2 Healthtech Stocks I'm Tracking Closely

The developing world is going silver.

No, this is not about inclination towards the precious metal but the demographic change that has been largely associated with only the developed world so far.

We think of the Japanese, Europeans, and Americans when we read about economic issues with populations comprising largely of senior citizens.

But the developing world is not far from it.

By 2050, one in five people in developing economies nations will be over 60 years old. Falling fertility rates, and increased life expectancy from improvements in health care, especially in Asia, has led to a rapidly ageing population.

In part, this reflects a worldwide trend. As per estimates, by 2030, for the first time ever, the number of people aged 65 years and older will outnumber children younger than 5 years of age.

But we are set to witness a seismic demographic shift of ageing to the developing world. By 2050, 80% of the 2 bn elderly people on this planet will live in the developing world.

The health systems of many developed and developing countries have over the past two decades been engaged in a precarious juggling act. They need to penetrate services while keeping costs under control.

So the 'silver economies' of the West have already created opportunities that a niche group of Indian entities have capitalised on.

Since healthcare costs in US, Europe and Australia continue to climb and administrative complexity increases, there is a greater incentive for health tech outsourcing companies to offer services for a fee.

A few listed health tech specialised entities in India have already cornered a reasonable share of the market in the US.

Since the healthcare ecosystem in the developed economies is largely dependent on insurance, it makes sense for the payers and providers of healthcare services to outsource the massive, non-core burden of registering patients and processing insurance to specialised, cost-efficient partners.

This ensures that the healthcare provider's market opportunity expands in sync with the demographic aging of Western economies.

Healthcare technology entities significantly reduce the cost burden while improving service through automation, enhanced data utilisation, and expanded access to care. These advancements target inefficiencies in administration, diagnosis, and care delivery.

Telemedicine, electronic health records, predictive analytics, home diagnostic tests, and home patient monitoring are all examples of innovations in healthcare technology.

Sagility India, for instance, carved out a unique position in the Indian healthcare technology landscape by focusing on complex, highly specialised healthcare Business Process Management (BPM), primarily serving the demanding US Payer and Provider market.

The company's primary moat lies in its domain expertise, which translates into high switching costs for its large, entrenched US clients.

Also, healthcare tech is not a commoditised service. It requires thousands of man hours of certified professionals who possess specific, non-transferable knowledge of US medical appointments, billing, and insurance management.

By embedding itself into the critical financial arteries of major US health insurers (Payers) and hospital systems (Providers), Sagility becomes an indispensable operational partner.

The risk and expense involved for a large client to migrate their entire ecosystem and retrain a new vendor's staff on millions of historical claims and complex state-specific regulations effectively locks the client into the Sagility ecosystem.

This gives the company a powerful, defensible competitive advantage.

Its competitor in the space, Inventurus Knowledge Solutions, offers a care enablement platform assisting physician enterprises in the US, Canada and Australia. It partners with an outpatient and inpatient health care organisations, enabling them to deliver care through a 'fee for value' model.

Both Sagility and Inventurus have a structurally wide Total Addressable Market (TAM), which is poised for continuous expansion. The expected surge in volume of administrative transactions such as claims processing, payment disputes, compliance checks etc offers opportunities.

While both the entities leverage AI, their competitors in the large technology firms and well-funded start-ups, are also rapidly developing advanced AI and automation tools for health tech space.

The business models of the health tech entities have, so far, not borne the brunt of tariffs etc.

However, the pricing model remains skewed in favour of the client. The underlying nature of outsourced services is often susceptible to price wars, especially from smaller, aggressive competitors or as clients push to reduce costs.

The shift toward subscription-based or outcome-based pricing models introduces new performance risk.

How Should Investors Evaluate Healthtech Stocks?

Healthtech stocks like Sagility and Inventurus benefit from a strong tailwind in the US healthcare outsourcing trend and the integrated platform approach.

But earnings visibility is highly dependent on managing regulatory exposure, winning the AI innovation race against tech competitors, and controlling operational costs by managing its large employee base effectively.

If they are able to innovate and sustain their moat in the developed economies, penetrating deeper in a tech-enabled developing healthcare market like India can be the long term upside.

Sagility and Inventurus are currently valued at 30 and 47 times earnings respectively.

So, investors need to evaluate the long term growth and margin sustainability of these businesses before considering a relatively high PE multiple for these stocks.

Happy investing.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)