The U.S. stock market experienced a strong rebound earlier this week, as the Dow Jones Industrial Average gained 500 points, and the S&P 500 and the Nasdaq Composite rose 1.5% and 1.8%, respectively, on March 24. This rally has, to some extent, rekindled investor interest in equities, which had been under pressure amid concerns about recession and policy-induced trade disruptions.

The latest gains stem from renewed investor optimism following indications that President Trump's upcoming set of tariffs may be less severe than initially anticipated, easing concerns about another round of potential global trade war.

While uncertainties still prevail, this rally highlights how quickly markets can reverse course when policy risks appear more manageable. The MedTech sector, which has lagged the broader market this year, stands to benefit if the rally extends further, particularly as investor sentiment shifts in favor of risk assets. In such a situation, MedTech stocks like Phibro Animal Health PAHC, Fresenius Medical Care FMS and InMode INMD are poised to grow.

Mixed 2025 for MedTech

The MedTech industry is witnessing a transformative 2025, driven by innovation and evolving regulations. The FDA’s final rule reclassifying all laboratory-developed tests as devices takes effect on May 6, 2025. This will trigger a four-year phaseout and stricter compliance measures. While this raises concerns about test availability during health crises, it also aims to enhance safety standards.

The past three months have been challenging for many medical device companies that rely on overseas sourcing. Stringent tariff proposals introduced by President Trump have increased costs, disrupted supply chains and forced some firms to reassess their production strategies. However, optimism surrounding a lenient approach toward the next set of tariff proposals and anticipated Fed rate cuts could drive investment and expansion.

Consumer-driven healthcare is gaining momentum, creating new revenue streams. Advances in CRISPR and next-generation sequencing are propelling hyper-personalized medicine, while AI-driven medical devices are expected to surge under the FDA’s streamlined approval process.

Oversold MedTech Stocks Poised for a Rebound

As stated earlier, the MedTech industry has underperformed relative to the broader market so far in 2025, with the S&P Health Care Equipment Select Industry Index declining 5.5% year to date, compared with the S&P 500’s 1.6% dip.

However, if the broader equity rally sustains, fundamentally strong MedTech companies could witness renewed interest, particularly those demonstrating solid innovation and financial strength. After a challenging 2024, the undervalued MedTech stocks could see a strong rebound in the coming months of 2025. Investors should thus focus on companies leveraging cutting-edge technology and personalized healthcare solutions for long-term growth.

Our Picks

Phibro: Its Medicated Feed Additives (MFA) offerings hold the third-largest share in the animal health market. These concentrated medicated products, sold through its MFAs and other segments, are seeing strong uptake in the international regions. The Vaccine product line is one of Phibro’s highest growth segments, delivering a 12% year-over-year increase in the second quarter of fiscal 2025. The momentum is backed by the continued growth of poultry products in Latin America along with rising international demand.

This Zacks Rank #1 (Strong Buy) stock currently boasts an attractive valuation, with a forward price-to-earnings (P/E) of 10.41X, well below the five-year industry average of 21.78X and its median of 13.54X. A discounted PEG multiple of 0.42X, compared with 2.08X of the broader industry, too potentially presents an opportunity for investors. Phibro’s five-year expected earnings growth rate is pegged at an impressive level of 26.2%. In fiscal 2025, the company is expected to report earnings growth of 63%.

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Fresenius Medical: The company is gaining from strong organic growth on the back of improving treatment volumes as well as a stabilizing labor environment in the United States. Continued improvement in these two key factors should be beneficial for the company in 2025. Overall pricing momentum also supported growth in the Care Enablement segment. FMS’ newly implemented operating model led to operational improvements. FMS’ continued divestment of its noncore and dilutive assets seems promising.

This Zacks Rank #1 stock has a forward P/E of 11.75X, well below the 5-year industry average of 29.65X and its own median of 14.43X. In 2025, the company is expected to report earnings growth of 25.9%.

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InMode: The company develops and markets minimally invasive aesthetic medical products based on its proprietary radio frequency-assisted lipolysis and deep subdermal fractional radiofrequency technologies in the United States, Europe, Asia and internationally.  InMode is aggressively entering new international markets in Asia, Latin America and Europe, where demand for aesthetic treatments is rising. The company’s EmpowerRF platform targeting women's health issues is gaining major market acceptance.

This Zacks Rank #2 (Buy) stock has a forward P/E of 9.37X, well below the five-year industry average of 21.61X and its own median of 13.66X. In 2025, the company is expected to report earnings growth of 10.8%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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Fresenius Medical Care AG & Co. KGaA (FMS) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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