Uncovering bargain stocks poised for substantial growth is hard. Understanding which stocks to buy can significantly impact investment success as the world navigates through the complexities of market trends and economic landscapes. Here, the focus is on three undervalued stocks set to explode in growth. Each of these companies possesses unique strengths and strategic advantages that make them compelling choices for growth opportunities. One company on the list, renowned for its diversified healthcare services and solid revenue streams, navigates challenges with stability.
Meanwhile, the second on the list leverages its expansive market reach and operational scale to sustain growth across its healthcare and pharmacy segments. The last one on the list has a sharp pharmaceutical portfolio and strategic cost management. The company continues to demonstrate solid revenue stability amidst competitive pressures. By exploring the fundamental factors driving the growth potential of these stocks, one can gain valuable insights into these companies’ financial health, market strategies, and stability in adverse macro environments. One should understand these companies’ fundamentals to make investment decisions for a lifetime.
CVS Health (CVS)
CVS Health (NYSE:CVS) operates one of the largest United States pharmacy healthcare networks. CVS Health has several fundamental strengths supporting the company’s rapid growth potential. CVS Health derived a 3.7% increase in total revenues to $88.4 billion for Q1 2024. It is due to solid performance in its Health Care Benefits and Pharmacy & Consumer Wellness segments. This top-line growth points to the effectiveness of CVS Health’s diversified business model. This spans healthcare benefits, pharmacy services, and consumer wellness. By diversifying its revenue streams across multiple sectors, CVS Health mitigates the risks associated with fluctuations in any market segment, positioning the company for sustained growth.
Further, despite challenges in its Medicare Advantage business, CVS Health remains proactive in managing costs and enhancing its operational edge. These challenges include increased utilization and cost pressures that have impacted margins. The company derived an adjusted operating income of approximately $3 billion, which reflects its ability to navigate these challenges through strategic cost management initiatives.
In short, CVS Health is on the bargain stocks due to its diversified revenue streams across healthcare benefits, pharmacy services, consumer wellness, and operational edge.
Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance (NASDAQ:WBA) dominates retail pharmacy and healthcare. The company boasts a massive scale and market reach, with nearly 9 million customers per day through its footprint. Walgreens has demonstrated stability in managing its financial performance. For instance, in Q3 fiscal 2024, Walgreens derived a 2.6% increase in sales annually to $36.4 billion. This is due to growth across all segments. This growth highlights the company’s ability to effectively manage and grow key revenue streams even in an adverse environment.
Moreover, the US retail pharmacy segment experienced a 2.3% increase in sales and a 3.5% growth in comparable sales. This is driven by brand inflation and pharmacy volume growth. The segment’s operating income declined by 48% based on temporary challenges. This is primarily due to lower sales leaseback gains, reduced incentive accruals, and challenging retail and pharmacy industry trends. However, pharmacy comp sales grew by 5.7%, driven by brand inflation and volume growth, outperforming the overall prescription market year-to-date.
In short, Walgreens was included in the list of bargain stocks for its extensive market reach and operational scale.
Pfizer (PFE)
Pfizer (NYSE:PFE) is a pharmaceutical giant with a diverse portfolio. Excluding the impact of Comirnaty and Paxlovid, Pfizer achieved an 11% operational top-line growth. Solid performances across key products such as Vyndaqel, Eliquis, and Abrysvo drove this growth. These collectively contributed to Pfizer’s revenue stability amidst high market challenges. Specifically, Vyndaqel showed a notable 66% operational growth, particularly in the U.S. and European markets. Eliquis also demonstrated 10% operational growth. It is driven by continued US adoption as an oral anticoagulant and selected European markets.
Additionally, Pfizer’s focus on cost management and sharp improvements is evident in its adjusted gross margin improvement of 5.3% annually to 79.6% in Q1 2024. This improvement primarily stemmed from a favorable sales mix due to lower Comirnaty sales volumes and cost management initiatives across its manufacturing network. The disciplined approach to cost management also supports Pfizer’s goal of achieving at least $4 billion in net cost savings by the end of 2024, further strengthening its operational edge and financial outlook.
To conclude, it’s featured in the bargain stocks list due to its solid revenue stability driven by key products and profitability.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
As of this writing, Yiannis Zourmpanos held long positions in CVS, WBA and PFE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
