If you’re a fan of the hit TV show Shark Tank, you’ve probably come across the intriguing term “unicorn” companies. Indeed, these fantastical entities are not only confined to the realm of imagination. In the field of finance, they are very real and coveted by venture investors looking for promising enterprises and valuations. The term “unicorn” in these contexts refers to privately owned companies whose valuations exceed the golden figure of $1 billion, and healthcare stocks are among the elite.
Rather than looking for the next unicorn startup, we wanted instead to look at established companies that possessed “unicorn” qualities. Today, we’re highlighting companies that have been undervalued and have amazing growth prospects. There are hundreds of small pharmaceutical and biotech companies vying for attention, creating innovative products and growing at explosive speeds. In this article, we’ll spotlight seven healthcare stocks with “unicorn”-like metrics that investors should look into.
United Therapeutics (UTHR)
United Therapeutics (NASDAQ:UTHR) creates unique products to help those with life-threatening and rare conditions. Its organ manufacturing program designed to combat the ongoing organ shortage has been a particular highlight for this company. With consistent new products and even a recently announced acquisition, United Therapeutics is undeniably primed for growth. In fact, ten Yahoo! Finance analysts predict the stock to trade within a range of $170.00 to $375.00 and an average of $284.60.
Last week, United Therapeutics announced plans to acquire Miromatrix Medical (NASDAQ:MIRO) for $91 million. This acquisition will accelerate the company towards making bioengineered organs, such as the liver and kidney, a reality for saving patient’s lives. Miromatrix’s newest technology is believed to efficiently scale the production of the liver and kidney.
Looking at the financials, United Therapeutics has a discounted P/E ratio of 12.70. Additionally, its revenue and profit have grown at around a 10% rate over the past year. Being so undervalued and yet consistently growing makes UTHR a unicorn among healthcare stocks.
Ginkgo Bioworks (DNA)
Ginkgo Bioworks (NYSE:DNA) automates organism design by developing crop treatments and medicine using living organisms to advance bioengineering processes. Yahoo! Finance analysts estimate that this stock will trade with a one-year range of $1.25 – $12, with an average of $4.02.
Being a part of the biotech industry, Ginkgo Bioworks faces constant FDA uncertainty around developing new drugs and products. However, while its $2.996 billion market cap is on the low end, its revenue is expected to grow by 24.39% in the coming years. With this great risk comes great reward.
While operating at a loss for the past couple of years, we have faith that this company is worth the risky undertaking. In its efforts to help other synthetic biology companies also grow, Ginkgo recently helped fund a program alongside Zymergen. With exciting new plans to create plant-based alternatives to meat, as well as medical undertakings with cell programming, we strongly recommend this company as a great buy if you’re looking for healthcare stocks.
Next among the healthcare stocks is DaVita (NYSE:DVA), a company that provides dialysis to patients dealing with kidney problems. With a market cap of just over $7 billion, the stock is up over 17% in the past year. Six Yahoo! Finance analysts have an average one-year price target of $113.00, which is a great upside to the current share price of $80.09.
The company has been cutting costs in its dialysis treatment and is massively undervalued. Its current P/E ratio of 12.77 is far below the sector median of 16.42 and its own five-year average of 13.95. The company’s growth prospects also appear to be equally as strong. In the next year, its EPS is expected to grow over 13% to reach a value of $7.52. This growth is only going to explode in the next five years with EPS expected to hit a staggering amount of $19.91.
Alkermes (NASDAQ:ALKS) focuses on innovating to provide new medicines, particularly for cancer, neurodegenerative and central nervous system diseases. It is also a mid-cap company with a market cap of $4.17 billion. The stock is up over 8% in the past year with an average Yahoo! Finance one-year price target of $35.80, way above the current share price of $25.25.
The company has recently been experiencing strong growth with its drug Lybalvi and this growth is only expected to soar in the coming years. For the fiscal year of 2023, EPS is expected to rocket up to $1.63, a more than 380% growth YoY. This is expected to continue in the long run as well with EPS expected to hit $3.18 by 2028. The company is also extremely undervalued as well. Its current P/E of 18.50 is trading far below its five-year average of 48.75.
Amphastar Pharmaceuticals (AMPH)
Another option in healthcare stocks is Amphastar Pharmaceuticals (NASDAQ:AMPH), a company focused on producing intranasal and inhalation products. It is a mid-cap company with a $2.29 billion market cap, and a stock that is up over 68% in the past year. Yahoo! Finance analysts gave it a one-year price target of $69.00, far above the current price of $46.83.
AMPH is undervalued, with a 19.58 P/E ratio that is trading far below its five-year average of 31.94. Assuming reversion to the mean, this presents the stock with a huge upside going forward. To support this valuation, the stock also has great earnings prospects. Its EPS is expected to hit $2.67 by the end of the year, a more than 35% growth YoY. This growth is also expected to continue in the long term with EPS expected to hit $6.50 by 2027.
Jazz Pharmaceuticals (JAZZ)
Jazz Pharmaceuticals (NASDAQ:JAZZ) produces and commercializes pharmaceutical products specific to sleep medicines, oncology and tumors to an international audience. The company is expected to trade at a one-year price target of $201.06 by Yahoo! Finance analysts.
On June 2, 2023, Jazz Pharmaceuticals announced positive progress in its partnership with Zymeworks (NASDAQ:ZYME). With new progressions in 2B trial data, it will no doubt be able to continue establishing a lead set of offerings against its competitors.
Looking at Jazz’s financials, we see that it has a FWD P/E ratio of 7.10, a steal when compared to its sector median of 18.45. While the company is currently going through issues with positive net EPS and earnings, many analysts believe this company will be able to carve out a niche worthy of being “unicorn”-like healthcare stocks.
OraSure Technologies (OSUR)
OraSure Technologies (NASDAQ:OSUR) delivers innovative health and wellness diagnostic and sampling tools, best known for its rapid diagnostics for Covid-19, Ebola and HIV. 5. While the stock did go through a period of reversion after the severity of Covid-19 died down, the stock has been making strides in improving profitability and operating efficiency and is currently up over 25% YTD.
Looking at OraSure Technologies’ valuation, we can immediately see that it is still sitting at a huge discount with a P/E ratio of 5.48, compared to its industry median of 16.74. On the financial side of things, we notice that while Orasure has consistently boasted gross margins of over 50%, it has largely been plagued with issues with R&D and operating costs. However, its partnership with Quest Diagnostics (NYSE:DGX) earlier this year has proven a strong driver in helping the company generate positive cash flow. Having seen streamlined organizational efficacy and collaboration, the company maintains its prospects towards robust growth. Even without Covid-19 testing and diagnostics factored in, OSUR remains a strong cheap pick for any investor looking for a potential healthcare “unicorn.”
On the date of publication, Ian Hartana and Vayun Chugh did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chandler Capital is the work of Ian Hartana and Vayun Chugh.