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Buy the Dip: 3 Oversold Healthcare Stocks

By Komal Bhattar

The healthcare sector has been thriving since the onset of the COVID-19 pandemic. Healthcare companies have rushed to develop vaccines and booster doses to contain the spread of the virus, and companies that succeeded have garnered massive returns. The healthcare sector is expected to remain in the limelight due to an increase in global chronic diseases, the emergence of new coronavirus variants, and a resurgence of cases.

Moreover, telehealth and digital channels in the healthcare space have been gaining traction over the past few years. Healthcare companies are constantly leveraging advanced technologies to improve healthcare services and investing in breakthrough developments, thus shaping the future of the healthcare industry. The global healthcare market is projected to reach $665.37 billion by 2028, while U.S. national healthcare expenditure is expected to reach $6.20 trillion by 2028.

Several fundamentally sound healthcare stocks, including Dr. Reddy's Laboratories Limited (RDY), Medpace Holdings, Inc. (MEDP), and AMN Healthcare Services, Inc. (AMN), have declined in price this year amid the market turbulence. These stocks look oversold and could potentially soar in the near term. Thus, we think these stocks could be worth buying now.

Click here to checkout our Healthcare Sector Report for 2022

Dr. Reddy's Laboratories Limited (RDY)

Headquartered in Hyderabad, India, RDY operates as an integrated pharmaceutical company worldwide through the Global Generics; Pharmaceutical Services and Active Ingredients (PSAI); Proprietary Products; and Others segments.

On April 20, RDY launched Posaconazole delayed-release tablets, the therapeutic generic equivalent to NOXAFIL®. Also in April, it launched Methylprednisolone Sodium Succinate for injection, the generic equivalent of SOLU-MEDROL®. These should add significantly to the company’s revenue stream.

In terms of its forward EV/EBIT, RDY is currently trading at 17.87x, which is 7.7% lower than the 16.60x industry average. Its forward 3.00 Price/Sales multiple is 25.3% lower than the 4.02 industry average.

For its fiscal third quarter, ended Dec. 31, 2021, RDY’s revenue increased 7.9% year-over-year to Rs53.20 billion ($0.69 billion). Its gross profit grew 7.8% from its year-ago value to Rs28.61 billion ($0.37 billion). Its income from operating activities for the quarter stood at Rs9.24 billion ($0.12 billion), reflecting a 320% increase year-over-year. Furthermore, its EPS was Rs42.48, up 3,469.7% from the prior-year quarter.

The Street expects RDY’s EPS for its fiscal quarter, ended March 31, 2022, to improve 20.8% year-over-year to $0.55. The $674.21 million consensus revenue estimate for the same period represents a 4.5% increase year-over-year.

RDY’s shares have slumped 24.1% in price year-to-date to close the last trading session at $49.62.

RDY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to Buy in our POWR ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

RDY has a B grade in Growth, Stability, and Value. It is ranked #22 of 167 stocks in the  Medical - Pharmaceuticals industry.

Beyond what is stated above, we have also rated RDY for Momentum, Sentiment, and Quality. Get all the RDY ratings here.

Medpace Holdings, Inc. (MEDP)

MEDP in Cincinnati, Ohio, is a global provider of clinical research-based drug and medical device development services in North America, Europe, and Asia.

Its 3.12 forward Price/Sales multiple is 22.3% lower than the 4.02 industry average. In terms of its forward EV/Sales, MEDP is currently trading at 3.25x, which is 5.3% lower than the 3.43x industry average.

MEDP’s net revenue increased 1,173% from the prior-year quarter to $330.95 million in its fiscal first quarter ended March 31, 2022. Its income from operations for the quarter came in at $64.20 million, reflecting a 34.9% increase year-over-year, while its net income stood at $61.31 million, up 41.6% year-over-year. The company’s net income per share increased 48.2% from the prior-year quarter to $1.69.

The $1.44 consensus EPS estimate for its fiscal quarter, ending June 30, 2022, represents a 32% improvement year-over-year. The $347.42 million consensus revenue estimate for the same quarter represents a 24.8% increase from the same period last year. Also, it has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.

The stock has slumped 39.9% in price year-to-date to close yesterday’s trading session at 130.77.

It is no surprise that MEDP has an overall B rating, which equates to Buy in our POWR Ratings system.

MEDP also has a B grade in Growth and Quality. Among  the 83 stocks in the Medical - Services industry, MEDP is ranked #19.

In addition to the POWR Rating grades I have just highlighted, one can see the MEDP’s ratings for Value, Momentum, Stability, and Sentiment here.

AMN Healthcare Services, Inc. (AMN)

San Diego, Calif.-based AMN provides healthcare workforce solutions and staffing services to hospitals and healthcare facilities in the United States. It operates through three segments: Nurse and Allied Solutions; Physician and Leadership Solutions; and Technology and Workforce Solutions.

In terms of its forward EV/Sales, AMN is currently trading at 0.98x, which is 71.4% lower than the 3.43x industry average. Its 8.79 forward EV/EBIT multiple is 47% lower than the 16.6% industry average.

AMN’s revenue increased 75.2% year-over-year to $1.55 billion in its fiscal first quarter, ended March 31, 2022. Its income from operations grew 99.2% from its  year-ago value to $207.93 million, while its net income improved 107.5% year-over-year to $146.01 million. Its net income per share increased 110.2% from its year-ago value to $3.09.

Analysts expect AMN’s revenue for its fiscal quarter ending June 30, 2022, to come in at $1.37 billion, indicating a 59.3% increase year-over-year. Also, the company’s EPS is expected to grow 71.5% year-over-year to $2.81 in the same period. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.

AMN’s shares have slumped 27.9% in price year-to-date to close the last trading session at $88.19.

AMN’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.

The company has an A grade in Growth and a B in Value. The stock is ranked #13 in the Medical - Services industry.

To get AMN’s ratings for Momentum, Quality, Stability, and Sentiment, click here.

Click here to checkout our Healthcare Sector Report for 2022


RDY shares were trading at $50.41 per share on Thursday morning, up $0.79 (+1.59%). Year-to-date, RDY has declined -22.93%, versus a -16.93% rise in the benchmark S&P 500 index during the same period.



About the Author: Komal Bhattar


Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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