The COVID-19 omicron variant has again placed the healthcare industry in the limelight. With surging COVID-19 cases and increasing chronic diseases, the sector could continue to see increased demand for vaccines and therapies for the foreseeable future. According to a Forbes report, consumerization, automation, and consolidation will likely drive the industry’s growth in fiscal 2022.

Furthermore, the digital health sector is also booming due to the convenience of improved online services. According to Report Ocean research, the global e-health market is expected to grow at a 14.5% CAGR between 2021 – 2027. Investors’ interest in the healthcare industry is evident in the Health Care Select Sector SPDR Fund’s (XLV) 4.8% returns over the past month and 22.3% year-to-date returns.

Given this backdrop, we think fundamentally-sound healthcare stocks CVS Health Corporation (CVS) and Anthem, Inc. (ANTM) could be solid additions to one’s portfolio now. These stocks have an overall A (Strong Buy) rating in our proprietary POWR Ratings system.

Click here to checkout our Healthcare Sector Report 

CVS Health Corporation (CVS)

CVS in Woonsocket, R.I., provides health services in the United States. Its segments include Pharmacy Services, Retail/LTC, and Health Care Benefits. In addition, it has roughly 9,900 retail locations, 1,100 MinuteClinic locations, and online retail pharmacy websites.

On November 3,CVS Health President and CEO Karen S. Lynch said, “We outperformed expectations once again and continue to lead the way in changing how, when and where care is delivered for millions of Americans.”

CVS’ total revenues came in at $73.79 billion for its fiscal third quarter, ended September 30, 2021, up 10% year-over-year. The company’s net income was $1.59 billion, representing a 30.2% year-over-year rise. Also, its EPS increased 29% year-over-year to $1.20.

In terms of forward EV/S, CVS’ 0.69x is 88.5% lower than the 5.98x industry average. And its 0.46x forward P/S is 93.5% lower than the 7.06x industry average.

Analysts expect CVS’ revenue to increase 7.9% year-over-year to $289.87 billion in its fiscal 2021. Its EPS is expected to grow 7.2% year-over-year to $8.04 in the current year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 50.1% in price to close yesterday’s trading session at $100.90.

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

CVS has an A grade of Growth and Sentiment and a B grade for Value and Stability. It is ranked #1  of 4 stocks in the Medical – Drug Stores industry. Click here to see CVS’ ratings for Momentum and Quality as well.

Anthem, Inc. (ANTM)

ANTM, through its subsidiaries, operates as a health benefits company in the United States. The Indianapolis, Ind.-based concern operates through four segments: Commercial & Specialty Business, Government Business, IngenioRx; and Others.

On November 10, 2021, ANTM announced that the company had agreed to acquire Integra Managed Care. Felicia Norwood, Executive Vice President of ANTM’s Government Business Division, said, “This acquisition aligns with our goal of growing Anthem’s Medicaid business, while serving our members with a comprehensive and coordinated approach to care.”

For its fiscal third quarter, ended September 30, 2021, ANTM’s total operating revenue increased 16% year-over-year to $35.55 billion. The company’s total operating gain came in at $2.06 billion, up 924.4% year-over-year. Also, its total operating margin was  5.8% compared to 0.7% in the year-ago period.

In terms of forward EV/S, ANTM’s 0.92x is 84.6% lower than the 5.98x industry average. Also, its 0.80x forward P/S is lower than the 7.06x industry average.

ANTM’s revenue is expected to be $137.64 billion in its fiscal year 2021, representing a 13.9% year-over-year rise. The company’s EPS is expected to increase 15.7% year-over-year to $26.01 in the current year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 49.7% in price to close yesterday’s trading session at $453.91.

It is no surprise that ANTM has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Growth and a B grade for Value, Stability, Sentiment, and Quality.

ANTM is ranked #1 of 12 stocks in the Medical – Health Insurance industry. Click here to see the additional POWR Rating for ANTM (Momentum).

Click here to checkout our Healthcare Sector Report 

CVS shares were trading at $101.49 per share on Thursday afternoon, up $0.59 (+0.58%). Year-to-date, CVS has gained 52.36%, versus a 27.68% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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