Medical is one of the few sectors that reported earnings growth in the first quarter of 2016. According to the latest Zacks Earning Trends, it is also one of the six sectors that are likely to report earnings growth in the second quarter of 2016.
We note that positive demographic trends, product innovation, continuing consolidation and expansion into emerging markets are some of the key growth factors for the Medical sector. These aspects will continue to help companies generate steady earnings in the near term.
Additionally, the weakening of the U.S. dollar against foreign currencies will drive top- and bottom-line growth. Moreover, the suspension of the controversial 2.3% medical device excise tax for two years will boost profits for the entire medical device industry, which forms a major part of the Medical sector.
Resiliency is the Key
Medical is one of the very few sectors that generally show great resilience during volatile phases. This characteristic demonstrates solid fundamental strength of the stocks in the sector.
Robust outlook based on a differential business model, steady earnings growth and decent dividend paying capabilities are some of the basic features of these stocks, making these particularly attractive to value investors.
Value investors seek stocks that are not only fundamentally strong but also less risky. Hence, Medical is the ideal sector for such investors.
Meanwhile, the investing principle offers an opportunity to enter the market and grab stocks that have otherwise been overlooked by a majority of investors, and, hence are trading cheap.
In this regard, we believe that PEG ratio helps identify cheap value stocks that have solid potential.
Our Picks
We have narrowed down our search to the following medical stocks based on a Zacks Rank #2 (Buy) or better and a PEG ratio of less than 1.25.
Denver, CO-based Air Methods Corp. provides air medical emergency transport services and systems throughout North America.
- Zacks Rank #1 (Strong Buy)
- PEG ratio of 0.57
Louisville, KY-based PharMerica Corporation is one of the largest institutional pharmacy services companies in the U.S. based on revenues and customer licensed beds under contract. The company operates 94 institutional pharmacies, 17 specialty infusion centers and 5 specialty oncology pharmacies across 45 states.
- Zacks Rank #1
- PEG ratio of 0.88
Headquartered at Scottsdale, AZ, Magellan Health Inc. provides healthcare management services including behavioral healthcare services, diagnostic imaging and musculoskeletal management. The company also offers medical and pharmacy benefit programs through its Pharmacy Management segment.
- Zacks Rank #1
- PEG ratio of 1.21
Express Scripts Holding Company is one of the largest pharmacy benefit management companies in North America. The company is headquartered in St. Louis, MO.
- Zacks Rank #2
- PEG ratio of 1.01
Raleigh, NC-based PRA Health Sciences Inc. offers outsourced clinical development services to the biotechnology and pharmaceutical industries. PRA Health is a Contract Research Organization (CRO) that offers both traditional, project-based Phase I through Phase IV services as well as embedded and functional outsourcing services.
- Zacks Rank #2
- PEG ratio of 1.15
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5 Medical Stocks with Incredibly Low PEG Ratios
Medical is one of the few sectors that reported earnings growth in the first quarter of 2016. According to the latest Zacks Earning Trends, it is also one of the six sectors that are likely to report earnings growth in the second quarter of 2016.
We note that positive demographic trends, product innovation, continuing consolidation and expansion into emerging markets are some of the key growth factors for the Medical sector. These aspects will continue to help companies generate steady earnings in the near term.
Additionally, the weakening of the U.S. dollar against foreign currencies will drive top- and bottom-line growth. Moreover, the suspension of the controversial 2.3% medical device excise tax for two years will boost profits for the entire medical device industry, which forms a major part of the Medical sector.
Resiliency is the Key
Medical is one of the very few sectors that generally show great resilience during volatile phases. This characteristic demonstrates solid fundamental strength of the stocks in the sector.
Robust outlook based on a differential business model, steady earnings growth and decent dividend paying capabilities are some of the basic features of these stocks, making these particularly attractive to value investors.
Medical Sector Price Index
Medical Sector Price Index
Value investors seek stocks that are not only fundamentally strong but also less risky. Hence, Medical is the ideal sector for such investors.
Meanwhile, the investing principle offers an opportunity to enter the market and grab stocks that have otherwise been overlooked by a majority of investors, and, hence are trading cheap.
In this regard, we believe that PEG ratio helps identify cheap value stocks that have solid potential.
Our Picks
We have narrowed down our search to the following medical stocks based on a Zacks Rank #2 (Buy) or better and a PEG ratio of less than 1.25.
Denver, CO-based Air Methods Corp. provides air medical emergency transport services and systems throughout North America.
Louisville, KY-based PharMerica Corporation is one of the largest institutional pharmacy services companies in the U.S. based on revenues and customer licensed beds under contract. The company operates 94 institutional pharmacies, 17 specialty infusion centers and 5 specialty oncology pharmacies across 45 states.
Headquartered at Scottsdale, AZ, Magellan Health Inc. provides healthcare management services including behavioral healthcare services, diagnostic imaging and musculoskeletal management. The company also offers medical and pharmacy benefit programs through its Pharmacy Management segment.
Express Scripts Holding Company is one of the largest pharmacy benefit management companies in North America. The company is headquartered in St. Louis, MO.
Raleigh, NC-based PRA Health Sciences Inc. offers outsourced clinical development services to the biotechnology and pharmaceutical industries. PRA Health is a Contract Research Organization (CRO) that offers both traditional, project-based Phase I through Phase IV services as well as embedded and functional outsourcing services.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>