Medical device makers, like many manufacturers, have faced challenges over the last year from inflationary supply chain costs, staffing shortages and the strong dollar impacting sales overseas. But the new year has brought a more positive tone from firms in the sector, even as large technology players and others are announcing layoffs and sounding the alarm over a possible recession. “Based on commentary, the broader environment seems to be gradually improving, and early 4Q pre-announcements have mostly been above consensus,” wrote KeyBanc Capital Markets analyst Matthew Mishan in a note to clients. “We continue to believe in a MedTech investment thesis of relatively recession resilient sales.” The sector is coming off its worst decline since the financial crisis in 2008. The iShares U.S. Medical Devices ETF (IHI) fell more than 20% last year, underperforming the S & P 500. However, since 2007 the device sector ETF has averaged a gain of 14% per year, 6 percentage points better than the broader market index over the same period. Medical device stocks to watch Given this backdrop, CNBC Pro screened for medical device companies with a valuation of more than $1 billion, which have buy ratings from at least 60% of analysts who cover them, as well as an average price target implying a gain of 30% or more over the next year. Seven companies met the criteria. Many of them have raised their outlook this month. One of the top names was Paragon 28 , a small cap device maker which went public in 2021. The company specializes in plating and bone graft systems to treat ankle and orthopedic problems. While not widely followed, all six of the analysts covering the stock rate it a buy, according to FactSet. The mean price target implies nearly 50% upside over the next 12 months. “We believe Paragon 28 is reaching its growth stride and is positioned to take share in the fastest-growing segment of the orthopedic market,” said Canaccord Genuity analyst Kyle Rose in a note to clients earlier this month. The company preannounced better than expected fourth quarter sales of $51.2 million-$51.5 million, which would represent 20% year over year growth. Shockwave Medical also raised its 2022 outlook, and boosted 2023 sales guidance as well. The maker of catheters used to treat hardened arteries told analysts last week that is confident that one of its marquee products will receive the highest tier Medicare reimbursement rate of $17,000 in coming months; the company is in discussions with the Centers for Medicare and Medicaid. More than 60% of analysts rate the shares a buy, with a mean price target implying 34% upside. But, Oppenheimer’s Suraj Kalia is not buying the bull case on Shockwave. He has a sell rating on the stock. “Our analysis suggests … their device is no better than much cheaper or inexpensive devices already on the market. They have not demonstrated why they are better or why they should be more expensive,” Kalia told CNBC. One of the standouts on the list is Procept BioRobotics , which makes surgical robots to treat urological conditions. Nearly 90% of analysts rate the stock a buy, with mean price target of $53, implying more than 30% upside. Earlier this month, the firm pre-announced preliminary 2022 full year sales of roughly $75 million, a more than tenfold increase over 2020 sales. CEO Reza Zadno told investors at the JP Morgan health conference that its newest robotic tools to treat enlarged prostate glands is seeing strong growth. “We have a long runway ahead of us. And patients are now asking for this procedure, because they want both efficacy, safety and durability,” Zadno said. BTIG analysts Marie Thibault and Ryan Zimmerman think that M & A could be another catalyst for the medical device sector in 2023, with robotic surgery players likely to be of particular interest. “There are a number of emerging surgical robotics companies and while many are unproven, companies such as Medtronic and J & J are finding it more challenging to muscle into ISRG’s space. We think MDT and JNJ could pick up some assets to either integrate or bolster their position in surgical robotics,” the BTIG analysts said in a research note.