In this article we discuss 10 cheap healthcare stocks to buy now. You can skip our detailed analysis of the healthcare industry, growth catalysts for healthcare stocks and go directly to 5 Cheap Healthcare Stocks To Buy Now.
Healthcare remains one of the most evergreen areas for investment. The S&P 500 Health Care Sector Index is up more than 11% over the last 12 months. The industry felt the impact of the coronavirus crisis amid restrictions and unforeseen challenges, but a strong recovery is on the horizon. With a mass rollout of COVID-19 vaccinations and economy coming back to normal, analysts believe healthcare stocks are ripe for growth. The demand for COVID-19 diagnostics, therapeutics and vaccines will also help the healthcare companies in the country. But there are several organic and secular growth catalysts that will boost healthcare stocks in the long term.
Growth Catalysts for Healthcare Stocks
The problem of aging population in America presents a long-term growth opportunity for healthcare stocks, as the need for treatments, managed care and therapies will surge. Data shows that by 2030, 1 out of every 5 Americans will reach the age of retirement. There will be 78 million people 65 years and older, compared to 76.7 million under the age of 18. According to the World Health Organization, global life expectancy jumped by 5.5 years between 2000 and 2016, the fastest increase since the 1960s. This positive news also brings new challenges, especially for governments worldwide. In a McKinsey report, CEO of Dana-Farber/Harvard Cancer Center Laurie H. Glimcher said that currently $250 billion is spent to take care of Alzheimer’s patients. This will rise to $1 trillion by 2050, “enough to take down the entire U.S. healthcare system.” Healthcare companies who are spending billions in R&D will reap the benefits in the future as they make treatments for advanced and sophisticated diseases.
Burgeoning Healthcare Spending
The U.S. has the biggest healthcare industry in the world. Estimates show that healthcare spending is expected to grow at an average rate of 5.5% annually from 2018 through 2027 and reach $6 trillion. Spending on healthcare is projected to grow 0.8 percentage point faster than GDP on a year-over-year basis from 2018 through 2027.
Despite heavy spending, shiny R&D divisions and futuristic pipelines, the healthcare industry has a lot of progress to make. Over 868,000 Americans still die of heart disease or stroke every year, causing a loss of $214 billion per year and resulting in $138 billion in lost productivity on jobs. Over 1.7 million people are diagnosed with cancer every year, and about 600,000 die from it. The cost of cancer care was expected to reach $174 billion by 2020. These are the most common diseases that are easily detectable and have several treatments. There are many other advanced and rapidly evolving diseases that are completely without any treatment so far. There is a lot of room for growth and improvement for healthcare companies in the future.
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Let’s take a look at 10 cheap healthcare stocks to buy now. We chose the best healthcare stocks with PE (TTM) or Forward PE ratio less than 15. We ranked these stocks based on the number of hedge funds having stakes in the companies at the end of the third quarter. For that we used Insider Monkey’s database of over 800 hedge funds.
10. Triple-S Management Corp. (NYSE: GTS)
PE Ratio (TTM): 9.99
Triple-S Management is a managed care and health services company which offers insurance products and services primarily in Puerto Rico. The company has over one million customers. The company also operates property and casualty insurance. In November 2020, Triple-S posted Q3 non-GAAP EPS of $0.61. Revenue in the quarter jumped 12.8% and reached $942.9 million.
A total of 11 hedge funds tracked by Insider Monkey held stakes in Triple-S Management at the end of the third quarter.
Related Article: Is GTS A Good Stock To Buy Now?
9. Prestige Consumer Healthcare Inc (NYSE: PBH)
PE Ratio (TTM): 12.72
New York-based Prestige sells over-the-counter healthcare and household cleaning products. The company was created as a result of the merger between Medtech Products, Inc., Prestige Brands International and the Spic and Span Company. Prestige posted a GAAP EPS of $0.81 for the third quarter, beating the analysts’ forecasts by $0.04. Revenue in the quarter came in at $238.78 million, beating the consensus by $7.23 million.
As of the end of the third quarter, Prestige Consumer was in the portfolios of 17 hedge funds, compared to 20 hedge funds a quarter earlier. The total value of these stakes is $110.5 million.
Related Article: Is PBH A Good Stock To Buy Now?
8. Supernus Pharmaceuticals Inc (NASDAQ: SUPN)
PE Ratio (TTM): 11.95
Maryland-based Supernus makes treatment for diseases related to the central nervous system. Supernus shares rallied about 25% in December 2020 after the company said phase 3 study for its SPN-812 drug to treat ADHD in adults met its primary endpoint with “robust statistical significance.”
As of the end of the third quarter, 19 hedge funds tracked by Insider Monkey held stakes in Supernus. The total value of these stakes is $150.82 million.
Related Article: Is Supernus Pharmaceuticals Inc (SUPN) A Good Stock To Buy?
7. Walgreens Boots Alliance Inc (NASDAQ: WBA)
Forward P/E : 9.38
Walgreen Boots operates three divisions: Retail Pharmacy, Retail Pharmacy International and Pharmaceutical Wholesale. Hedge fund interest in the company declined in the third quarter, as 31 funds ended the period with the stock on their portfolios, as compared to 45 funds a quarter earlier.
Guggenheim recently lifted WBA stock rating to Buy from Neutral. The firm thinks that WBA is “finally positioned” for a potential upward earnings revision cycle. It also said the company will get a significant capital boost amid Alliance Healthcare divestiture. The firm has a $55 price target for Walgreens Boots.
Related Article: Is WBA A Good Stock To Buy According To Hedge Funds?
6. Universal Health Services, Inc. Class B (NYSE: UHS)
PE Ratio (TTM): 12.84
United Health Service operates clinics and healthcare facilities in the U.S. and U.K. The company ranks 281 on the list of Fortune 500 list. Bank of America recently gave bullish comments about healthcare facilities stocks, citing a mass vaccine rollout, improving economy and an increased consumer spending in the future.
In the third quarter, United Health Service posted a non-GAAP EPS of $2.88, beating the Wall Street estimates by $1.01. Revenue in the quarter totaled $2.91 billion, beating the Street’s estimates by $130 million.
A total of 34 hedge funds tracked by Insider Monkey are bullish on UHS.
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Disclosure: None. 10 Cheap Healthcare Stocks To Buy Now is originally published at Insider Monkey.
