In this article, we discuss the 11 cheap healthcare stocks to invest in. If you want to skip the detailed analysis of the healthcare industry, go directly to 5 Cheap Healthcare Stocks To Invest In.
Healthcare is one of the biggest sectors in the world. According to a research report, the healthcare consumer market size was $332.391 billion and is expected to reach $667.37 billion by 2028. In 2020, the healthcare sector accounted for 19.7% of the US GDP and the healthcare expenditure was about $4.1 trillion or $12,530 per person. According to Deloitte, the US healthcare expenditure is expected to more than double to $8.3 trillion in 2040.
In the past year, the healthcare services industry has gained 7.7%, and its earnings are expected to grow by 14% annually. However, as of October 3, the sector has declined by 1.3% in the last week. At the time of writing, the industry is trading at a 24.6x PE ratio compared to the 3-year average of 22.2x.
When talking about healthcare stocks, large companies like UnitedHealth Group Incorporated (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), and Eli Lilly and Company (NYSE:LLY) steal the spotlight. However, in this article, we will discuss the cheap healthcare stocks in these times of inflation and global economic headwinds.
Photo by National Cancer Institute on Unsplash
Our Methodology
After a careful assessment of the healthcare sector, we picked these stocks based on their fundamentals, financial strength, analyst ratings, and dividend history. All of the stocks mentioned in the article are priced below $35 as of October 3.
The hedge fund sentiment around some of the stocks has also been added which was taken from Insider Monkey’s database of 895 elite hedge funds at the end of Q2 2022.
11 Cheap Healthcare Stocks To Invest In
11. AbCellera Biologics Inc. (NASDAQ:ABCL)
Price as of October 3: $10.25
AbCellera Biologics Inc. (NASDAQ:ABCL) is a Canadian biotechnology company that operates an AI-powered antibody discovery platform. As of the second quarter of 2022, 17 hedge funds had a stake in the company. Baker Bros. Advisors is the most prominent shareholder. The fund owned over 10.45 million shares, worth $111.29 million.
AbCellera Biologics Inc. (NASDAQ:ABCL) is one of the best health stocks due to its multiple revenue streams. The company generates revenues through optional investment shares, licensing, milestone payments, and research fees. However, the largest revenue stream is generated through royalties from successful drugs. Currently, the company maintains approximately 74% gross margins and close to 40% net profit margins. Additionally, the mid-cap company holds $1 billion in cash and cash equivalents and no debt as of the latest June quarter.
On August 10, Credit Suisse analyst Tiago Fauth maintained an Outperform rating on AbCellera Biologics Inc. (NASDAQ:ABCL)’s shares and lowered the price target to $34 from $40. The analyst mentioned that the company added six programs under contract and started discovery on an additional four, which brings up the cumulative program starts to 88.
AbCellera Biologics Inc. (NASDAQ:ABCL) is an affordable stock unlike expensive names like UnitedHealth Group Incorporated (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), and Eli Lilly and Company (NYSE:LLY).
10. Koninklijke Philips N.V. (NYSE:PHG)
Price as of October 3: $15.51
Koninklijke Philips N.V. (NYSE:PHG) is a Dutch medical devices company. It operates through three segments; diagnosis and treatment, connected care, and personal health.
Koninklijke Philips N.V. (NYSE:PHG) is one of the best healthcare stocks because of its strong focus on shareholder returns. The company pays dividends annually and as of October 3, the company has a yield of 5.88%. The next estimated dividend payout date is June 9, 2023. However, it has to be kept in mind that the Netherlands has a dividend withholding tax of 15% which lowers the dividend yield due to the dilution of shares as the shareholders prefer their dividends in form of shares rather than cash. Nonetheless, the company consistently repurchases its outstanding shares and has spent $5 billion on share repurchases since 2017.
Koninklijke Philips N.V. (NYSE:PHG) is also a good addition to investor portfolios as it has penetrated a market with obstructed entrance. The company has only two other competitors and has steady subscription services for some of its products, generating some strong recurring revenues for the company.
On September 12, Societe Generale analyst Delphine Le Louet upgraded Koninklijke Philips N.V. (NYSE:PHG) shares to Buy from Hold and lowered the price target to EUR 21 from EUR 22.40. The analyst believes that the company’s current share price “more than discounts the bad news.”
Here is what Artisan Partners had to say about Koninklijke Philips N.V. (NYSE:PHG) in its Q4 2021 investor letter:
“In the health care sector, our biggest detractor was Philips. Philips was a Q3 purchase. After exiting more consumer-focused businesses such as TV and lighting over the past decade, Philips has become a health care technology company operating across three main areas: diagnosis and treatment, connected care, and personal health. Shares came under pressure due to a recall of its first-generation CPAP machine for sleep apnea and fears regarding potential litigation. This created our opportunity to get involved. However, following our initial purchase, shares fell further in November after the FDA provided an update on the device recall and delineated deficiencies identified from an inspection of the device’s main manufacturing facility, which in itself is not unusual. Investors’ key sources of concern likely center around the recall expanding to additional products, the potential for legal recourse, and potential market share losses arising in the sleep division. Nonetheless, the sleep division is a small part of the overall business—which we do not believe is going to zero. The company has a large installed base of medical diagnostic equipment (e.g., MRI/PET/CT/ultrasound scanners) that offers a high recurring stream of software-like maintenance revenues. This is a sticky business as medical providers are reluctant to switch over to competitors. We believe shares have been overly penalized, so we added to our position on weakness.”
