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Healthcare Dashboard - Update


  • Valuation metrics in the healthcare sector.
  • Evolution since last month.
  • A list of stocks looking cheap in their industries.
  • Members of my private investing community, Quantitative Risk & Value, receive access to my breaking news coverage of this idea. Get started today >>

This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages.

Executive summary

Biotechnology is undervalued regarding historical averages in 2 out of 3 valuation metrics. However, profitability measured in return on equity is below the historical baseline. Healthcare providers and healthcare technology look moderately overpriced and close below their historical averages in profitability. Life science tools/services are significantly overpriced. Combining all metrics, healthcare equipment and pharmaceuticals are the less attractive groups. However, pharmaceuticals show a good price to free cash flow among other bad ratios.

Anyway, I think systemic risk is more important than market valuation to manage a portfolio (click here to learn more about it).

Since last month:

  • P/E has improved in all healthcare industries except a minor deterioration in pharmaceuticals.

  • P/S has improved in biotechnology, is stable in pharmaceuticals and deteriorated elsewhere.

  • P/FCF has improved in biotechnology, pharmaceuticals, healthcare providers and deteriorated elsewhere.

  • ROE is stable in biotechnology, life science tools/services and deteriorated in healthcare technology, providers, pharmaceuticals.

  • In 1 trailing month, the Health Care Select Sect SPDR ETF (XLV) and the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) have outperformed the SPDR S&P 500 ETF by almost 3%, whereas the SPDR Biotech ETF (XBI) has lagged the benchmark by 4.8%.

  • The five best performers among S&P 500 healthcare stocks in this period are Biogen Inc. (BIIB), HCA (HCA), Illumina, Inc. (ILMN), IQVIA Holdings Inc. (IQV), Eli Lilly and Co. (LLY).

Some cheap stocks in their industries

The stocks listed below are in the S&P 1500 index, cheaper than their respective industry factor for price/earnings, price/sales and price/free cash flow. The 10 companies with the highest return on equity are kept in the final selection. Quantitative Risk & Value Members have

This article was written by

Fred Piard profile picture
Data-driven portfolios and risk indicators.
Author of Quantitative Risk & Value and three books, I have been investing in systematic strategies since 2010. I have a PhD in computer science, an MSc in software engineering, an MSc in civil engineering and 30 years of professional experience in various sectors. My aim is making simple and efficient quantitative investing techniques available to my followers. Quantitative models can make investment decisions faster, reproducible and emotionless by focusing on relevant information in the middle of market noise. Moreover, models can be refined to meet specific risk tolerance and objectives. 

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I am an individual investor and an IT professional, not a finance professional. My writings are data analysis and opinions, not investment advice. They may contain inaccurate information, despite all the effort I put in them. Readers are responsible for all consequences of using information included in my work, and are encouraged to do their own research from various sources.

Analyst’s Disclosure: I am/we are long BIIB, CELG, XBI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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