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In the never-ending search for potentially undervalued stocks, one indicator is the ratio levered free cash flow/enterprise value. Companies with higher ratios appear more undervalued relative to their levered free cash flows.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm’s value from all ownership sources: market cap, outstanding debt, and preferred shares. From this value we subtract cash holdings because, in the event of a takeover, that cash would be used towards the takeover price.

We ran a screen on the healthcare sector for stocks with the highest ratios of levered free cash flow/enterprise value, possibly indicating that they are trading below their fair value.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month.

(Click for more detail)

Do you think the market is treating these stocks fairly? Use this list as a starting point for your own analysis.

List sorted by levered free cash flow/enterprise value.

1. NuVasive, Inc. (NASDAQ:NUVA): Engages in the design, development, and marketing of minimally disruptive surgical products and procedures for the spine. Market cap of $582.91M. Levered free cash flow/enterprise value at 23.48% (levered free cash flow at $140.91M and enterprise value at $600.19M). The stock has had a couple of great days, gaining 6.24% over the last week.

2. RTI Biologics, Inc. (NASDAQ:RTIX): Produces orthopedic and other surgical implants that repair and promote the natural healing of human bone and other human tissues, and improve surgical outcomes. Market cap of $235.66M. Levered free cash flow/enterprise value at 22.43% (levered free cash flow at $40.89M and enterprise value at $182.30M). The stock has gained 56.41% over the last year.

3. Aetna Inc. (NYSE:AET): Operates as a diversified health care benefits company in the United States. Market cap of $15.15B. Levered free cash flow/enterprise value at 21.40% (levered free cash flow at $3.12B and enterprise value at $14.58B). The stock has had a couple of great days, gaining 6.79% over the last week.

4. Almost Family Inc. (NASDAQ:AFAM): Provides home health services in the United States. Market cap of $140.27M. Levered free cash flow/enterprise value at 20.46% (levered free cash flow at $20.64M and enterprise value at $100.87M). The stock is a short squeeze candidate, with a short float at 8.55% (equivalent to 6.59 days of average volume). The stock has had a couple of great days, gaining 5.5% over the last week. The stock has performed poorly over the last month, losing 19.69%.

5. Momenta Pharmaceuticals Inc. (NASDAQ:MNTA): Specializes in the in the characterization and process engineering of complex molecules. Market cap of $770.65M. Levered free cash flow/enterprise value at 19.41% (levered free cash flow at $100.14M and enterprise value at $515.93M). The stock has lost 2.46% over the last year.

6. DepoMed Inc. (NASDAQ:DEPO): Develops and commercializes pharmaceutical products based on its proprietary oral drug delivery technologies in the United States. Market cap of $269.80M. Levered free cash flow/enterprise value at 19.16% (levered free cash flow at $28.34M and enterprise value at $147.92M). The stock is a short squeeze candidate, with a short float at 8.08% (equivalent to 6.19 days of average volume). The stock has had a couple of great days, gaining 7.03% over the last week.

7. Unitedhealth Group, Inc. (NYSE:UNH): Provides healthcare services in the United States. Market cap of $51.99B. Levered free cash flow/enterprise value at 18.42% (levered free cash flow at $8.02B and enterprise value at $43.55B). The stock has had a couple of great days, gaining 9.79% over the last week.

8. CryoLife Inc. (NYSE:CRY): Engages in the processing and distribution of implantable living human tissues for use in cardiac and vascular surgeries in the United States and Canada. Market cap of $115.94M. Levered free cash flow/enterprise value at 17.43% (levered free cash flow at $16.39M and enterprise value at $94.04M). The stock has performed poorly over the last month, losing 10.63%.

9. Targacept, Inc. (NASDAQ:TRGT): Engages in the design, discovery, and development of novel Neuronal Nicotinic Receptors (NNR) Therapeutics for the treatment of diseases and disorders of the central nervous system. Market cap of $250.68M. Levered free cash flow/enterprise value at 17.31% (levered free cash flow at $6.29M and enterprise value at $36.34M). This is a risky stock that is significantly more volatile than the overall market (beta = 3.19). The stock has performed poorly over the last month, losing 57.33%.

10. Aastrom Biosciences, Inc. (NASDAQ:ASTM): Engages in developing autologous cell therapies for the treatment of severe and chronic cardiovascular diseases. Market cap of $81.92M. Levered free cash flow/enterprise value at 16.72% (levered free cash flow at $12.62M and enterprise value at $75.47M). The stock is a short squeeze candidate, with a short float at 8.05% (equivalent to 11.52 days of average volume). The stock has performed poorly over the last month, losing 17.19%.

