The narrative surrounding drug stocks has been pretty awful recently.

The sector used to be a must-own back in 2015, and Valeant — now named Baush (NYSE:BHC) – was the hottest stock in the market. But, then the new pharma model of acquiring companies and slashing R&D blew up. Drug pricing was challenged by intense scrutiny from Washington. And, an accelerated pace of FDA approvals of generics created competitive headwinds a lot of these companies had never faced before.

The convergence of these headwinds caused Valeant stock to crash. All drug stocks followed suit. They remain weak today because the narrative surrounding drug stocks (regulation fears, big competition, and price erosion) hasn’t improved all that much.

But, drug stocks are as cheap as they’ve been in twenty-plus years, and are one of the only sectors in the market right now that isn’t trading above its historical valuation levels. As such, once the narratives surrounding these companies improve, drug stocks could soar.

With that in mind, here are five drug stocks which investors should consider buying while the pharma sector remain on sale.

Drug Stocks to Buy: Teva (TEVA)

Once considered one of the best drug stocks in the world, Teva (NYSE:TEVA) has followed in the footsteps of Valeant over the past several years.

This company’s highly levered, acquisition-focused growth story has come crashing down recently. The Israeli-based pharma company became the world’s largest generic drug manufacturer in 2015 when it acquired Actavis for $40.5 billion. But, the acquisition put a lot of burden on the balance sheet, which became loaded up with debt. To make matters worse, generic drug prices began to fall due to increased competition and heavy scrutiny from Washington.

Then, the company’s CEO left. And, the dividend got cut by 75% to pay down debt.

TEVA stock dropped from $70 in mid-2015 to $12 in late 2017.

But, the rebound has started. At $12, TEVA stock was just too cheap. Famed valued investor Warren Buffet started buying in. His stake has only grown since then. Also, the company recently received FDA approval for its generic EpiPen, and reported better than expected earnings in its most recent quarter. Now, TEVA stock sits at $24.

Overall, the narrative at TEVA is slowly improving. Meanwhile, this a stock that is still trading at just 9X forward earnings, versus a biotech average of 13X and an average 11-12X multiple a few years back. Thus, the valuation implies further upside, so long as fundamentals continue to inflect upward.

Drug Stocks to Buy: Allergan (AGN)

Pharmaceutical giant Allergan (NYSE:AGN) has been no exception to the beat-down that has happened in drug stocks over the past few years. AGN stock is more than 40% off its all-time highs, while the stock market is right near all-time highs.

But, Allergan is a wide-moat, stable-growth company with a bunch of visibility over the next several years through delivering drugs of various use-cases to people who need them. Meanwhile, AGN stock trades at just 11X forward earnings, versus a five-year average forward multiple of 13. Thus, so long as earnings don’t fall out from here, AGN stock will head higher in the long run.

Earnings won’t fall out from here.

Instead, earnings will get a big push from the Medical Aesthetics, Facial Aesthetics, and Plastics and Regenerative Medicine categories. Allergan’s treatments in those categories include widely popular things like Botox, CoolSculpting, Juvederm and Alloderm. Beyond that, new products aimed at treating bipolar depression and migraines should constitute the next wave of growth drivers.

All together, I’m not terribly concerned about the longevity of AGN’s growth drivers. As such, I believe earnings should trend higher in a multi-year window, a belief which makes the present 11X forward multiple seem rather anemic.

Drug Stocks to Buy: Gilead (GILD)

Much like the other drug stocks on this list, Gilead (NASDAQ:GILD) stock has been under pressure recently. It is 40% off its five-year highs, and down 30% over the past three years.

But, GILD stock is also dirt cheap at just 11X forward earnings and 8X trailing EBITDA. Thus, much like AGN, so long as earnings don’t fall out from here, GILD stock looks like a solid long term investment.

The numbers right now aren’t great, and earnings are presently in free fall. Last quarter, Gilead reported a 20%-plus revenue drop and 40%-plus earnings drop, mostly due to a steep drop off in HCV product sales. If this trend persists, then GILD stock is due for more weakness ahead.

There are signs these big revenue and earnings drops won’t persist. The company is on the cutting edge of cell therapy, which many consider to be the next big thing in the pharma world. If Gilead executes against its potential in this market, which the company has a track record of doing, then revenues and earnings will stabilize as HCV weakness phases out.

Indeed, analysts believe earnings and revenues will stabilize in 2019.

If that is the case, then GILD stock’s 11X forward multiple is just too low for a company with a stable earnings base, big moat, and healthy long-term drivers. As such, this looks like a solid drug stock on sale to me.

Drug Stocks to Buy: Amgen (AMGN)

Relative to other drug stocks, Amgen (NASDAQ:AMGN) has actually shown impressive resilience over the past several years. Not only is the stock right around five year highs, but it is also up 90% during that stretch.

Behind this strong share price performance are some really good numbers. Last quarter, Amgen reported revenue growth of 4% and adjusted earnings growth of 17%. Those are really good numbers in the pharma world, where negative revenue growth and earnings compression is the new norm.

Some of the company’s best selling drugs are under pressure from generics competition. That does dilute go-forward growth prospects. But, the company’s newer drugs are doing really and don’t have any major competitive threats, and there are some drugs coming through the pipeline with promising potential. Namely, Aimovig has received FDA approval and will allow Amgen to make inroads in the multi-billion dollar migraine market.

Despite the healthy narrative, AMGN stock is still pretty cheap. The stock trades at just 14X forward earnings. That is above average (13X). But, Amgen deserves a premium valuation because it is one of the few names in the sector that is actually growing.

As such, while Amgen might not have as much firepower as other drug stocks on this list, it still looks to be a winner over the next few years.

Drug Stocks to Buy: Celgene (CELG)

The bull thesis on Celgene (NASDAQ:CELG) is pretty simple: this is a growth company trading at a dirt cheap valuation.

Take a look at last quarter’s numbers. Revenues rose 17% year-over-year, led by 20%-plus growth in the company’s headline Revlimid drug. Meanwhile, earnings were up 16%, and management lifted its full-year guide. From head to toe, it was a very good quarter.

But, this is nothing new for Celgene. Revenue growth has been 10% and up for the past five years, and analysts are looking at 10% and up revenue growth over the next several years, too. And, it isn’t like margin compression is eating away all the revenue growth. Over the next several years, annualized earnings growth is expected to fall in the 17-20% range.

Yet, CELG stock trades at just 10x forward earnings. That multiple doesn’t make much sense next to nearly 20% earnings growth. Nor does it make sense compared to the company’s historically average 17x forward multiple.

Consequently, CELG stock looks like a big growth stock trading at a big discount due to excessive pessimism regarding the health of the pharma industry. Upside in a long-term window looks compelling from today’s depressed levels.

As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.