In light of the Supreme Court upholding most of the health care bill today, many healthcare companies are worth a look. One such company is Aetna (NYSE:AET), a major health insurance company. The stock has been suffering lately, but might be worth a look at current valuations. The market's immediate reaction to the announcement was largely negative, and fallout may continue for a few days or even weeks -- but nonetheless, Aetna's worth a look for several reasons.
- The Supreme Court's announcement on the health care bill has provided markets a definitive answer on the future of the health care industry. This clarity could spur a rally in healthcare stocks that investors were afraid to touch due to the lack of certainty. (It's also worth noting that according to Aetna, their business strategy has not changed due to ACA. And, of course, there's a good chance that Romney will win the election and subsequently repeal the healthcare law.)
- Aetna has a lot less debt to deal with than many of its peers: Aetna's Debt/Equity ratio of 38%, while the Health Care Providers and Services industry has an average of nearly 100%.
- Forward EPS growth is projected at a very solid 10.5%, in line with Aetna's five-year history of 12% annualized EPS growth.
- Aetna's trailing P/E is a dirt cheap 7.97, which is about half of the healthcare industry's average of 15.73. Aetna's PEG clocks in at 0.77, suggesting future growth is not adequately priced in the stock.
- Aetna has positive analyst consensus behind it. Of the 22 firms with reports on Aetna, 7 have a "strong buy" recommendation, 5 have a "buy" recommendation, 9 say "hold," and only 1 says "reduce." No analysts have outstanding "sell" ratings.
- Analyst price targets range from a low of $44 to a high of $59, with a mean of $51.60. The mean target represents an upside of over 20%.
- While Aetna's dividend isn't staggering, it does provide investors with some guaranteed return. The current dividend yield is 1.71% and the dividend has been increased twice in the past two years.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.