With a growing population and rising rates of chronic conditions, the demand for better healthcare solutions has never been greater. Thus, scooping shares of fundamentally sound healthcare stocks, Pfizer Inc. (PFE), The Cigna Group (CI) and Centene Corporation (CNC). All three stocks offer an easier entry point, being undervalued and receiving high upside potential from analysts.

Chronic diseases are becoming more prevalent worldwide, leading to a surge in demand for innovative treatments. As conditions like heart disease, diabetes, and respiratory issues rise, healthcare providers and pharmaceutical companies must meet the increasing need for effective and accessible solutions to manage these ailments.

The induction of Artificial Intelligence (AI) and machine learning are reshaping the healthcare landscape. By improving task management, patient services, and complex measurements, AI is streamlining operations and facilitating the healthcare industry’s growth, making it more efficient and patient-centric.

Moreover, the industry continues to demonstrate its potential, as seen with the U.S. Food and Drug Administration’s approval of 43 new drugs for chronic conditions this year. With global pharmaceutical revenue expected to hit $1.45 trillion by 2029, growing at a steady CAGR of 4.7%, the future of healthcare looks promising.

With these conductive trends in mind, let us dive deep into the fundamentals of three healthcare stocks.

Pfizer Inc. (PFE)

PFE discovers, develops, manufactures, and markets pharmaceutical products. The company offers medicines and vaccines across therapeutic areas, including cardiovascular, infectious diseases, immunology, oncology, and women’s health.

On November 20, PFE announced the approval by the European Commission (EC) for HYMPAVZI™ for the routine prophylaxis of bleeding episodes in patients 12 years of age and older weighing at least 35 kg with severe hemophilia A without FVIII inhibitors or severe hemophilia B without FIX inhibitors.

The approval strengthens PFE’s position in the genetic disease treatment market and facilitates stable growth prospects through its offerings.

On October 22, PFE announced the U.S. Food and Drug Administration’s (FDA) approval of ABRYSVO, its bivalent RSV prefusion F vaccine, for the prevention of lower respiratory tract disease (LRTD) caused by RSV in individuals 18 through 59 years of age who are at increased risk for LRTD caused by RSV.

The approval broadens the company’s infectious disease treatment pipeline and helps solidify the company’s position as an industry leader.

PFE’s forward non-GAAP P/E of 8.96x is 57% lower than the industry average of 12.12x. Its forward EV/EBIT multiple of 10.35 is 39.3% lower than the sector average of 12.22x. Likewise, the stock’s forward Price/Book of 1.68x is 40% lower than the industry average of 2.80x.

For the fiscal 2024 third quarter that ended September 29, PFE’s total revenues increased 31.2% year-over-year to $17.70 billion. The company’s adjusted net income and adjusted earnings per common share attributable to PFE common shareholders stood at $6.05 billion and $1.06, compared to a net loss and loss per share of $968 million and $0.17 in the prior year’s quarter, respectively.

Analysts expect PFE’s revenue and EPS for the fiscal fourth quarter (ending December 2024) to increase 21.3% and 369.7% year-over-year to $17.28 billion and $0.47, respectively. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.

Shares of PFE have surged 1.4% intraday, closing the last trading session at $26.20. Its 12-month price target of $31.93 reflects a 21.8% potential upside.

PFE’s POWR Ratings mirror its solid fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

PFE has an A grade for Growth and a B for Value. It is ranked #27 out of 154 stocks in the Medical – Pharmaceuticals industry.

In addition to the POWR Rating highlighted above, you can check PFE’s ratings for Stability, Sentiment, Momentum, and Quality here.

The Cigna Group (CI)

CI offers insurance and related services. It has two segments: Evernorth and Cigna Healthcare, which provide coordinated and point-solution health services, delivering medical, pharmacy, behavioral health, dental, and other products, including Medicare plans and international health coverage for individuals and employees.

On January 31, CI announced a definitive agreement for Health Care Service Corporation (HCSC) to acquire its Medicare Advantage, Cigna Supplemental Benefits, Medicare Part D, and CareAllies businesses for an approximate transaction value of $3.7 billion.

This agreement would enable CI to uphold value for its stakeholders by freeing up resources to accelerate investment in its services platform.

CI’s forward non-GAAP P/E of 11.85x is 43.2% lower than the industry average of 20.86x. The stock’s forward EV/Sales of 0.50x is 86.6% lower than the sector average of 3.73x. Additionally, its forward Price/Book multiple of 2.23 is 20.1% lower than the 2.80x industry average.

For the fiscal 2024 third quarter that ended September 30, CI’s adjusted revenues increased 29.8% year-over-year to $63.70 billion. Its adjusted income from operations rose 5% from the year-ago value to $2.11 billion. Moreover, the company’s adjusted income from operations per share grew 10.9% from the prior year’s quarter to $7.51.

The consensus revenue estimate of $63.03 billion for the fiscal fourth quarter (ending December 2024) reflects a year-over-year rise of 23.2%. Its EPS for the same period is expected to increase 15.2% from the prior year’s period to $7.82. Also, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

CI’s shares have gained 25.5% over the past year, closing the last trading session at $337.80. Wall Street analysts expect the stock to reach $397.38 in the near term, indicating a potential upside of 17.6%.

CI’s POWR Ratings reflect its sound outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

CI has a B grade for Growth and Value. It is ranked #2 within the 10-stock A-rated Medical – Health Insurance industry.

To check CI’s Quality, Momentum, Sentiment, and Stability ratings, click here.

Centene Corporation (CNC)

CNC provides essential healthcare programs and services to underinsured and uninsured families, commercial organizations, and military families. The company operates through Medicaid; Medicare; Commercial; and Other segments.

On May 2, CNC’s Medicare business, Wellcare, announced a partnership with Wellvana to expand affordable, patient-centered primary healthcare for Medicare Advantage members in Georgia, Tennessee, and Texas.

This partnership supports independent primary care physicians, improves clinical outcomes, and strengthens CNC’s presence in value-based care, driving growth in its Medicare sector.

CNC’s forward non-GAAP P/E of 8.79x is 57.9% lower than the industry average of 20.86x. Its forward Price/Book of 1.18x is 58% lower than the sector average of 2.80x. Furthermore, the stock’s forward EV/EBITDA of 7.89x is 42% lower than the 13.60x industry average.

For the fiscal third quarter that ended September 30, 2024, CNC’s total revenues increased 10.5% year-over-year to $42.02 billion. The net earnings and earnings per common share attributable to CNC grew 52% and 56.3% from the prior year’s quarter to $713 million and $1.36, respectively.

For the fiscal year ending December 2024, Street expects CNC’s revenue to increase 4.8% year-over-year to $161.37 billion. Its EPS for the same period is expected to rise 2.2% year-over-year from the prior year’s period to $6.83 Plus, the company has surpassed the consensus revenue and EPS estimates in all of its four trailing quarters.

Shares of CNC marginally surged intraday to close the last trading session at $60. Its 12-month price target of $80.83 reflects a 34.7% potential upside.

CNC’s POWR Ratings reflect its sound outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

CNC has a B grade for Value and Growth. Out of 10 stocks in the Medical – Health Insurance industry, CNC is ranked #3.

To check CNC’s Quality, Momentum, Sentiment, and Stability ratings, click here.

What To Do Next?

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PFE shares were trading at $25.82 per share on Monday afternoon, down $0.39 (-1.49%). Year-to-date, PFE has declined -3.48%, versus a 28.12% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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