11. Par Pharmaceutical Companies Inc. (NYSE:PRX): Engages in the development, manufacture, and distribution of generic and branded drugs in the United States. Market cap of $1.18B. Levered free cash flow/enterprise value at 16.27% (levered free cash flow at $138.57M and enterprise value at $851.63M). The stock has had a couple of great days, gaining 9.64% over the last week.

12. AngioDynamics Inc. (NASDAQ:ANGO): Designs, develops, manufactures, and markets various therapeutic and diagnostic devices that enable interventional physicians to treat PVD, tumors, and other non-coronary diseases. Market cap of $381.18M. Levered free cash flow/enterprise value at 15.88% (levered free cash flow at $36.06M and enterprise value at $227.08M). The stock has had a couple of great days, gaining 9.8% over the last week.

13. Theragenics Corp. (NYSE:TGX): Operates as a medical device company serving the cancer treatment and surgical products markets primarily in the United States and Europe. Market cap of $57.10M. Levered free cash flow/enterprise value at 15.28% (levered free cash flow at $5.83M and enterprise value at $38.15M). The stock has had a good month, gaining 12%.

14. China Biologic Products, Inc. (NASDAQ:CBPO): Engages in the research, development, manufacturing, and sale of plasma-based pharmaceutical products. Market cap of $213.34M. Levered free cash flow/enterprise value at 15.0% (levered free cash flow at $18.64M and enterprise value at $124.30M). The stock is a short squeeze candidate, with a short float at 5.36% (equivalent to 77.77 days of average volume). The stock has had a couple of great days, gaining 19.12% over the last week.

15. PetMed Express Inc. (NASDAQ:PETS): Markets non-prescription and prescription pet medications; and other health products for dogs, cats and horses. Market cap of $189.57M. Levered free cash flow/enterprise value at 14.05% (levered free cash flow at $18.67M and enterprise value at $132.92M). The stock is a short squeeze candidate, with a short float at 25.97% (equivalent to 21.29 days of average volume). The stock has lost 45.31% over the last year.

16. USANA Health Sciences Inc. (NYSE:USNA): Develops, manufactures, distributes, and sells nutritional and personal care products worldwide. Market cap of $510.73M. Levered free cash flow/enterprise value at 13.73% (levered free cash flow at $62.20M and enterprise value at $453.01M). The stock is a short squeeze candidate, with a short float at 32.65% (equivalent to 30.46 days of average volume). The stock has had a couple of great days, gaining 5.89% over the last week.

17. Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX): Engages in the acquisition, development, and commercialization of branded prescription products for the hospital acute care and gastroenterology markets. Market cap of $120.27M. Levered free cash flow/enterprise value at 13.60% (levered free cash flow at $7.12M and enterprise value at $52.35M). The stock is a short squeeze candidate, with a short float at 11.52% (equivalent to 41.59 days of average volume). The stock has lost 14.24% over the last year.

18. AstraZeneca PLC (NYSE:AZN): Develops, and commercializes prescription medicines for cardiovascular, gastrointestinal, infection, neuroscience, oncology, and respiratory and inflammation diseases worldwide. Market cap of $60.02B. Levered free cash flow/enterprise value at 13.38% (levered free cash flow at $7.61B and enterprise value at $56.88B). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 5.87%, current ratio at 1.53, and quick ratio at 1.4. The stock has had a couple of great days, gaining 5.12% over the last week.

19. PDL BioPharma, Inc. (NASDAQ:PDLI): Engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. Market cap of $894.91M. Levered free cash flow/enterprise value at 13.31% (levered free cash flow at $146.42M and enterprise value at $1.10B). The stock is a short squeeze candidate, with a short float at 11.79% (equivalent to 7.92 days of average volume). The stock has had a couple of great days, gaining 5.96% over the last week.

20. Progenics Pharmaceuticals Inc. (NASDAQ:PGNX): Engages in the development and commercialization of therapeutic products to treat the unmet medical needs of patients with debilitating conditions and life-threatening diseases in the United States and internationally. Market cap of $226.87M. Levered free cash flow/enterprise value at 12.99% (levered free cash flow at $13.99M and enterprise value at $107.70M). The stock has had a couple of great days, gaining 22.85% over the last week.

*Data from 11/29. Levered free cash flow and enterprise value data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 20 Healthcare Stocks Undervalued By Levered Free Cash Flow