Broadly speaking, the ASX-listed healthcare sector is struggling to break out of its "multi-year downgrade cycle", according to the team at Wilsons Advisory.
But that doesn't mean there aren't bargains to be had, with some shares oversold and others not yet hitting the highs they should be, according to the broking house.
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ASX healthcare stocks a bargain
Wilsons has put out a research note to clients which suggests there are genuine bargains to be had among the ASX healthcare majors.
They said regarding the sector:
After a challenging period for healthcare returns, valuations across the sector have become increasingly attractive. At the index level, the ASX 100 Healthcare sector now trades at two-decade lows on a relative P/E basis. Every Canaccord Genuity-covered ASX 100 healthcare name currently offers material upside to our equity research team's target prices. Most companies are also trading at multi-year low earnings multiples and well below historical averages, despite generally maintaining compelling growth outlooks. Broadly speaking, this backdrop presents an attractive risk/reward for the sector which – alongside compelling bottom-up stock stories – supports the Focus Portfolio's overweight exposure.
Regarding particular stocks, Wilsons says the Canaccord Genuity price target for ResMed Inc (ASX: RMD) is $46.50, implying 33% upside.
Wilsons said the sleep apnoea device maker's results were "solid", and looking forward, there was continued growth in sleep apnoea diagnoses, which boded well.
Wilsons said the valuation of the shares remained "undemanding" and they were trading well below their 10-year average from a price-to-earnings (P/E) point of view.
Cochlear Ltd (ASX: COH) shares were trading at a steep 64% discount to the Canaccord Genuity target price, Wilsons said.
They added that they believed Cochlear was "one of the highest quality companies on the ASX" with a 60% share of the cochlear implant market.
They added:
Cochlear is approaching an inflection point in its earnings growth trajectory, supported by the ongoing global rollout of Nucleus Nexa (approved in mid-2025), which is its most significant product launch in over two decades.
On to Telix Pharmaceuticals Ltd (ASX: TLX), and its shares are trading at a large 179% discount to the target price of $28.50.
Wilsons said after a challenging period, "we believe Telix offers compelling value at current levels, with the market undervaluing its diagnostics franchise and assigning limited value to its pipeline''.
Wilsons said they believe the diagnostics business is more resilient than the market appreciates, and the company also has a potential blockbuster prostate cancer treatment making its way through the clinical trial process.
And finally, for CSL Ltd (ASX: CSL), the Canaccord Genuity target price is 58% higher than the current price at $225, but Wilsons said they still held a "cautious" view on the stock, due to its negative earnings and operational momentum.
They said the company missed its forecast earnings for the first half but reiterated full-year guidance, "which implies a particularly strenuous second half contribution''.
As a result, CSL is not held within the Focus Portfolio, despite the stock offering deep value, trading below global peers for the first time in over a decade and at 15 year lows on a forward P/E basis, at 14x.
