Investors can look at the current market decline in one of two ways. Some view it as a reason to throw up their hands in despair. Others see the steep pullback as an opportunity.
Which perspective you have depends primarily on how long your time horizon is. Investors with long-term mindsets can find plenty of attractive opportunities in today’s market. Here are two stocks that are ridiculously cheap right now.
1. Viatris
Viatris (VTRS 2.12%) appears to be a textbook value stock. The drugmaker’s shares currently trade at a super-low 3.05 times expected earnings. Its enterprise-value-to-revenue multiple is below 2. And the stock price is only a little over 5 times expected free cash flow.
There are two primary factors behind Viatris’ low valuation. First, its business isn’t growing. In the first quarter, revenue fell 5% year over year. Several of Viatris’ top branded drugs have lost exclusivity, and their sales declined in the face of competition.
Viatris also announced in February that it plans to sell its biosimilars portfolio to Biocon Biologics. In exchange, the company will receive $2 billion in cash up front, $1 billion in convertible preferred equity, and up to $335 million in additional payments expected in 2024.
Investors didn’t like the deal. Several of the biosimilars that Viatris will hand over to Biocon were expected to be among the company’s key growth drivers. However, Viatris believes the transaction will unlock shareholder value. In particular, the cash generated from the deal will enable the company to pay down debt.
2. Teladoc Health
Teladoc Health (TDOC 9.45%) definitely doesn’t fit the mold of most value stocks. The virtual care leader isn’t profitable yet, so you can throw earnings-based valuation metrics out the window.
However, Teladoc’s shares have plunged by more than 80% from their 52-week high. Much of that decline happened gradually as investors worried about its slowing growth. But the stock also took a sharp dip after Teladoc provided its first-quarter update in late April.
The company posted a stunning Q1 net loss of $6.67 billion, though nearly all of that loss stemmed from a $6.6 billion goodwill impairment related to Teladoc’s acquisitions (mainly, its 2020 buyout of Livongo Health).
Teladoc also lowered its full-year 2022 guidance. It attributed the revised outlook to the slower-than-expected growth of its BetterHelp behavioral health business and elongated sales cycles in the chronic condition market.
There’s a good case to be made, though, that Teladoc is now ridiculously cheap. The company still projects revenue growth in the ballpark of 20% this year. Its stock trades at less than 2.4 times expected sales.
Are they buys?
Many investors will turn their noses up at both of these stocks. However, I think that some could find them attractive.
Viatris’ dividend yield currently tops 4.5%. The company’s cash flow should continue to be strong enough to keep the payouts flowing. It remains to be seen if the Biocon deal will be worth the growth that Viatris is giving up. But many income investors will probably like the stock.
I remain an unabashed bull about Teladoc. Sure, management has lost a lot of credibility with shareholders. My view, though, is that the headwinds the company faces won’t be permanent ones. Teladoc is still the leader in virtual care and should stay at the top. I expect the stock will be worth a lot more by the end of this decade.
