Morningstar’s outlook for healthcare stocks

31 December 2015

Damien Conover, director of healthcare equity research, at Morningstar, has published its outlook for healthcare stocks on Morningstar.com.

The recent market uptick in healthcare has pushed the valuation of the sector to slightly undervalued, with the group trading close to 4% below our analysts' fair value estimates in aggregate. However, some stocks still look significantly undervalued, including Amgen (Nasdaq: AMGN), Biogen (Nasdaq: BIIB) and BioMarin Pharmaceutical (Nasdaq: BMRN).
Despite increasing political rhetoric coming out of Washington, Morningstar’s analysts expect pricing power for drug and biotech companies to remain strong.
Adding to some healthcare valuations (especially smaller potential healthcare targets), mergers and acquisitions continue at a rapid pace as large conglomerates look for growth avenues and opportunities to cut costs, partly through lowering taxes.
Strong drug launches and excellent clinical data in specialty-care areas, such as oncology, are increasing the productivity of drug and biotech companies.

The commentary is part of Morningstar’s Quarter-End Insights.

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