3 Growth Stocks With P/E Ratios Below Industry Average

NYSE: CAH | Cardinal Health Inc. News, Ratings, and Charts

CAH – Growth stocks trading at lower P/E ratio than the industry average can be a suitable investment choice. Top picks now could be Cardinal Health (CAH), Baxter International (BAX), and DocuSign (DOCU). Keep reading…

Investing in growth stocks appears as an ideal strategy for various investors to attain long-term growth, investment appreciation, and stable income. Rapid demand, cutting-edge technologies, and market evolution offer various growth prospects in the medical and technology industry.

Amid this backdrop, investors could consider fundamentally sound growth stocks Cardinal Health, Inc. (CAH), Baxter International Inc. (BAX), and DocuSign, Inc. (DOCU) to buy.

Amid widespread labor shortages and escalating costs, adoption of artificial intelligence (AI) and similar technologies offers potential solutions in the medical industry. AI is contributing in streamlining health care processes with qualities like precision and efficiency in administration, operations, supply chain and patient care.

Also, remote technologies reshape care delivery, expanding scope of medical services. With this advancement, medical devices market is predicted to reach revenue of $509.90 billion in 2024 with cardiology devices market emerging the largest, with expected volume of $73.42 billion. Also, the industry is expected to register growth at a CAGR of 5.7% until 2029.

Besides, the global Software as a Service (SaaS) market is projected to grow from $317.55 billion in 2024 to $1,228.87 billion by 2032, growing at a CAGR of 18.4%. The market growth can be attributed to factors like rise in adoption of public & hybrid cloud-based solutions, integration with other tools, and centralized data-driven analytics.

Given these favorable market trends, let us deep dive into the fundamentals of the top growth stocks.

Cardinal Health, Inc. (CAH)

CAH operates as a healthcare services and products company internationally. It offers customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. It operates through two segments, Pharmaceutical; and Medical.

In terms of forward non-GAAP P/E, CAH is trading at 13.04x, 30% lower than the industry average of 18.62x. Likewise, the stock’s forward EV/Sales multiple of 0.11 is 96.6% lower than the industry average of 3.32. Also, its forward Price/Sales of 0.10x is considerably lower than the industry average of 3.59x.

CAH’s revenue and EBITDA have grown at respective CAGRs of 12.1% and 1% over the past three years. The company’s EBIT has increased 3.5% over the same timeframe, while its normalized net income and total assets have improved at CAGRs of 5.3% and 1.5%, respectively.

On May 8, CAH’s Board of Directors approved an increase to its quarterly dividend, to $0.5056 per share, out of the company’s capital surplus. The dividend will be payable on July 15, 2024 to shareholders of record at the close of business on July 1, 2024.

CAH pays an annual dividend of $2.02, which translates to a yield of 2.11% at the current share price. Its four-year average dividend yield is 3%. Moreover, the company’s dividend payouts have increased at a CAGR of 1% over the past three years. Kroger has raised its dividends for 29 consecutive years.

On April 2, CAH commenced the construction of a new 350,000 square-foot logistics center in Columbus, Ohio, to be served as a centralized replenishment center for the distribution of over-the-counter consumer health products in support of its core pharmaceutical business. The center will widen its capabilities and serve as a centralized hub for distribution of consumer health products.

During the third quarter that ended March 31, 2024, CAH’s revenue increased 8.8% year-over-year to $54.91 billion. Its non-GAAP operating earnings of $666 million indicates growth of 9.9% from the year-ago value. Non-GAAP net earnings and EPS attributable to CAH came in at $509 million and $2.08, up 13.9% and 19.5% from the prior year’s quarter, respectively.

Furthermore, the company’s total assets stood at $45.88 billion as of March 31, 2024, versus $43.42 billion as of June 30, 2023.

For the fiscal year 2024, CAH estimates its non-GAAP EPS attributable to CAH to $7.30 to $7.40. The company raised its Pharmaceutical and Specialty Solutions segment profit from 7% to 9% growth to 8.5% to 9.5% growth.

Analysts expect CAH’s revenue for the fourth quarter (ended June 2024) to increase 9.5% year-over-year to $58.50 billion, while the company’s EPS for the same quarter is expected to grow 11.7% year-over-year to $1.73. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.

Shares of CAH have surged 2.4% over the past year to close the last trading session at $96.91.

CAH’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Value, Growth and Sentiment. Within the Medical – Services industry, CAH is ranked #4 out of 59 stocks.

Click here to access additional ratings of CAH for Quality, Momentum, and Stability.

Baxter International Inc. (BAX)

BAX develops and provides a portfolio of healthcare products globally. The company operates in four segments: Medical Products and Therapies; Healthcare Systems and Technologies; Pharmaceuticals; and Kidney Care.

In terms of forward non-GAAP P/E, BAX is trading at 11.97x, 35.7% lower than the industry average of 18.62x. Similarly, the stock’s forward Price/Sales multiple of 1.18 is 67.2% lower than the industry average of 3.59. Further, its forward EV/EBITDA of 9.77x is 23.7% lower than the industry average of 12.80x.

