6 Highly Shorted Healthcare Stocks Undervalued By Levered Free Cash Flows

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Includes: CPIX, MOH, PDLI, PETS, SHPG, USNA
by: Kapitall

Do you look for undervalued opportunities in the market? If so, here's a list you might find interesting. We began by screening the healthcare sector for stocks with bearish sentiment, with float shorts above 10%.

We then screened for stocks that appear undervalued relative to their cash flows, indicated by high ratios of levered free cash flow/enterprise value.

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. When companies have ratios of levered free cash flow/enterprise value in excess of 10%, it may indicate that the company as a whole is being undervalued.

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

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Do you think these names are being undervalued? Use this list as a starting point for your own analysis.

List sorted by LFCF/EV.

  1. PDL BioPharma, Inc. (NASDAQ:PDLI): Engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. Market cap at $941.46M, most recent closing price at $6.73. Float short at 11.83%. Levered free cash flow at $191.99M vs. enterprise value at $1.14B (implies a LFCF/EV ratio at 16.84%).

  2. Molina Healthcare Inc. (NYSE: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 at $1.17B, most recent closing price at $25.29. Float short at 10.41%. Levered free cash flow at $95.28M vs. enterprise value at $568.86M (implies a LFCF/EV ratio at 16.75%).

  3. ViroPharma Inc. (VPHM): Engages in the development and commercialization of products that address serious diseases with a focus on products used by physician specialists or in hospital settings in the United States and internationally. Market cap at $1.56B, most recent closing price at $22.42. Float short at 14.57%. Levered free cash flow at $170.83M vs. enterprise value at $1.22B (implies a LFCF/EV ratio at 14%).

  4. 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 at $120.99M, most recent closing price at $6.12. Float short at 12.94%. Levered free cash flow at $7.38M vs. enterprise value at $61.56M (implies a LFCF/EV ratio at 11.99%).

  5. USANA Health Sciences Inc. (NYSE:USNA): Develops, manufactures, distributes, and sells nutritional and personal care products worldwide. Market cap at $652.65M, most recent closing price at $43.92. Float short at 36.84%. Levered free cash flow at $60.45M vs. enterprise value at $513.34M (implies a LFCF/EV ratio at 11.78%).

  6. PetMed Express Inc. (NASDAQ:PETS): Markets non-prescription and prescription pet medications; and other health products for dogs, cats, and horses. Market cap at $190.29M, most recent closing price at $9.36. Float short at 22.95%. Levered free cash flow at $19.01M vs. enterprise value at $183.08M (implies a LFCF/EV ratio at 10.38%).

*LFCF/EV 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.