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Do you consider yourself a value investor, always looking for underestimated and potentially undervalued stocks? For a closer look at stocks that may be trading below their fair value, we ran a screen.

We began by screening the healthcare sector for stocks that appear to be undervalued relative to earnings growth, with PEG below 1.

We then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

(click to enlarge)

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. Aetna Inc. (AET): Operates as a diversified health care benefits company in the United States. Market cap at $13.76B, most recent closing price at $39.81. PEG at 0.71. Diluted TTM earnings per share at 5.14, and a MRQ book value per share value at 29.65, implies a Graham Number fair value = sqrt(22.5*5.14*29.65) = $58.56. Based on the stock's price at $42.07, this implies a potential upside of 39.19% from current levels.

2. POZEN Inc. (POZN): Develops products for the treatment of acute and chronic pain, and other pain-related conditions in the United States. Market cap at $201.66M, most recent closing price at $6.43. PEG at 0.16. Diluted TTM earnings per share at 1.31, and a MRQ book value per share value at 3.26, implies a Graham Number fair value = sqrt(22.5*1.31*3.26) = $9.80. Based on the stock's price at $7.29, this implies a potential upside of 34.46% from current levels.

3. Cigna Corp. (CI): Operates as a health service organization. Market cap at $12.52B, most recent closing price at $43.30. PEG at 0.88. Diluted TTM earnings per share at 4.62, and a MRQ book value per share value at 29.71, implies a Graham Number fair value = sqrt(22.5*4.62*29.71) = $55.57. Based on the stock's price at $45.09, this implies a potential upside of 23.25% from current levels.

4. Humana Inc. (HUM): Offers various health and supplemental benefit plans in the United States. Market cap at $12.35B, most recent closing price at $74.91. PEG at 0.95. Diluted TTM earnings per share at 8.1, and a MRQ book value per share value at 50.46, implies a Graham Number fair value = sqrt(22.5*8.1*50.46) = $95.90. Based on the stock's price at $78.04, this implies a potential upside of 22.88% from current levels.

5. Universal Health Services Inc. (UHS): Operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers, and radiation oncology centers. Market cap at $3.7B, most recent closing price at $37.76. PEG at 0.57. Diluted TTM earnings per share at 4.2, and a MRQ book value per share value at 25.07, implies a Graham Number fair value = sqrt(22.5*4.2*25.07) = $48.67. Based on the stock's price at $39.73, this implies a potential upside of 22.51% from current levels.

6. 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 at $604.64M, most recent closing price at $43.02. PEG at 0.99. Diluted TTM earnings per share at 3.53, and a MRQ book value per share value at 32.85, implies a Graham Number fair value = sqrt(22.5*3.53*32.85) = $51.08. Based on the stock's price at $43.3, this implies a potential upside of 17.97% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 6 Healthcare Stocks Undervalued By Earnings Growth, The Graham Number