BAX’s revenue and EBITDA have grown at respective CAGRs of 8% and 2.2% over the past three years. The company’s net income has increased 35.4% over the same timeframe, while its EPS and total assets have improved at CAGRs of 36.1% and 12.6%, respectively.

On May 13, BAX secured U.S. FDA approval of an expanded indication for Clinolipid (Lipid Injectable Emulsion) to be used in pediatric patients, including preterm and term neonates. The expanded indication demonstrates BAX’s commitment to meet the diverse nutritional needs of patients, from preterm neonates to adults.

On April 11, BAX expanded its pharmaceuticals portfolio with five injectable product launched in the U.S. These products features ready-to-use formulations to help support patient safety and offer added convenience for healthcare professionals.

The five new launches reinforced BAX’s focus on differentiated products and enhanced its pharmaceuticals portfolio in critical therapeutic areas.

For the first quarter that ended March 31, 2024, BAX’s net sales increased 2.2% year-over-year to $3.59 billion. Its adjusted operating income grew 17.3% from the year-ago value to $515 million. Adjusted net income attributable to Baxter stockholders and EPS came in at $331 million and $0.65, up 11.4% and 10.2% from the prior year’s quarter, respectively.

Analysts expect BAX’s revenue and EPS for the second quarter (ended June 2024) to increase 1.2% and 20.4% year-over-year to $3.75 billion and $0.66, respectively. Moreover, the company topped the consensus EPS and revenue estimates in three of the trailing four quarters.

Shares of BAX have gained 2.9% over the past month to close the last trading session at $33.84.

BAX’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has a B grade for Value and Growth. Within the Medical – Devices & Equipment industry, BAX is ranked #20 of 132 stocks.

Click here to access additional ratings of BAX for Momentum, Quality, Sentiment, and Stability.

DocuSign, Inc. (DOCU)

DOCU offers electronic signature solution internationally. The company offers e-signature solution enabling sending and signing of agreements, Contract Lifecycle Management which automates workflows, Document Generation streamlines the process of generating new, custom agreements, and Gen for Salesforce, to automatically generate agreements.

In terms of forward non-GAAP P/E, DOCU is trading at 16.77x, 30.7% lower than the industry average of 24.19x. Further, the stock’s forward EV/EBIT multiple of 12.60 is lower than the 20.73 industry average. Also, its forward Price/Cash Flow of 12.14x is 48.3% lower than the industry average of 23.51x.

DOCU’s revenue has grown at a CAGR of 20% over the past three years. The company’s total assets has increased 8.4% over the same timeframe, while its levered free cash flow has improved at CAGR of 19.8%.

On June 4, DOCU announced the upcoming launch of its new Docusign Connector for SAP Ariba solutions as a new offering to automate workflows between Docusign CLM and SAP Ariba solutions to help businesses accelerate time to value and eliminate friction in source-to-pay agreement processes.

The new connector will be available globally starting from September. The launch reinforces DOCU’s commitment to its partnership with SAP and its vision to transform agreement processes across the source-to-pay workflow.

On May 31, DOCU acquired Lexion, a leading AI-powered agreement management company. The strategic acquisition strengthens DOCU’s position in Intelligent Agreement Management and introduces new AI-assisted capabilities to the Docusign IAM platform.

During the first quarter that ended April 30, 2024, DOCU’s total revenue increased 7.3% year-over-year to $709.64 million. Its non-GAAP gross profit grew 6.5% from the year-ago value to $582.17 million. The company’s non-GAAP income from operations of $202.09 million indicates growth of 15% from the prior year’s quarter.

In addition, the company’s non-GAAP net income came in at $172.84 million and $0.82 per share, up 15.1% and13.9% from the prior year’s quarter, respectively.

As per the company’s second quarter 2024 guidance, DOCU expects total revenue between $725 million and $729 million, and its subscription revenue is expected to be within a range from $705 million to $709 million.

For the fiscal full year, the company expects total revenue of $2.92 billion – $2.93 billion and subscription revenue of $2.84 billion to $2.85 billion.

Analysts expect DOCU’s revenue and EPS for the second quarter (ending July 2024) to increase 5.7% and 11.6% year-over-year to $727.19 million and $0.80, respectively. Moreover, the company topped the consensus revenue and EPS estimates in all of the trailing four quarters.

DOCU’s stock has surged 5.2% over the past month and 5.2% over the past year to close the last trading session at $53.56.

DOCU’s POWR Ratings reflect its bright prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

DOCU has an A grade for Quality and Growth. The stock also has a B grade for Value. The stock is ranked #2 among the 19 stocks in the A-rated Software – SAAS industry.

To access DOCU’s other ratings for Momentum, Sentiment, and Stability, click here.

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CAH shares were trading at $97.02 per share on Monday afternoon, up $1.13 (+1.18%). Year-to-date, CAH has declined -2.82%, versus a 17.44% rise in the benchmark S&P 500 index during the same period.


About the Author: Rjkumari Saxena


Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...


More Resources for the Stocks in this Article

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