Many healthcare investors focus on faster-growing companies, or those in faster-growing segments of the sector, but it’s a great place to find undervalued gems as well. Although plenty of stocks in this category are cheap for a reason, and are at risk of becoming value traps<\/a>, there are a few where the market has overreacted, creating an ideal situation for contrarian investors.<\/p>\n That’s the situation with the following three undervalued healthcare stocks.<\/p>\n Image source: Getty Images.<\/p>\n 1. DaVita is not the value trap it appears to be at first glance<\/p>\n So far this year, shares in dialysis center operator DaVita (DVA<\/a> +0.91%) have slumped, falling by around 14% since January. A variety of factors have put pressure on the stock.<\/p>\n These have included disappointing quarterly earnings releases, a ransomware attack, and reports on Warren Buffett’s Berkshire Hathaway, a longtime DaVita shareholder, trimming its position.<\/p>\n However, while all of this gives DaVita some serious value-trap vibes, there are silver linings to these perceived negatives. Berkshire’s steady selling has to do with a shareholder agreement in which it sells shares back to DaVita when its ownership percentage exceeds 45%. This happens often because DaVita continues to aggressively repurchase shares<\/a>.<\/p>\n Today’s Change<\/p>\n (0.91%) $1.17<\/p>\n Current Price<\/p>\n $129.19<\/p>\n Key Data Points<\/p>\n Market Cap<\/p>\n $9B<\/p>\n Day’s Range<\/p>\n $128.48 – $130.47<\/p>\n 52wk Range<\/p>\n $122.92 – $179.60<\/p>\n Volume<\/p>\n 699K<\/p>\n Avg Vol<\/p>\n 767K<\/p>\n Gross Margin<\/p>\n 27.13%<\/p>\n Dividend Yield<\/p>\n N\/A<\/p>\n Regarding earnings, DaVita is expanding internationally. This growth, coupled with the stability of its U.S.-based core business, could mean more well-received quarterly earnings releases in the future. The stock, trading at a forward price-to-earnings ratio (P\/E)<\/a> of 11, could experience valuation expansion<\/a> as well.<\/p>\n 2. Merck could surge once its patent expiration issue is resolved<\/p>\n Merck (MRK<\/a> +0.36%) has yet to release a blockbuster drug<\/a> for weight loss, but the pharmaceutical giant continues to report strong earnings, namely from its cancer drug Keytruda. The issue, however, is that the drug’s patent protection expires in 2028.<\/p>\n When that happens, the release of generic biosimilars<\/a> will likely lead to a severe reduction in Keytruda sales. So it’s not surprising you can buy this stock today for just 9 times forward earnings. However, Merck could find a solution to this big problem.<\/p>\n Today’s Change<\/p>\n (0.36%) $0.31<\/p>\n Current Price<\/p>\n $87.49<\/p>\n Key Data Points<\/p>\n Market Cap<\/p>\n $219B<\/p>\n Day’s Range<\/p>\n $87.11 – $88.06<\/p>\n 52wk Range<\/p>\n $73.31 – $105.11<\/p>\n Volume<\/p>\n 7.9M<\/p>\n Avg Vol<\/p>\n 12M<\/p>\n Gross Margin<\/p>\n 75.25%<\/p>\n Dividend Yield<\/p>\n 0.04%<\/p>\n The launch of Keytruda Qlex, a subcutaneously administered version, may mitigate the impact. Merck also has 20 potential blockbuster drugs in its pipeline, representing $50 billion in potential revenue. If these efforts calm worries about Keytruda, the stock could experience a moderate re-rating to a forward valuation in the low to mid-teens, on par with other pharma stocks.<\/p>\n 3. Earnings growth could boost Universal Health Services<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/10\/financial-health-stethoscope-money-cash-hundred-bills-medical-healthcare.jpg\"\/)
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