9. Abcam plc (NASDAQ:ABCM)
Price as of October 3: $15.68
Abcam plc (NASDAQ:ABCM) is a UK-based company that focuses on the production and distribution of protein research tools. The company identifies, develops, and distributes tools for scientific research, diagnostics, and drug discovery.
Abcam plc (NASDAQ:ABCM) is one of the best healthcare stocks due to its healthy growth in recent years. The company’s revenues in FY2019 were 259.9 million GBP and reached 315.4 GBP in 2021. In the first half of 2022, the company recorded a revenue of 185.2 million GBP, projected at 371 million GBP for the full year. Abcam plc (NASDAQ:ABCM) management also updated its guidance for the year 2024 and is committed to generating 450-525 million GBP in FY24.
On September 14, RBC Capital analyst Charles Weston reiterated an Outperform rating on Abcam plc (NASDAQ:ABCM)’s shares with 2,200 GBP, up from 1,700 GBP.
8. Exelixis, Inc. (NASDAQ:EXEL)
Price as of October 3: $16.35
Exelixis, Inc. (NASDAQ:EXEL) is a California-based biotechnology company, primarily focusing on oncology.
Exelixis, Inc. (NASDAQ:EXEL) holds a healthy balance sheet because of its portfolio of drugs. The company has a cash position of $2 billion after $100 million was added in the latest June quarter. The company’s flagship product, cabozantinib, remains to be the tyrosine kinase inhibitor of choice for renal cell carcinoma. Its sales have been growing for 7 consecutive quarters and is experiencing market share improvements sequentially. The TKI had a 37% market share in Q2 2022. Due to expected competition in the future, the company is also adding new products to its pipeline.
On August 10, Cowen analyst Yaron Werber maintained an Outperform rating on Exelixis, Inc. (NASDAQ:EXEL)’s shares and raised the price target to $26 from $24. According to the analyst, the recent results of the company were a low-quality beat and the unchanged guidance reflects a growth outlook for 2H22.
7. R1 RCM Inc. (NASDAQ:RCM)
Price as of October 3: $18.85
R1 RCM Inc. (NASDAQ:RCM) provides end-to-end revenue cycle management services to health care providers in the US. According to our database, 30 hedge funds were bullish on the company at the end of Q2 2022. McKinley Capital Management was the most prominent stakeholder in the quarter with 292,270 shares, worth $6.126 million.
R1 RCM Inc. (NASDAQ:RCM) made it to the list of one of the best healthcare stocks to invest in because of its recent acquisition of CloudMed. Prior to the acquisition, the company covered 95% of the client NPR and had a 5% leakage due to limited capabilities around covering complex and smaller dollar claims. On the other hand, CloudMed targets the remaining 5% leakage leaving no costs or complexity issues for R1 RCM Inc. (NASDAQ:RCM).
On September 15, KeyBanc analyst Scott Schoenhaus initiated coverage of R1 RCM Inc. (NASDAQ:RCM) with an Overweight rating and a $30 price target. According to the analyst, with its fundamentals, the company is “strategically positioned an outsourcing pure-play,” He views it as “a beat-and-raise story” in the future.
6. REGENXBIO Inc. (NASDAQ:RGNX)
Price as of October 3: $24.17
REGENXBIO Inc. (NASDAQ:RGNX) is a clinical-stage biotechnology company that provides gene-therapy products.
REGENXBIO Inc. (NASDAQ:RGNX) is one of the best healthcare stocks because of its future growth prospects of two products in its 5×25 strategy. According to the 5×25 strategy, the company intends to launch five gene therapies by 2025. The first product that the company is advancing is RGX-121 for the treatment of Mucopolysaccharidosis II. Upon approval, the company will enter the $4.7 billion Mucopolysaccharidosis market in 2024. The MPS market is still growing at a CAGR of 10%.
The bellwether of the company’s product pipeline remains to be RGX314, which is being developed for wet age-related macular degeneration. The company recently received a $1.38 billion partnership deal with AbbVie Inc. (NYSE:ABBV) for RGX314’s commercialization and development. The global market for macular edema and macular degeneration market was valued at $8.3 billion in 2020 and is expected to reach $16.5 billion by 2030.
In the last three months, 5 analysts have covered REGENXBIO Inc. (NASDAQ:RGNX) and given an average of Moderate Buy rating. The price target average is $48, which shows a 98.59% upside to its current share price.
UnitedHealth Group Incorporated (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), and Eli Lilly and Company (NYSE:LLY) are some of the best healthcare stocks along with REGENXBIO Inc. (NASDAQ:RGNX).
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Disclosure. None. 11 Cheap Healthcare Stocks To Invest In is originally published on Insider Monkey.