These 3 Healthcare Stocks Are Ridiculously Cheap

By Markets

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Who doesn't like a good bargain? The good news for investors looking to increase their exposure to healthcare is that there are several bargains to be found right now. Here are three healthcare stocks that are ridiculously cheap.

Supply and demand

AMN Healthcare Services (NYSE: AHS)is in the right place at the right time. Physicians, nurses, and other healthcare professionals are in high demand, and researchers predict shortages of healthcare professionals in the coming years. Hospitals and other healthcare facilities must scramble to fill open positions. AMN Healthcare's business is to help them do so.

Business is booming, with AMN reporting record revenue and earnings in its most recent quarter. Much of the company's growth is being achieved organically, but AMN Healthcare continues to make acquisitions. In June the company bought Peak Health Solutions to expand into medical coding and consulting; earlier in the year, AMN acquired healthcare executive search firm B.E. Smith.

Wall Street thinks highly of the company -- and its stock. Out of eight analysts covering the company, four rate the stock as a buy, with the other four giving AMN Healthcare a strong buy rating. The average analyst price target for AMN's shares represents a 57% premium over the current price.

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The really good news about AMN Healthcare is that the stock has an attractive valuation, especially considering its terrific growth potential. AMN trades at 14 times trailing 12-month earnings. I think this stock is a smart buy for investors looking to profit from the supply-and-demand dynamics in the healthcare industry.

Taking flight

Air Methods (NASDAQ: AIRM) is technically a services company. However, I view the stock as a healthcare play for an important reason: Over 80% of its revenue comes from providing air medical services, making Air Methods the largest provider of air medical services in the U.S.

The company's size gives it economies of scale that allow it to compete effectively against rivals. And Air Methods continues to get even larger through strategic acquisitions. The company bought Tri-State Care Flight earlier this year; Tri-State provides critical-care transport in Arizona, New Mexico, Nevada, and Colorado.

While Air Methods' revenue and earnings are growing, the company can experience some choppiness in its quarterly results. In particular, adverse weather conditions can affect the volume of flights. However, around 80% of Air Methods' revenue stems from fixed monthly fees paid by hospitals and other customers. These steady monthly payments shield the company from huge swings in its financial results from quarter to quarter.

Analysts are almost as enthusiastic about Air Methods as they are about AMN Healthcare. Half of the six analysts covering the company recommend the stock as a buy, with the other half giving Air Methods a strong buy rating. The consensus price target for the stock is more than 50% above the current price of Air Methods shares.

Investors don't have to worry about paying a sky-high price for the air medical transport stock, though: Air Methods trades for less than 11 times trailing 12-month earnings.

Boring is beautiful

AmerisourceBergen (NYSE: ABC) competes in what many might consider a boring industry -- drug wholesale distribution. But when you look at the company's prospects, you might find that boring is beautiful.

There's no question that AmerisourceBergen and other drug distributors face challenges. In particular, an increase in the rate of generic-drug price deflation and fewer generic launches have resulted in headwinds. However, the company seems to be taking the right steps to overcome these hurdles. AmerisourceBergen grew revenue by nearly 8% year over year in the most recent quarter; adjusted earnings per share jumped 14% compared to the prior-year period.

Like AMN Healthcare and Air Methods, AmerisourceBergen is no stranger to acquisitions. The drug distributor bought MWI Veterinary Supply and PharMEDium, a provider of outsourced compounded sterile preparations, in 2015.

What does Wall Street think about AmerisourceBergen? Analysts are admittedly less enthusiastic about the stock than they are the other two cheap healthcare stocks discussed here. Of the 17 analysts covering the company, 12 maintain a hold rating for the stock. However, one analyst gives AmerisourceBergen a buy rating, and another four rate it a strong buy. Still, the analysts' average one-year price target for the stock reflects an increase of nearly 15% above the current share price.

AmerisourceBergen's price-to-earnings multiple is just under 11; that's well below some of its peers. Considering that the company signed its biggest customer to another five-year deal and its acquisitions are making solid contributions, I think this is a cheap healthcare stock worth considering.

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Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Air Methods and AMN Healthcare Services. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.