These 2 Oversold Healthcare Stocks Are too Cheap to Ignore Any Longer

Concordia Healthcare Corp. (TSX:CXR)(NASDAQ:CXRX) and Valeant Pharmaceuticals Intl Inc. (TSX:VRX)(NYSE:VRX) are oversold and could generate huge returns going forward. Which should you buy?

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The healthcare industry has been hit with a wave of weakness over the past few weeks due to concerns about price gouging, but I think this is a short-term issue that has resulted in a very attractive long-term buying opportunity. Let’s take a look at two beaten-down stocks that are now trading at very inexpensive valuations compared with both their five-year and industry averages, so you can decide which would be the best fit for your portfolio.

Concordia Healthcare Corp.

(All figures are in U.S. dollars)

Concordia Healthcare Corp. (TSX:CXR)(NASDAQ:CXRX) is a diverse healthcare company focused on legacy pharmaceutical products and orphan drugs. Its stock has risen over 27% year-to-date, but it has fallen over 40% in the last month.

At today’s levels, Concordia’s stock trades at just 12.6 times fiscal 2015’s estimated earnings per share of $4.74 and only 8.2 times fiscal 2016’s estimated earnings per share of $7.27, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 101.3 and the industry average multiple of 32.1.

I think Concordia’s stock could consistently trade at a fair multiple of at least 15, which would place its shares upwards of $71 by the conclusion of fiscal 2015 and upwards of $109 by the conclusion of fiscal 2016, representing upside of over 18% and 82%, respectively, from current levels.

In addition, Concordia pays a quarterly dividend of $0.075 per share, or $0.30 per share annually, giving its stock a 0.65% yield.

Valeant Pharmaceuticals Intl Inc.

Valeant Pharmaceuticals Intl Inc. (TSX:VRX)(NYSE:VRX) is one of the world’s largest pharmaceutical companies. Its stock has risen over 43% year-to-date, but it has fallen over 19% in the last month.

At current levels, Valeant’s stock trades at just 20.5 times fiscal 2015’s estimated earnings per share of $11.61 and only 14.8 times fiscal 2016’s estimated earnings per share of $16.12, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 185.4 and the industry average multiple of 32.1.

I think Valeant’s stock could consistently command a fair multiple of at least 25, which would place its shares upwards of $290 by the conclusion of fiscal 2015 and around $403 by the conclusion of fiscal 2016, representing upside of more than 21% and 69%, respectively, from today’s levels.

Which of these healthcare stocks should you buy today?

Concordia Healthcare and Valeant Pharmaceuticals represent two of the most attractive long-term investment opportunities in the healthcare industry today. All Foolish investors should strongly consider establishing positions in one of them.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned. Tom Gardner owns shares of Valeant Pharmaceuticals. The Motley Fool owns shares of Valeant Pharmaceuticals.

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