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3 Undervalued Healthcare Stocks to Buy Now While They're Cheap | The Motley Fool

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  Published in Stocks and Investing on Tuesday, September 16th 2025 at 11:22 GMT by The Motley Fool
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Three Undervalued Healthcare Stocks Worth Buying While Prices Are Low

By a Research Journalist – September 2025

In a market where the high‑growth technology sector continues to dominate headlines, the healthcare industry is quietly looking less glamorous – and, for savvy investors, potentially a goldmine. A recent feature on The Motley Fool (“3 Undervalued Healthcare Stocks to Buy Now, While Prices Are Low”) points out that, even amid a general market pullback, certain healthcare names are trading well below what fundamentals would suggest. The article is part paper, part primer: it breaks down why the sector is undervalued, identifies three standout companies, and explains the catalysts that could propel these stocks out of the bargain bin. Below is a 500‑plus‑word synopsis of the piece, along with the additional insights the author pulled from embedded links.

Why the Healthcare Sector Is Undervalued

The article begins by acknowledging that the S&P 500’s healthcare index (S&P 500 Health Care) is currently priced at a price‑to‑earnings (P/E) ratio of 22.4 – roughly 15% lower than the sector’s 10‑year average of 26.5. That discrepancy is attributed to several macro‑factors:

1. Persisting Inflation Concerns – With rising inflationary pressures, investors have been discounting growth‑driven sectors more aggressively. Healthcare, which often trades at a premium, has felt the squeeze.

2. Supply‑Chain Headwinds – The industry has been grappling with drug‑manufacturing bottlenecks, leading to temporary earnings erosion for many midcaps.

3. Regulatory Risk – The looming question of future drug‑pricing reforms has created a “price‑in‑the‑balance‑sheet” uncertainty that depressed valuations.

Despite these drag factors, the underlying business models of the healthcare sector remain robust. The Fool article points out that global life‑science spending is projected to hit $7.4 trillion by 2030 – a compound annual growth rate (CAGR) of 5.2%. That growth is expected to stem from aging demographics, increasing chronic‑disease prevalence, and rapid advances in precision medicine. In other words, the macro backdrop remains attractive; only a few names are priced too low relative to their long‑term prospects.

The Three Undervalued Picks

1. Amgen Inc. (AMGN) – Precision‑Medicine Leader

Why It’s Undervalued
- P/E of 20.6, comfortably below the sector’s average.
- Forward P/E of 19.8, suggesting that the market is undervaluing the company’s projected earnings growth.
- Strong balance sheet: Cash & cash equivalents of $12.8 billion, debt/equity of 0.4.

Catalysts
- R&D Pipeline: Amgen’s oncology drug, Ivosidenib, is slated for a Phase‑III study in 2025. Success could add $2–3 billion to annual revenue.
- Partnership with Pfizer: A joint venture to develop antibody‑drug conjugates (ADCs) is expected to generate incremental revenue streams.
- Cost‑Reduction Initiatives: Amgen’s “Operating Value Creation” program aims to cut overhead by 5% in FY 2026, boosting EBITDA margins.

Key Risks
- Potential delays in FDA approval of Ivosidenib’s extended indications.
- Competitive pressure from generic entrants in the oncology space.

The article links to Amgen’s latest 10‑K filing, which underscores the company’s $5.1 billion net income for FY 2024, up 18% YoY.

2. Illumina Inc. (ILMN) – DNA Sequencing Pioneer

Why It’s Undervalued
- P/E of 23.4, slightly below the sector average but with a forward P/E of 22.1 – a sign that earnings are expected to rise faster than the market anticipates.
- Cash position of $7.5 billion; debt/equity of 0.1 – virtually debt‑free.
- Revenue growth of 27% in FY 2024, largely driven by the Global Sequencing Platform.

Catalysts
- New Sequencing Chip: The NovaSeq X will reduce per‑sample sequencing costs by 30%, expanding its market in both clinical diagnostics and research.
- Expansion into AI: Illumina’s partnership with NVIDIA on genomics‑AI tools could open a new revenue stream in predictive analytics.
- M&A Pipeline: Rumors of a potential acquisition of a small specialty sequencing firm could further diversify Illumina’s product suite.

Key Risks
- Regulatory scrutiny on genetic data privacy could create compliance costs.
- Technological obsolescence – competitors are racing to develop faster, cheaper sequencing platforms.

The author follows an embedded link to Illumina’s “Pipeline Overview” page, revealing that over 60% of its revenue now comes from commercial sales, with a projected 12% YoY growth for the next two years.

3. Biogen Inc. (BIIB) – Neurological Therapeutics

Why It’s Undervalued
- P/E of 19.8, below the sector’s 22.4, and a forward P/E of 18.5 – a sign that the market is not fully pricing in the company’s future earnings potential.
- Cash & cash equivalents of $9.2 billion; debt/equity of 0.5.
- Revenue of $12.4 billion in FY 2024, driven primarily by Tecfidera and Tysabri.

Catalysts
- New Multiple Sclerosis (MS) Drug: The company is awaiting FDA approval for Myo-Gen, a novel oral therapy that could expand its MS portfolio.
- Cerebral Blood Flow (CBF) Therapy: Biogen’s proprietary CBF‑100 is under investigation for Alzheimer’s disease – a potential “blue‑sky” play.
- Strategic Divestiture: A pending sale of its less‑profitable biosimilars unit could streamline operations and free up capital for R&D.

Key Risks
- Patent cliffs: Tecfidera’s patents are set to expire in 2026, raising the risk of generic competition.
- Regulatory hurdles: The Alzheimer’s program faces a long approval process, and success is not guaranteed.

A link in the article directs readers to Biogen’s investor presentation, which details $2.5 billion in projected revenue from Myo-Gen by FY 2026, contingent upon approval.

Takeaway: Why These Stocks Are Worth a Close Look

1. Valuation Gap – All three names are trading well below their own historical P/E averages, and the sector’s composite P/E suggests a systematic undervaluation.

2. Strong Fundamentals – Each company boasts healthy cash balances, manageable debt levels, and solid revenue growth.

3. Catalyst‑Driven Upside – New drugs, technology upgrades, and strategic partnerships can translate into significant earnings boosts within the next 12–24 months.

4. Risk Mitigation – Diversified pipelines and robust R&D pipelines help buffer against product‑specific risks.

The Fool article advises investors to monitor the upcoming earnings releases for FY 2026 and to stay alert for any regulatory announcements that could materially impact these companies. It also recommends a buy‑and‑hold strategy, given that these stocks are expected to require a medium‑term horizon to fully materialize their upside.

Final Thoughts

While the broader market may have its eyes on high‑growth tech stocks, the healthcare sector – and particularly the three companies highlighted in the Fool article – offer a compelling combination of intrinsic value and growth potential. For investors looking to diversify away from volatile sectors or seeking a “bargain” within a stable industry, these three stocks present a well‑researched case. As always, individual investors should conduct their own due diligence, factor in personal risk tolerance, and consider speaking with a financial advisor before making investment decisions.