In this watchlist, we’ll focus on healthcare stocks that combine solid fundamentals with attractive price points. Given the sector’s potential for innovation and growth, these picks are poised for appreciation. This is an opportune time to consider these stocks, as they offer a balance of stability and potential upside in a volatile market.
CVS Health (NYSE:CVS) – A Steady Performer in Healthcare’s Bargain Bin
CVS Health, a giant in the healthcare plans subsegment, is a household name operating across Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness segments. This diversified business model offers investors a broad exposure to the healthcare sector, making CVS an attractive pick for those hunting for value.
Despite not being the flashiest stock on the market, CVS has demonstrated commendable consistency, outperforming earnings per share (EPS) expectations in each of the last four quarters, with an average positive surprise of just over 5%. This trend of exceeding analyst expectations is noteworthy, especially considering that EPS forecasts for Q2 2024 have been adjusted upwards three times in the past 30 days.
Financial projections for the current fiscal year are optimistic, with EPS expected to hit $8.31 on a robust revenue of $370.82 billion, up from last year’s earnings of $8.74 per share on $357.78 billion in revenue. Despite these strong fundamentals, CVS’s shares are trading at a forward earnings multiple of 9.48X, which is lower than 85.71% of its competitors in the healthcare sector. This valuation discrepancy suggests that CVS’s stock is undervalued, making it a compelling option for investors looking to tap into the healthcare industry without paying a premium.
Voyager Therapeutics (NASDAQ:VYGR) – A High-Risk, High-Reward Biotech Bet
Voyager Therapeutics stands at the forefront of the biotech industry, specializing in groundbreaking gene therapies for neurological disorders. Its leading clinical candidate, VY-TAU01, aims to tackle Alzheimer’s disease through an innovative anti-tau antibody program. Additionally, its pipeline includes promising research into gene therapy for ALS (amyotrophic lateral sclerosis), highlighting the company’s commitment to addressing some of the most challenging medical conditions.
VYGR’s journey is emblematic of the biotech sector’s inherent volatility—a trait that may deter risk-averse investors but offers tantalizing prospects for those with an appetite for speculation. This was evident in the company’s financial performance last year, where a slight miss in Q3 was followed by a surprising Q4, with EPS of $1.25 against an anticipated loss of 29 cents per share.
Looking ahead to fiscal 2024, expectations are tempered, with analysts predicting a significant 84% decline in revenue. Yet, the forecast for fiscal 2025 suggests a potential turnaround, signaling that the current challenges may be a precursor to future gains. Presently, Voyager’s shares are trading at 1.72X tangible book value, a figure that falls short of the sector’s median of 2.88X, suggesting a potential undervaluation.
With unanimous analyst consensus pegging Voyager as a Strong Buy and setting a price target of $16.33, the stock presents a compelling case for those willing to navigate the uncertainties of the biotech landscape. For investors drawn to the high-stakes world of biopharmaceuticals, Voyager Therapeutics offers a unique blend of risk and reward, making it an intriguing addition to any watchlist of undervalued healthcare stocks.
Semler Scientific (NASDAQ:SMLR) – A High-Risk Bet in Medical Devices
Semler Scientific, operating within the medical devices sector, stands out as perhaps the most speculative yet potentially rewarding pick in our list of undervalued healthcare stocks. Semler specializes in innovative technology solutions aimed at improving the clinical effectiveness and efficiency of healthcare providers. Its flagship product, QuantaFlo, is a cutting-edge in-office blood flow test that assists in evaluating patients’ vascular health, showcasing the company’s commitment to advancing medical diagnostics.
Despite the apparent market relevance of Semler’s offerings, investor sentiment took a hit in March, leading to a significant de-risking of SMLR stock. This downturn was partly attributed to a perceived underperformance in Q4 of the previous year, where Semler reported an EPS of 59 cents, slightly above the expected 57 cents but failing to match the impressive 36.55% positive earnings surprise seen in Q2 and Q3.
Looking forward, there’s a cautious optimism for a rebound in fiscal 2024, with analysts projecting an EPS of $3.40 on revenue of $75.5 million, up from last year’s earnings of $2.68 per share on $68.18 million in revenue. Currently, Semler’s shares are trading at a multiple of 10.59X trailing-year revenue, positioning it below 90.36% of its industry peers in terms of valuation.
With Lake Street setting a target price of $65 for SMLR, the stock presents a compelling case for those willing to navigate its volatility. For investors intrigued by the potential of cutting-edge medical technology and willing to bear the associated risks, Semler Scientific could be a valuable addition to your watchlist of undervalued healthcare stocks.
