We recently published a list of 8 Most Undervalued Healthcare Stocks to Buy According to Analysts. In this article, we are going to take a look at where Teva Pharmaceutical Industries Limited (NYSE:TEVA)stands against other most undervalued healthcare stocks to buy according to analysts.
Rising Healthcare Costs and the Impact of Tariffs on US-China Trade in the Healthcare Sector
Healthcare prices and expenditures have been rising in the United States. Healthcare spending in the United States climbed 7.5% from 2022 to $4.9 trillion in 2023, according to the Centers for Medicare & Medicaid Services. The healthcare sector accounted for 17.6% of the US economy in 2023, up 17.4% from 2022. The two primary drivers of this rise are the expansion of private health insurance and Medicare.
As more and more US companies look to China for deals on the next promising chemical, whether in the obesity or cancer area, the effect of tariffs on this ongoing trend has become a major point of dispute in the healthcare business. On February 7, Carlo Rizzuto, managing director of Versant Ventures, discussed how tariffs affect healthcare on CNBC’s “Fast Money.” According to Rizzuto, tariffs could have two effects on the industry. The first would be goods created in China and released into the US or other markets. To understand how tariffs might affect such trade operations, the industry would need to observe how the tariffs are implemented in the market.
Second, and more specifically, China serves as a major base for contract production and research in the US healthcare sector. Therefore, anything that increases that cost is likely to make the market more challenging. The management of the healthcare industry, which is already under pressure from investors, will not be improved by cost increases.
Impact of China on Healthcare R&D and the Growing Potential of Undervalued Healthcare Stocks
The great majority of healthcare organizations use a Chinese CRO or manufacturing partner in some capacity during the research and development phase, according to Rizzuto, who discussed China’s significant influence in the pharmaceutical and healthcare industries. It, therefore, has a significant impact on how pharmaceutical and biotech businesses operate in the country. This pattern is quite frequent across all sizes of enterprises.
Simply said, healthcare companies are unable to reshore all of their externalized R&D and production to the United States due to the absence of the infrastructure necessary to manage the transfer. As a result, it is difficult to see how such a massive reshoring might take place. The costs to attain this goal can be calculated linearly with the number of tariffs implemented.
McKinsey projects that healthcare EBITDA will increase at a 7% CAGR from a baseline of $676 billion in 2023 to $987 billion in 2028. While growth is expected to be faster in some sectors (such as specialty pharmacy and HST), recovery from post-pandemic lows is expected to promote improvement in several categories. Because they enable payers and providers to function more efficiently in a complex environment, software platforms are vital to the healthcare ecosystem.
Technological innovation (such as generative AI and machine learning) continues to offer opportunities for stakeholders from all sectors by automating processes, promoting data connectivity, and generating actionable insights. Specialty pharmacy revenue is expected to expand significantly because of higher utilization and pipeline extension (as in cancer), according to McKinsey. The increased usage of specialty drugs is contributing to the continued growth of specialty pharmacy profit pools.
Our Methodology
For our methodology, we used a screener to filter healthcare stocks with a forward PE ratio of less than 15 and an analyst upside of over 20%. We then ranked the stocks based on the analyst upside as of March 30th, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up shot of various types of medicines on a table, illustrating the specialty and generic products offered by the pharmaceutical company.
Teva Pharmaceutical Industries Limited (NYSE:TEVA)
Price Target Upside: 24%
Teva Pharmaceutical Industries Limited (NYSE:TEVA) is a global leader in the pharmaceutical industry that is primarily focused on generic drugs. The company is the biggest producer of generic drugs, with more than 3,500 items in a variety of therapeutic categories. Developing, producing, and distributing both generic and specialty medications globally are all part of the company’s business plan. The corporation produces 76 billion tablets and capsules a year and touches about 200 million people every day in North America, Europe, and other regions.
Teva Pharmaceutical Industries Limited (NYSE:TEVA) made significant strides in 2024, which aided in its expansion and financial stability. Its revenue growth was driven by key items like AUSTEDO, UZEDY, and AJOVY, with AJOVY expanding by 18%, UZEDY exceeding its sales goal, and AUSTEDO witnessing a 34% rise in sales.
The inventive pipeline of the company is encouraging; late-stage drugs, including Olanzapine, Duvakitug, and ICS/SABA DARI, are making headway in clinical trials, increasing the company’s potential for future expansion. While the corporation’s API business expanded modestly, the generics business also saw good performance, which was driven by enhanced product launches and operational efficiencies. Given its strong growth and solid financials, Teva is often considered one of the most undervalued stocks in the healthcare sector, presenting a potential opportunity for investors.
Teva Pharmaceutical Industries Limited (NYSE:TEVA) announced $16.5 billion in revenue for the fourth quarter of 2024, which is a 9% year-over-year gain. Its adjusted EBITDA also increased by 9%, and its non-GAAP EPS increased by 10%. This expansion included all business areas, including APIs, generics, and new products. Strong revenue performance combined with efficient expense control is reflected in the total profitability improvement.
Overall, TEVA ranks 8th on our list of most undervalued healthcare stocks to buy according to analysts. While we acknowledge the potential of healthcare companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TEVA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.