- Pfizer Inc. could outperform with consistent dividend and revenue growth.
- Regeneron Pharmaceuticals Inc. has a high P/E with a low upside but value could increase on continued revenue growth.
- Innoviva Inc. started the year heavily down but strong revenue gains could offset projected losses.
- Exelixis Inc. is near its 52-week bottom but a furtive P/E and impressive upside could push it to a 52-week high.
- 5 stocks we like better than Exelixis
Q4 2022 hedge fund letters, conferences and more
Find A Qualified Financial Advisor
Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now.
For those interested in playing the long game with the market, healthcare stocks can make solid additions to a portfolio. Companies in this sector have the potential for a lot of revenue, which translates to stock earnings unless the stock is not effectively valued.
When a stock is undervalued, it has fair potential to outperform expectations. These four undervalued healthcare stocks could kick off your 2023.
Pfizer Inc.
Pfizer Inc. (NYSE:PFE) stock is down 10.50% since this same time last year, and it projects that earnings will decline by -26.93% by the same time next year. The stock price started to slip as the coronavirus improved, despite a successful launch of its RNA-based COVID-19 vaccine in 2021.
In addition, Pfizer's 9.55 forward P/E is roughly 30% lower than the sector median, suggesting that investors believe the stock is not earning as efficiently as the sector as a whole. These factors have all likely contributed to the stock's "hold" rating.
However, this less favorable outlook contrasts the fact that the firm has paid a quarterly dividend for at least 83 years and consistently increased its dividend over the last 12 years. It is now at $1.60 with a 3.22% yield and a 30.77% payout ratio.
Furthermore, COVID-19 vaccine sales totaling $36.7 billion represented 45% of Pfizer's total revenue for 2020. Pfizer expects vaccine sales to top $54 billion this year, which could mean more revenue and potential earnings than initially anticipated.
Regeneron Pharmaceuticals Inc.
Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) also develops and manufactures novel medicines for treating various diseases, including COVID-19. The company also found the COVID-19 pandemic a bit of an earnings windfall, as its vaccine contribution was also quite successful.
When the pandemic began to fade, Regeneron made a timely transition to focus on a new eye drug, a move which seemed to please investors. That strategic move then went on to help push REGN stock value up nearly 21% in the last 12 months.
Regeneron only trades at 15.26 times its earnings, while the $772.15 price target represents an upside of only 8.1%, so take caution. Compared to its revenue growth over the last three years — 47.3% — Regeneron may be highly undervalued.
Innoviva Inc.
Innoviva Inc (NASDAQ: INVA) is a San Francisco-based healthcare royalty and asset manager. Their stock value is currently down nearly 25% since the same period one year ago. In the first week of the year, Innoviva closed out down about 1%. This is just a little beyond the losses posted by the S&P 500, which lost 0.4%.
The Dow Jones Industrial Average saw nearly the same loss, while the Nasdaq took the biggest hit at 4.72%. Innoviva may align with the overall market even if it is off to a rocky start. The good news for Innoviva is that its stock value is now up nearly 6% over the last three months.
Of course, the company needs more than incremental growth to determine an undervalued stock price. But with a current share price of around $13 and a price target of $14, the stock's upside is only about 7%. Additionally, analysts project earnings will plunge 59.37% despite a current P/E of only $4.11.
However, only a few months ago, Innoviva boasted a three-year revenue growth rate of 21.8%, besting more than 68% of Innoviva's index peers. These figures suggest outcomes could eventually outperform.
Exelixis Inc.
Genomics-based drug discovery company Exelixis Inc. (NASDAQ:EXEL) is down nearly 8% from the same period one year ago, but that is still about 10% off the 52-week bottom. While it's not a stellar performance, more of the same could be on the horizon.
However, Exelixis's forward P/E (17.46) is still better than much of the industry, and its $28 price target represents an almost contradictory upside of 68.8%. This would break through the previous 52-week high ($23.40).
In addition, analysts project earnings for the oncology-focused biotechnology company could grow by more than 103%, which would be on track with the EPS this quarter ($0.23) compared to one year ago ($0.12). If everything falls into place, it could make a surprising run.
Should you invest $1,000 in Exelixis right now?
Before you consider Exelixis, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Exelixis wasn't on the list.
While Exelixis currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
Article by Keala Miles, MarketBeat
