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Healthcare may be a touchy political subject but when it comes to hunting for opportunity it's simply business. Still, given the continual uncertainty that plagues this sector for a variety of reasons we think it's best to focus on out-of-favor names that seem to be making a comeback when looking for potential opportunities. That is why we focused on healthcare stocks that have posted strong earnings growth but continue to trade at a cheap price-multiple valuation.

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.

The Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below “break up” value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.

We ran a screen for healthcare stocks are undervalued from a price-multiple valuation standpoint (P/BV>1). From this narrowed list of candidates we then looked for companies that could be turning things around by improving bottom line growth over the last year (1-year fiscal EPS growth rate>10%). We did not screen market caps.

The list is ranked from highest to lowest by the P/BV ratio:

1. LifePoint Hospitals, Inc. (LPNT)

Sector

Healthcare

Industry

Medical Care

Market Cap

$1,855M

Beta

0.90

The company operates general acute care hospitals in non-urban communities in the United States. LPNT has a P/BV ratio of 0.96 & a 1-year fiscal EPS rate of 12.36%. The short interest was N/A as of 10/14/2011.

2. Universal American Corp. (UAM)

Sector

Healthcare

Industry

Health Care Plans

Market Cap

$969M

Beta

1.17

The company provides health insurance and managed care products and services to the senior population in the United States. UAM has a P/BV ratio of 0.96 & a 1-year fiscal EPS rate of 37.57%. The short interest was N/A as of 10/14/2011.

3. Community Health Systems Inc. (CYH)

Sector

Healthcare

Industry

Medical Care

Market Cap

$1,772M

Beta

1.47

The company provides healthcare services through the operation of hospitals in the United States. CYH has a P/BV ratio of 0.75 & a 1-year fiscal EPS rate of 14.02%. The short interest was 6.40% as of 10/14/2011.

We hope this list helps as investors do their own due diligence and research in the healthcare sector.

*Company profiles were sourced from Finviz.

Source: 3 Cheap Healthcare Stocks With Strong Earnings Growth