year, the industry saw growth in the teens, beating the US market growth of 10.79%. Vocera Communications lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its healthcare tech peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 65.61% in the upcoming year. This future growth may make Vocera Communications a more expensive stock relative to its peers.

Is Vocera Communications and the sector relatively cheap?

The healthcare tech sector's PE is currently hovering around 32x, higher than the rest of the US stock market PE of 20x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 9.47% on equities compared to the market’s 10.46%. Since Vocera Communications’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Vocera Communications’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? Vocera Communications’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Vocera Communications as part of your portfolio. However, if you’re relatively concentrated in healthcare tech, you may want to value Vocera Communications based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If Vocera Communications has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the healthcare tech industry. However, before you make a decision on the stock, I suggest you look at Vocera Communications’s future cash flows in order to assess whether the stock is trading at a reasonable price, as well as other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.

For a deeper dive into Vocera Communications's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other healthcare stocks instead? Use our free playform to see my list of over 1000 other healthcare companies trading on the market.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.