Some indicators suggest that equity markets are currently overvalued. For instance, the S&P 500 Shiller CAPE ratio is near multi-year highs. In this environment, it pays to look for bargains, stocks that look cheap right now, given their growth prospects. Here are two examples to consider in the healthcare sector: Pfizer (PFE 0.50%) and Novo Nordisk (NVO 0.29%).
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1. Pfizer
Pfizer's shares are down substantially since they hit their all-time highs in late 2021. It's no wonder. Its financial results have been subpar in the past few years. Here's the good news. Pfizer is currently trading at 9 times forward earnings, compared to the healthcare sector's average of 18.5x. At current levels, the company's shares look attractive considering its deep pipeline that should allow it to replenish its lineup and significantly improve its financial results.
Pfizer could make significant progress toward that goal this year as the company plans to start over a dozen phase 3 studies across various candidates. Even with a modest 50% success rate in these late-stage clinical trials, the company should eventually be able to launch lucrative new products.
NYSE: PFE
Key Data Points
Two areas where Pfizer is looking to make waves are oncology and the weight loss market. Pfizer has a deep pipeline of candidates in oncology, including one called PF'4404 that looks especially promising, as it belongs to a newer class of medicines that could slowly revolutionize the cancer market. In weight loss, Pfizer's mid-stage candidate demonstrated strong efficacy and encouraging tolerability, making it a potential go-to option for patients looking to minimize side effects while offering convenient once-monthly dosing.
Pfizer's comeback won't happen overnight, but for investors willing to hold on to the stock through the next five years and beyond, now is a great time to buy the company's shares before it starts posting meaningful clinical and regulatory success.
2. Novo Nordisk
A few years ago, Novo Nordisk was the leader in the weight loss market. It has now lost that lead to its biggest rival, Eli Lilly, while it will face even more competition from other biotechs and pharma leaders in the next few years. The company's sales will decline in 2026 as well. Given all these factors, it's not surprising that the stock has lagged broader equities recently. But Novo Nordisk's shares now look too attractive to pass up, as they trade at 10.5 times forward earnings.
NYSE: NVO
Key Data Points
Can the Denmark-based healthcare giant bounce back? Novo Nordisk might not displace Eli Lilly as the leader in the weight loss market anytime soon, but given how fast this area is growing, there will be room for multiple winners. Novo Nordisk's next-gen candidates, such as CagriSema, proved more effective than Wegovy.
Novo Nordisk has other promising programs. The company's UBT251, which mimics the action of three gut hormones (no such approved product exists in the anti-obesity space yet), posted excellent results in a mid-stage study conducted in China.
Lastly, Wegovy's newer label expansions could eventually give Novo Nordisk an edge. It is now approved for metabolic dysfunction-associated steatohepatitis, while an oral version of the therapy became the first of its kind approved for weight loss. Novo Nordisk won't bounce back overnight either, but the stock's prospects look bright at current levels.
