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For a look into the healthcare sector, here’s a list you may be interested in.

There are many different ways to look at a company’s profitability, but one of the most telling is the sources of profitability. DuPont analysis of return on equity (ROE) profitability can indicate what sources drive changes in profitability. Because some sources are better than others, DuPont indicates the quality of a company’s growing profitability.

ROE can be broken up into three components such that increases in ROE can be attributed to those components.

ROE
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

Analyzing the sources of returns for a company, we can focus on companies with the following characteristics: Increasing ROE along with,

• Decreasing leverage, i.e. decreasing Asset/Equity ratio
• Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.

We ran DuPont analysis on stocks of the healthcare sector that are trading within 10% of their 52-week highs.

‪Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬‬


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these companies have strong profitability? Use this list as a starting-off point for your own analysis.

List sorted by increase in ROE.

1. Synergetics USA, Inc. (NASDAQ:SURG): Engages in the design, manufacture, and marketing of microsurgical instruments and consumables primarily for ophthalmology and neurosurgery markets in the United States and internationally. Market cap of $167.30M. MRQ Net Profit Margin increased to 12.91% from 7.66% year-over-year, Sales/Assets increased to 0.19 from 0.18, while Assets/Equity decreased to 1.61 from 1.65. Exhibiting strong upside momentum--currently trading 7.12% above its SMA20, 18.41% above its SMA50, and 22.4% above its SMA200. The stock has had a good month, gaining 24.77%.

2. Teleflex Incorporated (NYSE:TFX): Develops, manufactures, and supplies single-use medical devices used by hospitals and healthcare providers worldwide. Market cap of $2.48B. MRQ Net Profit Margin increased to 11.74% from 6.43% year-over-year, Sales/Assets increased to 0.10 from 0.09, while Assets/Equity decreased to 2.0 from 2.22. The stock has had a couple of great days, gaining 5.47% over the last week.

3. Thoratec Corp. (NASDAQ:THOR): Develops, manufactures, and markets proprietary medical devices used for circulatory support. Market cap of $2.22B. MRQ Net Profit Margin increased to 19.58% from 16.78% year-over-year, Sales/Assets increased to 0.17 from 0.12, while Assets/Equity decreased to 1.10 from 1.38. The stock has had a good month, gaining 12.15%.

4. Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR): Provides prescription drugs for central nervous system and inflammatory disorders. Market cap of $2.62B. MRQ Net Profit Margin increased to 38.20% from 36.84% year-over-year, Sales/Assets increased to 0.27 from 0.21, while Assets/Equity decreased to 1.27 from 1.32. Exhibiting strong upside momentum--currently trading 25.92% above its SMA20, 39.91% above its SMA50, and 84.31% above its SMA200. The stock has had a couple of great days, gaining 21.63% over the last week.

5. Intuitive Surgical, Inc. (NASDAQ:ISRG): Designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Market cap of $17.02B. MRQ Net Profit Margin increased to 27.40% from 25.15% year-over-year, Sales/Assets increased to 0.16 from 0.15, while Assets/Equity decreased to 1.16 from 1.17. The stock has had a couple of great days, gaining 5.03% over the last week.

6. Hi Tech Pharmacal Co. Inc. (NASDAQ:HITK): Develops, manufactures, markets, and sells generic, prescription, over-the-counter (OTC), and nutritional products in liquid and semisolid dosage forms in the United States. Market cap of $463.32M. MRQ Net Profit Margin increased to 24.50% from 22.08% year-over-year, Sales/Assets increased to 0.25 from 0.24, while Assets/Equity decreased to 1.13 from 1.14. The stock is a short squeeze candidate, with a short float at 16.5% (equivalent to 8.31 days of average volume). The stock has had a couple of great days, gaining 9.14% over the last week.

7. Centene Corp. (NYSE:CNC): Operates as a multiline healthcare company in the United States. Market cap of $1.79B. MRQ Net Profit Margin increased to 2.23% from 2.02% year-over-year, Sales/Assets increased to 0.64 from 0.62, while Assets/Equity decreased to 2.26 from 2.27. Exhibiting strong upside momentum--currently trading 23% above its SMA20, 19.78% above its SMA50, and 12.95% above its SMA200. The stock has had a couple of great days, gaining 25.97% over the last week.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 7 Healthcare Stocks Trading Near Highs With Strong Sources Of Profitability