What Defines a Value Stock?
A value stock traditionally has a lower price when compared to stock prices of companies in the same industry. This indicates that the company may be undervalued, as investors are not expressing as much interest in such companies. The most commonly used way to check for value is with the price-to-earnings multiple, or P/E. A low P/E multiple is a good indication that the stock is undervalued.
Below is a list of notable value stocks in the healthcare sector:
- ITeos Therapeutics (NASDAQ:ITOS) - P/E: 4.45
- Tenet Healthcare (NYSE:THC) - P/E: 8.52
- Vir Biotechnology (NASDAQ:VIR) - P/E: 5.45
- Collegium Pharmaceutical (NASDAQ:COLL) - P/E: 7.9
- Novartis (NYSE:NVS) - P/E: 8.01
ITeos Therapeutics saw an increase in earnings per share from 1.86 in Q3 to $4.88 now. Tenet Healthcare's earnings per share for Q1 sits at $1.93, whereas in Q4, they were at 2.7. This quarter, Vir Biotechnology experienced a decrease in earnings per share, which was $3.92 in Q4 and is now $3.85. Collegium Pharmaceutical has reported Q4 earnings per share at $-0.51, which has decreased by 331.82% compared to Q3, which was 0.22. Novartis saw an increase in earnings per share from 1.4 in Q4 to $1.46 now. The company's most recent dividend yield sits at 2.54%, which has increased by 0.3% from 2.24% last quarter.
The Significance: A value stock may need some time to rebound from its undervalued position. The risk of investing in a value stock is that this emergence may never materialize.
