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Nutex Health (NASDAQ: NUTX) and Elevance Health (NYSE: ELV) are having strong years, outshining the sector, but the share prices of the healthcare stocks still have plenty of room to rise.
While Nutex's shares are up more than 36% and Elevance's have risen more than 11%, they are still trading at a lower valuation than the healthcare sector's average price-to-earnings ratio of 29.75. Nutex is trading at less than 9 times trailing earnings, while Elevance is trading at less than 18 times trailing earnings.
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Let's look at why each of these companies is being overlooked and why now might be a good time to buy their shares hand over fist.
The main reason Nutex is overlooked is that it is a small-cap stock, so it isn't as well-known. Also, until the last couple of years, it wasn't profitable. The market has historically viewed small-cap hospital operators skeptically, giving disciplined investors an entry point before broader institutional coverage fully catches up with the companies' revised earnings outlooks.
The company operates 28 microhospitals and specialty hospitals across 12 states. Through the first six months, Nutex reported earnings per share of $15.87, up 2,785% year over year. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were $162.5 million, an increase of 218% over the same period a year ago. The growth shows that its core hospital and network utilization strategies are executing at scale.
Nutex also benefits from this year's changes to the Independent Dispute Resolution process. Under the No Surprises Act, the company was seeing collection backlogs. However, updated federal IDR arbitration is clearing legacy receivables, and the Centers for Medicare and Medicaid Services (CMS) administrative fee for the federal IDR process decreased from $115 to $15 per party per dispute, beginning on June 11.
The combined effect of those two changes has trimmed Nutex's contract services expenses for the first six months of the year by $52.3 million, the company said.
Elevance is one of the largest healthcare insurers in the country, but not all investors have caught on to the stock since it rebranded from Anthem in 2022.
It operates Blue Cross and/or Blue Shield plans in 14 states. More than 80% of its revenue comes from its health benefits segment, which encompasses employer-sponsored and individual plans, Medicare Advantage, Medicare supplements, Medicaid, and federal health programs.
The company is also growing its earnings from its Carelon ecosystem, which spans its pharmacy benefit manager (CarelonRx) and Carelon Services, its fastest-growing operating unit that delivers behavioral health, wellness programs, integrated care delivery, palliative care, and utilization management.
While medical loss ratios (MLRs) across managed care were volatile from 2024 to 2025 due to elevated healthcare utilization, Elevance successfully adjusted premium rates across its commercial and government risk pools. Reaffirming full-year 2026 earnings guidance signals that cost structures are fully stabilized.
The company reported revenue of $106.5 billion in the first six months, up 2% year over year. EPS was $14.73, down 15% compared to the same period in 2025. However, the company said it expects adjusted EPS for 2026 to be $27, up at least 12%, and that it expects another 12% jump in 2027.
The company gives shareholders a reason to be patient, as it repurchased 700,000 of its shares in the quarter and has $5.3 billion remaining in its current stock buyback program.
Its dividend yield is an above-average 1.74%. Elevance has raised its dividend by 164.6% over the past decade and has increased it for 15 consecutive years.
Nutex offers significant growth potential, but as a smaller company, it carries greater risk and likely more volatility. Despite its share price rise this year, the stock appears underpriced, presenting an opportunity for investors.
Elevance Health's well-funded dividend and stock buybacks make the stock well-suited for income-oriented investors. The company is expecting double-digit growth this year and next in adjusted EBITDA, thanks mainly to its Carelon health services segment. Its forward P/E of 14.52 is below its average over the past five years and below many of its competitors.
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James Halley has no position in any of the stocks mentioned. The Motley Fool recommends Nutex Health. The Motley Fool has a disclosure policy.
2 Stocks to Buy Hand Over Fist in October was originally published by The Motley Fool
