Seeking Alpha
Newsletter provider, fund holdings, insider ownership
Profile| Send Message|
( followers)  

Healthcare is one of the fastest growing industries in the world. The annual growth rate of total expenditures on healthcare is 7.1% between 2000-2008 in the United States. Average annual growth in National Health Expenditures (NHE) for 2009 through 2019 is expected to be 6.3%. NHE as a share of Gross Domestic Product (GDP) is expected to be 19.6% by 2019. The table below shows recent NHE expenditures and next 10 years projections.

Year

National Health Expenditures (billions)

National Health Expenditures as a Percent of Gross Domestic Product

2004

$1,855.4

15.6%

2005

$1,982.5

15.7%

2006

$2,112.5

15.8%

2007

$2,239.7

15.9%

2008

$2,338.7

16.2%

Projected 2009

$2,473.3

17.3%

Projected 2010

$2,600.2

17.5%

Projected 2011

$2,709.8

17.4%

Projected 2012

$2,851.6

17.2%

Projected 2013

$3,024.8

17.3%

Projected 2014

$3,302.4

17.9%

Projected 2015

$3,538.2

18.2%

Projected 2016

$3,795.9

18.7%

Projected 2017

$4,044.8

19.0%

Projected 2018

$4,297.6

19.3%

Projected2019

$4,571.5

19.6%

Here is the list of the most undervalued healthcare stocks, when comparing the current P/E ratios and analysts' expectations of growth.

Symbol

Company

Market Cap

P / E

5 yr Growth Expectation

AGP

AMERIGROUP Corporation Common S

2.85B

10.79

32.86%

CI

CIGNA Corporation Common Stock

11.51B

8.79

8.53%

HS-OLD

Healthspring, Inc.

2.15B

10.95

36.55%

HUM

Humana Inc. Common Stock

10.67B

9.79

33.25%

MGLN

Magellan Health Services, Inc.

1.59B

11.92

9.93%

UNH

UnitedHealth Group Incorporated

47.64B

10.62

7.40%

UAM

Universal American Corporation

1.66B

8.8

49.24%

WLP

WellPoint, Inc. Common Stock

25.09B

9.63

7.04%

Amerigroup Corporation (AGP): Amerigroup Corporation operates as a multistate managed healthcare company. It focuses on serving people who receive healthcare benefits through publicly sponsored programs, such as Medicaid, Children's Health Insurance Program (CHIP), Medicaid expansion programs and Medicare Advantage. Amerigroup Corporation announced on Feb. 18, 2011 that net income for the fourth quarter of 2010 was $79.6 million, versus net income of $40.2 million for the fourth quarter of 2009. Annual membership increased by 143,000 members to approximately 1.9 million at the end of the fourth quarter, an 8% increase year-over-year and essentially unchanged from the third quarter of 2010. Fourth quarter total revenues were $1.5 billion, a 10.2% increase over the fourth quarter of 2009 and a 0.5% increase over the third quarter of 2010. Currently AGP shares are trading at $58.28. Earnings estimates for AGP are $4 per share in 2011 and and $4.35 in 2012. Current P/E ratio is 10.79 on these shares.

CIGNA Corporation (NYSE:CI): CIGNA Corporation provides health care and related benefits in the United States and internationally. It operates in five segments: Health Care, Disability and Life, International, Run-off Reinsurance and Other Operations. Lee Ainslie's Maverick Capital bought 111 million worth of CIGNA shares during the last quarter of 2010. CIGNA's consolidated revenues increased 15% to $21.3 billion for full year 2010. Adjusted income from operations increased 16% for full year 2010 to $1.28 billion. Shareholders’ net income for full year 2010 was $1.35 billion. Currently CI shares are trading at $43. Earnings estimates for CI are $4.74 per share in 2011 and $5.21 in 2012. Current P/E ratio is 8.79 on these shares.

Healthspring, Inc. (NYSE:HS-OLD): HealthSpring Inc., through its subsidiaries, operates as a managed care organization in the United States. It focuses primarily on Medicare, the federal government sponsored health insurance program for U. S. citizens aged 65 and older, qualifying disabled persons and persons suffering from end stage renal disease in the states of Alabama, Florida, Illinois, Mississippi, Tennessee and Texas. Healthspring's net income in the 2010 fourth quarter was $50.9 million, compared with $38.8 million in the 2009 fourth quarter, an increase of 29.4% on a per diluted share basis. Premium revenue for the year was $3.1 billion, an increase of 17.8% over 2009. Currently HS shares are trading at $37.29. Earnings estimates for HS are $3.81 per share in 2011 and $4.12 in 2012. Current P/E ratio is 10.95 on these shares.

Humana Inc. (NYSE:HUM): Humana Inc. offers various health and supplemental benefit plans in the United States. Its government segment comprises beneficiaries of government benefit programs and operates in three lines of businesses: Medicare, Military and Medicaid. For the year ended December 31, 2010 (FY10), HUM reported $6.47 in EPS, compared to $6.15 for the year ended December 31, 2009 (FY09). Consolidated revenues for FY10 rose 9% to $33.87 billion from $30.96 billion for FY09 with total premiums and administrative services fees up 9% compared to the prior year's period. Bruce Berkowitz's $19 Billion Fairholme Fund started to reduce its HUM shares during the fourth quarter of 2010. Currently HUM shares are trading at $63.04. Earnings estimates for HUM are $6.27 per share in 2011 and $6.72 in 2012. Current P/E ratio is 9.79 on these shares.

Magellan Health Services, Inc. (NASDAQ:MGLN): Magellan Health Services, Inc. provides managed behavioral healthcare, radiology benefits management, specialty pharmaceutical management and Medicaid administration products and services in the United States. MGLN shares are trading at $48.10. Earnings estimates for MGLN are $3.38 per share in 2011 and $3.88 in 2012. Current P/E ratio is 11.92 on these shares. MGLN is one of the 10 Stocks Insiders Are Selling Without Any Fear.

UnitedHealth Group Incorporated (NYSE:UNH): UnitedHealth Group Incorporated provides healthcare services in the United States. Its Health Benefits segment offers consumer-oriented health benefit plans and services to national employers, public sector employers, mid-sized employers, small businesses and individuals; and non-employer based insurance options for purchase by individuals. UNH shares are trading at $43.56. Earnings estimates for UNH are $3.77 per share in 2011 and $4.21 in 2012. Current P/E ratio is 10.62 on these shares. David Tepper’s Appaloosa and Roberto Mignone’s Bridger Management are hedge funds that hold UNH positions as of the end of December 2010.

Universal American Corporation (NYSE:UAM): Universal American Corp., together with its subsidiaries, provides health insurance and managed care products and services primarily to the senior population in the United States. It operates in four segments: Senior Managed Care Medicare Advantage, Medicare Part D, Traditional Insurance, and Senior Administrative Services. UAM shares are trading at $20.54. Earnings estimates for UAM are $1.67 per share in 2011 and $1.73 in 2012. Current P/E ratio is 8.8 on these shares.

WellPoint, Inc. (NYSE:WLP): WellPoint, Inc., through its subsidiaries, operates as a health benefits company in the United States. It offers various network-based managed care plans to large and small employer, individual, Medicaid, and senior markets. WLP shares are trading at $67.91. Earnings estimates for WLP are $6.59 per share in 2011 and $7.33 in 2012. Current P/E ratio is 9.63 on these shares.

Source: 8 Healthcare Stocks With Low P/E Ratios and Great Growth Expectations