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Do you consider yourself a value investor? For ideas on how to search for potentially undervalued names, we ran a screen.

We began by screening the healthcare sector for stocks that appear 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.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall.

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. POZEN Inc. (NASDAQ:POZN): Develops products for the treatment of acute and chronic pain, and other pain-related conditions in the United States. Market cap at $213.03M, most recent closing price at $7.12. PEG at 0.18. 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 $7.26, this implies a potential upside of 35.02% from current levels.

2. WellCare Health Plans, Inc. (NYSE:WCG): Provides managed care services for government-sponsored healthcare programs in the United States. Market cap at $2.18B, most recent closing price at $50.67. PEG at 0.48. Diluted TTM earnings per share at 6.77, and a MRQ book value per share value at 27.42, implies a Graham Number fair value = sqrt(22.5*6.77*27.42) = $64.63. Based on the stock's price at $51.58, this implies a potential upside of 25.3% from current levels.

3. Universal Health Services Inc. (NYSE:UHS): Operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers, and radiation oncology centers. Market cap at $3.81B, most recent closing price at $39.29. PEG at 0.65. 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 $39.42, this implies a potential upside of 23.47% from current levels.

4. Cigna Corp. (NYSE:CI): Operates as a health service organization. Market cap at $13.01B, most recent closing price at $45.12. PEG at 0.94. 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 $45.29, this implies a potential upside of 22.7% from current levels.

5. Humana Inc. (NYSE:HUM): Offers various health and supplemental benefit plans in the United States. Market cap at $12.89B, most recent closing price at $79.02. PEG at 0.99. 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 $78.7, this implies a potential upside of 21.85% from current levels.

6. Emergent BioSolutions, Inc. (NYSE:EBS): Develops, manufactures, and commercializes immunobiotics such as vaccines and immune globulins that assist the body's immune system. Market cap at $490.69M, most recent closing price at $13.57. PEG at 0.41. Diluted TTM earnings per share at 1.04, and a MRQ book value per share value at 11.33, implies a Graham Number fair value = sqrt(22.5*1.04*11.33) = $16.28. Based on the stock's price at $13.64, this implies a potential upside of 19.37% from current levels.

7. National Healthcare Corp. (NYSEMKT:NHC): Operates and manages long-term health care centers, and associated assisted living and independent living centers in the United States. Market cap at $597.37M, most recent closing price at $42.73. PEG at 0.98. 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 $42.84, this implies a potential upside of 19.23% from current levels.

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

Source: 7 Healthcare Stocks Undervalued By Graham Number And Earnings Growth