Is Haemonetics Corporation (HAE) an Undervalued Healthcare Stock to Buy in 2025?

We recently published a list The 10 Worst Cheap Stocks to Buy NowIn this article, we’ll take a look at where Haemonetics Corporation (NYSE:HAE) stacks up against some of the worst cheap stocks to buy right now.

How is the market coping with interest rate cuts?

In one of our recent articles on 10 Hot Penny Stocks On the Move, we discussed how the overall macroeconomic conditions played a key role in creating an environment leading up to the upcoming Fed rate cut. Here is an excerpt from the article:

“The U.S. economy has stabilized, recession risks have been delayed, and inflation continues to decline. On August 30, Reuters reported that the Federal Reserve received new confirmation that inflation is continuing to decline. The consumer price index rose 2.5% year over year in July, and inflation remains within the Fed’s 2% target. The Fed chairman indicated that “the time has come to cut interest rates.”

Moreover, another Reuters report on the same day reported a gain for the U.S. dollar as another key inflation indicator fell in line with forecasts. The Fed is expected to cut rates by 25 basis points this month. Going forward, markets are forecasting 100 basis points of cuts by the end of 2024.

The stock market is already riding the wave of expected interest-rate cuts. On Aug. 20, CNBC reported that the stock market was rising again, putting the S&P 500 and NASDAQ on track for their eighth consecutive session of gains, their longest winning streaks this year.

While there was debate about a 25- or 50-point cut, the market was hesitant about the announcement. On September 17, CNBC reported that the S&P 500 was down after hitting a record high on Tuesday. The market hit a new record high of 5,670.81 and was down 0.1% to 5,627. The Nasdaq was up 0.1%, while the Dow Jones fell 40 points.

Traders have pushed past summer headwinds and turned their focus away from concerns about the health of the U.S. economy on expectations of a Fed rate cut. Wall Street, on the other hand, has remained muted. Analysts are hopeful that rate cuts will help boost corporate earnings growth.

Tom Lee, co-founder of Fundstrat Global Advisors, joined CNBC to discuss how the market is expected to react in the wake of the Fed’s rate cuts and after they are announced. Lee believes that one factor causing confusion among investors is the election season. The market is expected to remain in a volatile environment for the next eight weeks until the election is over. However, the Fed’s rate cuts come at a key time to give some positive effects to the market.

There are two main reasons why the interest rate cuts led to the cut, one is the fall in inflation and the other is the slower job market that needs help from the Federal Reserve. Furthermore, Lee believes that regardless of whether the Fed decides to cut by 25 or 50 basis points, the result will be positive for the market. He believes that investors should be confident for the next 12 months because whenever the Fed cuts interest rates, the win rate for the markets has been almost 100%. Furthermore, markets rise after the election regardless of who takes office.

Our methodology

To compile a list of the 10 worst cheap stocks to buy right now, we used Finviz’s stock screener. We set our filters to get cheap stocks with high short interest, i.e. stocks trading below the market average Forward P/E of 23.79, expecting positive earnings growth this year, and having high short interest. From the list of cheap stocks, we selected the 20 stocks that were most widely held by institutional investors. Once we had the aggregated list, we sorted them based on their short percentage of outstanding shares, sourced from Yahoo Finance. Note that the list is sorted in order of ascending short interest.

Why do we care about what hedge funds are doing? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A row of automated plasma collection machines in a modern laboratory.

Haemonetics Corporation (NYSE:HAE)

P/E ratio for the future: 16.55

Profit growth this year: 16.20%

Number of hedge fund owners: 28

Short % of shares outstanding: 11.90%

Haemonetics Corporation (NYSE:HAE) is an international healthcare company that offers a range of medical products and solutions. The company’s technology and solutions help reduce healthcare costs and improve patient care.

The company’s competitive advantage lies in the breadth of its portfolio. Its technology portfolio includes blood and plasma components, surgical gowns and hospital transfusion services. Haemonetics Corporation’s (NYSE:HAE) Blood Center solutions enable self-sufficient international plasma supply, helping to meet demand for plasma therapy.

The company faces challenges due to the planned CSL transition. As a result, plasma revenues declined 3% in the first quarter of fiscal 2025, while North American disposal revenues also declined 5%. The transition is expected to slow revenue growth to single-digits in fiscal 2025. Haemonetics Corporation (NYSE:HAE) ranks 8th among our worst cheap stocks to buy right now, as it has a short interest as a percentage of shares outstanding of 11.9%.

But there is a bright side to the story. While Plasma revenue fell 3% in the latest quarter, it grew 35% last year, indicating the company’s ability to drive business. What’s more, the company has achieved 68% revenue growth in the sequential periods, and management is focused on achieving individual product goals. Growth in the first quarter was driven by vessel closure devices and increased use of pressure in related procedures.

In addition, Haemonetics Corporation (NYSE:HAE) also announced full market access for VASCADE MVP XL, which has a 58% larger collagen plug, with positive results in medical procedures. The company has already achieved penetration in over 600 accounts in the U.S. and over 100 accounts in Japan. It is currently targeting entry into the European market this year. It also plans to maintain over 20% growth in the vascular sealing industry and expand its leadership position in the $2.7 billion market.

Management still expects revenue growth of 5% to 8% in fiscal 2025. It is cheap at current levels as it is trading at 16 times its forward earnings, which is a 24% discount to the sector. Analysts expect its earnings to grow 16% for the year. Furthermore, HAE was held by 28 hedge funds in Q2 2024, with a total stake worth $278.93 million. Royce & Associates is the largest shareholder in the company, with a position worth $97.6 million.

Total HAE takes 8th place on our list of the worst cheap stocks to buy right now. While we recognize HAE’s potential as an investment, our conviction is based on the belief that some AI stocks offer greater promise for higher returns, and in a shorter time frame. If you’re looking for an AI stock that’s more promising than HAE but is trading at less than 5 times earnings, check out our report on cheapest AI action.

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Disclosure: None. This article was originally published on Insider Monkey.