Value investors look for stocks that they believe are trading below their fair value, with the assumption that they’ll soon rise to that fair value, generating a profit.
In the never-ending search for potentially undervalued stocks, we ran a screen on the healthcare sector for stocks that appear undervalued relative to their industry peers based on three price multiples: TTM P/E, PEG, and TTM P/CF.
Stocks with lower price multiples than their industry averages may be undervalued.
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 chart for more detail)
Do you think the market is underestimating these companies? Use this list as a starting point for your own analysis.
List sorted by TTM P/E.
1. Thermo Fisher Scientific, Inc. (TMO): Provides analytical instruments, equipment, reagents and consumables, software, and services for research, manufacture, analysis, discovery, and diagnostics. Market cap of $17.77B. TTM P/E at 17.86 vs. industry average at 18.85. PEG at 1.4 vs. industry average at 1.41. TTM P/CF at 9.84 vs. industry average at 11.66. The stock has lost 9.83% over the last year.
2. Hanger Orthopedic Group Inc. (HGR): Engages in the ownership and operation of orthotic and prosthetic (O&P) patient-care centers in the United States. Market cap of $545.63M. TTM P/E at 14.74 vs. industry average at 15.66. PEG at 1.11 vs. industry average at 1.24. TTM P/CF at 8.45 vs. industry average at 11.36. The stock is a short squeeze candidate, with a short float at 5.23% (equivalent to 6.03 days of average volume). The stock has lost 23.03% over the last year.
3. Select Medical Holdings Corporation (SEM): Operates specialty hospitals and outpatient rehabilitation clinics in the United States. Market cap of $1.29B. TTM P/E at 14.47 vs. industry average at 15.66. PEG at 1.1 vs. industry average at 1.24. TTM P/CF at 8.21 vs. industry average at 11.36. The stock has gained 38.44% over the last year.
4. Molina Healthcare Inc. (MOH): Provides Medicaid-related solutions to meet the health care needs of low-income families and individuals, as well as assists state agencies in their administration of the Medicaid program. Market cap of $994.43M. TTM P/E at 14.04 vs. industry average at 15.66. PEG at 0.84 vs. industry average at 1.24. TTM P/CF at 6.91 vs. industry average at 11.36. The stock is a short squeeze candidate, with a short float at 8.09% (equivalent to 5.32 days of average volume). The stock has gained 31.16% over the last year.
5. HealthSpring Inc. (HS): Operates as a managed care organization in the United States. Market cap of $3.70B. TTM P/E at 13.54 vs. industry average at 15.66. PEG at 1.04 vs. industry average at 1.24. TTM P/CF at 11.32 vs. industry average at 11.36. The stock has gained 89.33% over the last year.
6. Chemed Corp. (CHE): Provides hospice care, and repair and cleaning services in the United States. Market cap of $1.02B. TTM P/E at 13.29 vs. industry average at 15.73. PEG at 1.06 vs. industry average at 1.24. TTM P/CF at 9.75 vs. industry average at 11.36. The stock is a short squeeze candidate, with a short float at 10.79% (equivalent to 6.88 days of average volume). The stock has performed poorly over the last month, losing 13.24%.
7. Lincare Holdings Inc. (LNCR): Provides oxygen and other respiratory therapy services to home health care market in the United States. Market cap of $2.16B. TTM P/E at 12.85 vs. industry average at 15.66. PEG at 0.82 vs. industry average at 1.24. TTM P/CF at 7.63 vs. industry average at 11.36. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.28%, current ratio at 1.36, and quick ratio at 1.3. The stock is a short squeeze candidate, with a short float at 7.89% (equivalent to 6.52 days of average volume). The stock has lost 2.09% over the last year.
8. AMERIGROUP Corporation (AGP): Operates as a multi-state managed healthcare company. Market cap of $2.75B. TTM P/E at 12.12 vs. industry average at 15.66. PEG at 1.05 vs. industry average at 1.24. TTM P/CF at 9.88 vs. industry average at 11.36. The stock has gained 29.97% over the last year.
9. WellCare Health Plans, Inc. (WCG): Provides managed care services for government-sponsored healthcare programs in the United States. Market cap of $2.40B. TTM P/E at 11.98 vs. industry average at 15.73. PEG at 0.9 vs. industry average at 1.24. TTM P/CF at 10.49 vs. industry average at 11.36. The stock has gained 94.11% over the last year.
10. Universal Health Services Inc. (UHS): Operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers, and radiation oncology centers. Market cap of $3.86B. TTM P/E at 11.66 vs. industry average at 15.66. PEG at 0.9 vs. industry average at 1.24. TTM P/CF at 6.27 vs. industry average at 11.36. The stock has lost 1.96% over the last year.
11. WuXi PharmaTech (Cayman) Inc. (WX): Engages in providing laboratory and manufacturing services to support research and development for pharmaceutical, biotechnology, and medical device companies. Market cap of $802.31M. TTM P/E at 11.45 vs. industry average at 18.85. PEG at 1.05 vs. industry average at 1.41. TTM P/CF at 9.66 vs. industry average at 11.66. It's been a rough couple of days for the stock, losing 5.5% over the last week.
12. Unitedhealth Group, Inc. (UNH): Provides healthcare services in the United States. Market cap of $52.60B. TTM P/E at 10.99 vs. industry average at 15.66. PEG at 0.93 vs. industry average at 1.24. TTM P/CF at 8.69 vs. industry average at 11.36. The stock has gained 35.7% over the last year.
13. National Healthcare Corp. (NHC): Operates and manages long-term health care centers, and associated assisted living and independent living centers in the United States. Market cap of $602.30M. TTM P/E at 10.89 vs. industry average at 15.66. PEG at 0.91 vs. industry average at 1.24. TTM P/CF at 6.42 vs. industry average at 11.36. The stock has lost 3.05% over the last year.
14. The Ensign Group, Inc. (ENSG): Provides nursing and rehabilitative care services in California, Arizona, Texas, Washington, Utah, Colorado, and Idaho. Market cap of $521.13M. TTM P/E at 10.84 vs. industry average at 15.66. PEG at 0.81 vs. industry average at 1.24. TTM P/CF at 7.37 vs. industry average at 11.36. The stock has gained 13.24% over the last year.
15. WellPoint Inc. (WLP): Operates as a health benefits company in the United States. Market cap of $23.83B. TTM P/E at 8.94 vs. industry average at 15.73. PEG at 0.96 vs. industry average at 1.24. TTM P/CF at 7.79 vs. industry average at 11.36. The stock has gained 22.98% over the last year.
16. Aetna Inc. (AET): Operates as a diversified healthcare benefits company in the United States. Market cap of $15.11B. TTM P/E at 8.84 vs. industry average at 15.66. PEG at 0.85 vs. industry average at 1.24. TTM P/CF at 6.84 vs. industry average at 11.36. The stock has gained 40.77% over the last year.
17. Universal American Corp (UAM): Provides health insurance and managed care products and services primarily to the senior population in the United States. Market cap of $1.03B. TTM P/E at 8.51 vs. industry average at 15.73. PEG at 0.68 vs. industry average at 1.24. TTM P/CF at 7.79 vs. industry average at 11.36. The stock has lost 15.5% over the last year.
18. Coventry Health Care Inc. (CVH): Operates as a managed healthcare company in the United States. Market cap of $4.65B. TTM P/E at 7.86 vs. industry average at 15.66. PEG at 0.92 vs. industry average at 1.24. TTM P/CF at 6.37 vs. industry average at 11.36. The stock has gained 22.78% over the last year.
*Price multiples sourced from Fidelity, 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.
