3 Hot Healthcare Stocks For 2016: AstraZeneca plc, NMC Health PLC And Alliance Pharma plc

Now could be the perfect time to buy a slice of AstraZeneca (LSE: AZN). Certainly, the chances of a takeover are slimmer than they were last year, with the US tax authorities closing a loophole that made UK-domiciled healthcare companies such as AstraZeneca more appealing from a tax perspective. However, with the company’s acquisition strategy set to bear fruit, 2016 could be a prosperous year for its investors.

In fact, just this week AstraZeneca announced two important deals that could boost its long-term profitability. The first is the purchase of Takeda’s respiratory business for $575m and the second is an investment of up to $100m in Chinese biological drug manufacturer WuXi AppTec. The two transactions strengthen AstraZeneca’s exposure to its core growth areas and should make a positive impact on its goal to double sales within the next eight years.

With the company having a very strong balance sheet and excellent cash flow, it seems capable of making further acquisitions to bolster its growth prospects in 2016. And with it having a price-to-earnings (P/E) ratio of 15.8, it appears to offer excellent value given its bright long-term future.

Bright future

Similarly, Alliance Pharma (LSE: APH) also appears to be a very sound buy at the present time. Like AstraZeneca, it has recently engaged in M&A activity, with Alliance purchasing the health products arm of Sinclair Pharma for £132m. The deal will provide Alliance with access to a wider range of countries, notably the US and across Asia, and will also bolster its dermatology portfolio.

Looking ahead, Alliance has clear upward rerating potential since its shares trade on a P/E ratio of just 13.2. While an earnings growth forecast of 6% for next year is rather modest, Alliance has a sound balance sheet, with further acquisitions very much on the cards. And with an increased presence in lucrative markets such as the US and Asia, it appears to have a very bright long-term future that could begin to be priced-in during the course of 2016.

Star of wonder

Meanwhile, NMC Health (LSE: NMC) has been one of the stars of 2015, with the UAE-focused medical services company posting a share price rise of 93% since the turn of the year. A key reason for this is the company’s impressive near-term growth prospects, with NMC being forecast to increase its bottom line by 40% in the current year.

Looking ahead to next year, NMC is expected to continue this strong rate of growth with a rise of 38% forecast in its bottom line. This puts its shares on a price-to-earnings growth (PEG) ratio of just 0.5, which indicates that they offer growth at a very reasonable price. Certainly, the company has a lack of geographical diversity, but with a wide margin of safety it appears to be a sound long-term buy at the present time.

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Peter Stephens owns shares of Alliance Pharma and AstraZeneca. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.