A Safer Growth Stock: The “Picks and Shovels” Play Behind Medical Imaging

When investors think about healthcare, they usually focus on drug companies, insurers, or hospital operators.

Few people look at the companies that make the equipment inside the machines.

But one quiet player sits right in the middle of a massive global industry, and it’s a stock you’ve probably never heard of. 

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And its role is more important than most investors realize. This stock is A rated according to our Zen Ratings system … and scoring highly in both Growth and Safety.

Ready for the ticker?

Here it is…

Varex Imaging (NASDAQ: VREX). Told you it probably wouldn’t ring a bell. But here’s why it matters…

The Parts That Make Medical Imaging Work

Varex doesn’t manufacture CT scanners or X-ray machines.

So what does VREX do? 

It builds the core components that make those systems function, including:

• X-ray tubes (the radiation source)
• Digital imaging detectors
• High-voltage power components
• Imaging software

These components are sold to the major manufacturers that build the finished machines … companies like GE HealthCare (NASDAQ: GEHC), Siemens Healthineers, and Philips (NYSE:PHG).

So while those companies assemble the scanners hospitals buy, Varex often supplies the technology inside them.

That’s why I think of it as a picks-and-shovels business within the medical imaging ecosystem.

Why the Replacement Cycle Matters

Medical imaging equipment doesn’t run forever.

Hospitals rely on CT scans, X-rays, and fluoroscopy machines every day, and the core components inside those machines wear out over time … particularly the X-ray tubes.

That creates a built-in replacement cycle.

Once a Varex component is designed into a system, hospitals and manufacturers typically continue using the same parts for maintenance and replacements. Switching suppliers can be complicated because imaging systems must meet strict regulatory and reliability standards.

That means each machine installed in a hospital today can generate years of future replacement demand.

A Structural Tailwind: More Imaging Everywhere

Demand for medical imaging continues to rise globally.

Several forces are pushing that trend:

• Aging populations requiring more diagnostic testing
• Greater use of imaging in preventative care
• Expanding healthcare infrastructure in emerging markets

Even modest growth in imaging volumes can drive steady demand for new systems , and for replacement components inside existing machines.

It’s Not Just Healthcare

While medical imaging is the core business, Varex also sells technology used in:

• Industrial inspection
• Aerospace testing
• Security and cargo scanning

These markets rely on similar imaging technology and add another revenue stream beyond hospitals.

The diversification doesn’t eliminate cyclicality, but it broadens the company’s opportunity set.

Why the Market Still Treats It Like a Cyclical

Imaging has built-in structural demand, which adds a degree of safety and consistency to VREX

Plus, if imaging demand continues expanding globally (which most long-term healthcare trends suggest it will) companies embedded in the supply chain can benefit steadily over time.

That’s why VREX scores a B in both its Growth and Safety Component Grades. Our Safety model weighs factors like stock price stability, receivables standard deviation, and earnings estimate standard deviation.

We go into why we consider safety so important here.

By the way, there’s one Component Grade where VREX is scoring an A. To see it, click here.

It’s a smaller market cap name, so not many analysts follow it. But the two Wall Street analysts we track who do both have high forecasts for VRX, with their average prediction calling for 49% gains:

See their price predictions here.

The Bottom Line

VREX doesn’t develop blockbuster drugs or run hospital networks. But it does supply the essential technology that allows modern medical imaging to exist in the first place.

That puts it in a unique position: a quiet infrastructure provider inside a critical healthcare system.

For those looking for growth, safety, or a picks and shovels play on healthcare, this is a name worth adding to your watchlist here.

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