3 Top Healthcare Stocks to Buy for March – The Motley Fool
After the S&P 500 index’s 10% year-to-date correction, there’s no shortage of attractively priced stocks for long-term investors.
One sector that’s loaded with cheap stocks is healthcare. This sector currently has a forward price-to-earnings (P/E) ratio of 15.1, which is well below the average forward P/E ratio of 18.6 for the S&P 500 index.
Here are three healthcare stocks that pair quality with attractive valuations to consider buying in March.
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1. CVS Health
The first healthcare stock to purchase this month is the health insurer and pharmacy chain CVS Health ( CVS 0.62% ). With a $133 billion market capitalization, CVS is the second-largest health insurer in the world behind UnitedHealth Group ( UNH 2.48% ).
Due to ever-growing healthcare costs and an aging population, it’s projected that the global health insurance industry will grow 4.6% annually from $2.8 trillion in 2020 to $3.9 trillion by 2027. As a massive health insurer via its Aetna business, CVS Health will be able to capitalize on the growth of the health insurance industry better than almost all of its peers.
That’s why analysts forecast that CVS will grow its non-GAAP (adjusted) diluted earnings per share (EPS) at 6% annually over the next five years. And due to CVS’s promising fundamentals, the company’s board of directors recently authorized a 10% raise in the quarterly dividend to $0.55 per share.
Dividend growth investors can scoop up CVS Health’s market-beating 2.1% dividend yield at a forward P/E ratio of just 11.7. For a stock of its quality, CVS Health appears to be trading at a bargain valuation at this time.
2. Amgen
The next healthcare stock to think about buying in March is pharma company Amgen ( AMGN 0.12% ). With a $125 billion market cap, Amgen is the 10th-largest pharma stock in the world.
For many of the same reasons that the health insurance industry is going to do well, the pharmaceutical industry will also post a healthy growth rate in the years to come. A burgeoning and aging global population is expected to result in the global pharmaceutical industry growing 4.7% annually, from nearly $1.3 trillion in 2020 to $1.6 trillion by 2025.
In addition to Amgen’s portfolio of growing blockbuster drugs like Prolia and Xgeva (for osteoporosis) and Otezla (for plaque psoriasis and psoriatic arthritis), the company’s pipeline should power growth in the years ahead. That’s because Amgen’s drug pipeline includes 40 compounds at various stages of clinical trials.
These factors explain why analysts believe Amgen’s non-GAAP diluted EPS will compound at 7% annually over the next five years. The company’s decent growth outlook should position it for steady, high single-digit annual dividend growth in the medium term. Paired with Amgen’s market-topping 3.3% dividend yield, this is an enticing mix of income and growth potential.
And investors can acquire Amgen’s shares at a forward P/E ratio of 12.2, which seems to be a discount to its growth prospects.
3. Sanofi
The final healthcare stock to contemplate purchasing this month is French drugmaker Sanofi ( SNY -3.39% ). Sanofi’s market cap of $122 billion makes it the 11th-largest pharma stock on the planet behind Amgen. Like Amgen, Sanofi should benefit from ever higher global pharmaceutical spending in the future.
Sanofi also boasts a robust portfolio of steadily growing blockbusters, like a drug co-owned with Regeneron ( REGN 1.51% ) called Dupixent (for eczema and asthma) as well as a variety of influenza, polio, and pertussis vaccines. Thanks to its existing portfolio and pipeline of 86 projects in different phases of clinical trials, analysts are predicting 10% annual earnings growth for the next five years.
Despite Sanofi’s encouraging growth profile, the stock trades at a forward P/E ratio of just 10.9. The cherry on top is Sanofi’s market-crushing 3.9% dividend yield, which is nearly triple the S&P 500’s 1.4%.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
