Despite macro headwinds, the inelastic demand for healthcare products and services helps the sector to perform relatively well. Healthcare leaders are upbeat about the economy and their performance this year, with 91% expecting to retain or increase revenue and sales, 87% hoping to raise profits, and 76% expecting to maintain or add headcount.

Moreover, the growing market for preventive care and data analytics in healthcare should boost the industry. Additionally, the market for digital healthcare is growing amid increasing smartphone users, improved internet connectivity, and advancement in healthcare IT infrastructure.

AI in the healthcare market is anticipated to grow at a CAGR of 47.6% until 2028. Furthermore, according to the Centers for Medicare and Medicaid Services, US health spending will reach $6.2 trillion by 2028.

Given the backdrop, investors could consider buying fundamentally stable medical stocks Centene Corporation (CNC), Cardinal Health, Inc. (CAH), and Nature’s Sunshine Products, Inc. (NATR) now. These stocks are currently trading under $100.

Centene Corporation (CNC)

CNC is a multinational healthcare company that provides government-sponsored and commercial healthcare programs, focusing on underinsured and uninsured individuals. It operates through the Managed Care and Specialty Services segments.

On January 3, 2023, the company’s Health Net of California subsidiary received new Medi-Cal direct contracts from the California Department of Health Care Services (DHCS). This should enable CNC to reach more people, provide member-focused care, and enhance health outcomes.

In terms of forward EV/EBITDA, CNC is trading at 8.44x, 39.7% lower than the industry average of 13.78x. Its forward Price/Sales of 0.28x is 94.3% lower than the industry average of 4.87x.

CNC’s trailing-12-month asset turnover ratio of 1.68x is 398.1% higher than the 0.34x industry average. Its trailing-12-month net income margin of 1.51% is higher than the negative 5.84% industry average.

CNC’s total revenues came in at $35.56 billion for the fourth quarter that ended December 31, 2022, up 9.2% year-over-year. Its premium revenue increased 10.4% year-over-year to $31.88 billion.

In addition, its total current liabilities came in at $30.13 billion for the period ended December 31, 2022, compared to $28.50 million for the period ended December 31, 2021.

CNC’s EPS is expected to grow 10.8% year-over-year to $6.36 in 2023. It surpassed EPS estimates in all four trailing quarters. CNC’s shares have lost marginally intraday to close the last trading session at $70.98.

CNC’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CNC has a B for Value, Sentiment, and Quality. In the A-rated Medical – Health Insurance industry, it is ranked #5 out of 11 stocks. Click here for the additional POWR Ratings for Stability, Momentum, and Growth for CNC.

Cardinal Health, Inc. (CAH)

CAH is an integrated healthcare service and solutions provider. It offers customized solutions for healthcare organizations like hospitals, pharmacies, ambulatory surgery facilities, clinical laboratories, and patients receiving care at home. The company operates through two segments: Pharmaceutical and Medical.

On January 26, 2023, CAH entered a strategic partnership with Palantir Technologies Inc. (PLTR), a leading builder of operating systems for the modern enterprise.

CAH aims to reshape the pharmaceutical supply chain with innovative procedures, products, and solutions to improve access to critical pharmaceuticals and streamline pharmacy inventory management using PLTR’s platform.

In terms of forward EV/EBITDA, CAH is trading at 8.80x, 36.1% lower than the industry average of 13.78x. Its forward Price/Sales of 0.10x is 98% lower than the industry average of 4.87x.

CAH’s trailing-12-month asset turnover ratio of 4.38x is substantially higher than the 0.34x industry average. Its trailing-12-month ROTC of 20.32% is higher than the negative 22.12% industry average.

CAH’s revenues came in at $51.47 billion for the second quarter that ended December 31, 2022, up 13.2% year-over-year. Moreover, its gross margin was $1.66 billion, indicating a marginal increase year-over-year.

The company’s total current assets came in at $34.60 billion for the period ended December 31, 2022, compared to $32.94 billion for the period ended June 30, 2022.

Street expects CAH’s revenue to increase 11.8% year-over-year to $202.76 billion in 2023. Its EPS is expected to grow 7.5% year-over-year to $5.44 in 2023. The stock has gained 49.4% over the past year to close the last trading session at $78.61.

CAH’s overall A rating equates to a Strong Buy in our POWR Ratings system. It has a B for Growth, Value, and Sentiment. It is ranked #4 out of 80 stocks in the Medical – Services industry.

Beyond what is stated above, we’ve also rated CAH for Stability, Momentum, and Quality. Get all CAH ratings here.

Nature’s Sunshine Products, Inc. (NATR)

Natural health and wellness company NATR primarily manufactures and sells nutritional and personal care products in Asia, Europe, North America, Latin America, and internationally.

On November 3, 2022, CEO Terrence Moorehead said, “We remain confident that we will navigate this unique period of volatility and uncertainty, bolstered by our strong balance sheet and a team of experts on the ground.”

NATR’s forward EV/Sales of 0.35x is 80.4% lower than the industry average of 1.78x. Its forward Price/Sales of 0.43x is 64.6% lower than the industry average of 1.21x.

NATR’s trailing-12-month gross profit margin of 71.59% is 127% higher than the industry average of 31.53%. Its trailing-12-month ROTA of 4.96% is 39.4% higher than the industry average of 3.56%.

NATR’s selling, general, and administrative expenses came in at $36.79 million for its third quarter ended September 30, 2022, down 6.9% year-over-year. Its total current liabilities came in at $63.89 million for the period ended September 30, 2022, compared to $76.67 million for the period ended December 31, 2021.

NATR’s revenue is expected to rise marginally year-over-year to $420.61 million in the current fiscal year, 2023. Its EPS is estimated to grow 280% year-over-year to $0.18 in 2023. Over the past three months, the stock has gained 9.1% to close the last trading session at $9.39.

It’s no surprise that NATR has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It also has an A grade for Value and Quality and a B for Stability and Sentiment. It is ranked first among nine stocks in the B-rated Medical – Consumer Goods industry. To see NATR’s ratings for Growth and Momentum, click here.

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CNC shares were trading at $72.44 per share on Wednesday morning, up $1.46 (+2.06%). Year-to-date, CNC has declined -11.67%, versus a 7.43% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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