If there is any industry for which it's hard to find beaten down stocks, it's healthcare. The healthcare sector's performance over the past year more than doubled that of the broader S&P 500 index. And yet, there are still some oversold healthcare stocks out there. Here are three such stocks that could be poised for a turnaround.
1. Air Methods ( AIRM )
Air Methods is more than 23% below its 52-week high. Shares of the provider of air emergency transport services plunged last October on disappointing preliminary third quarter earnings guidance. When the actual quarterly results were announced a couple of weeks later, Air Methods sank even more.
The stock mounted something of a comeback in early March after the company beat fourth quarter earnings estimates. Since then, though, Air Methods resumed its downslide. Could it be primed to fly again? I think so.
The lowest one-year price target of the six brokers covering Air Methods surveyed by Thomson/First Call calls is over 20% above the stock's current price. This optimistic outlook seems to be warranted in my view.
Low fuel costs should help the company control expenses. In March, Air Methods' CEO Aaron Todd pointed to 11 hospital customers that had either given verbal approval or were close to being finalized for outsourcing air transport. This trend looks good for the future. And Air Methods is branching out more into helicopter tourism, a move that appears to be paying off.
2. Enanta Pharmaceuticals ( ENTA 3.45% )
2015 hasn't been kind to Enanta Pharmaceuticals so far. The stock is down 29% year-to-date. One reason behind the slide stems from a hepatitis C drug pricing battle between Enanta's partner AbbVie and Gilead Sciences. Another is Enanta's first quarter revenue and earnings miss.
Wall Street still maintains solid expectations for this biotech, though. The consensus one-year price target for Enanta reflects an increase of nearly 15% above the current stock price. I'd say the long-term prospects for Enanta are even more encouraging.
Hepatitis C should continue to play an important role in Enanta's success. AbbVie has a phase 2b clinical trial under way involving one of the small biotech's experimental drugs. Enanta also claims a pre-clinical program focusing on another liver disease that's attracting a lot of attention -- nonalcoholic steatohepatitis, or NASH.
3. Hanger (NYSE: HGR)
Shares of orthotic and prosthetic services provider Hanger have dropped more than 30% from their 52-week high. The stock plunged in early August after Hanger badly missed earnings expectations and significantly lowered its guidance for full-year 2014.
More bad news followed in November when Hanger postponed the release of its third quarter financial results. Ultimately, even worse news emerged. In February, the company announced that it would restate financial results for multiple periods going back to 2012. Ouch.
Despite all of the gloom, analysts still see hope for Hanger. The average one-year price target estimate is more than 12% higher than the stock's current price. That target seems doable for this company with a history going back 150 years.
Hanger is the biggest and arguably the best at what it does. The company treats over 1 million orthotic and prosthetic patients each year at more than 740 locations. A cloud will definitely still hang (no pun intended) over Hanger's head until all of the financial results are restated. However, once the dust settles, there seems to be a good chance of this stock rebounding nicely.
The inevitable hedging of bets
Of course, just because these three stocks seem poised for a turnaround doesn't mean that they actually will bounce back anytime soon. Risks abound.
Air Methods could fail to lock down enough new hospital bases to achieve satisfactory growth. Enanta might encounter problems with its pipeline. Hanger's financial restatements could be worse than anyone expects. That being said, I like the chances for all three stocks. Helicopters, hepatitis C, and hope for amputees make for an intriguing combination.