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There are many different ways to look at a company’s profits. If the company sells a lot of inventory, such as a medical device company in the healthcare sector, one good measure is gross margin – the percentage of profits taken after deducting “cost of goods sold.”

We ran a screen on the healthcare sector for stocks seeing consistent increases in gross margin over the last four years, which most likely indicates a better control of their cost structure over time. It also indicates higher profitability.

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 are improving their operations? Use this list as a starting point for your own analysis.

List sorted by market cap.

1. Novo Nordisk A/S (NVO): Engages in the discovery, development, manufacture, and marketing of pharmaceutical products in Denmark and internationally. Market cap of $76.81B. Gross profit margins increased from 76.59% to 77.81% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 77.81% to 79.56% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 79.56% to 80.78% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). The stock has gained 5.45% over the last year.

2. Bristol-Myers Squibb Company (BMY): Develops, and delivers innovative medicines that help patients prevail over serious diseases. Market cap of $58.07B. Gross profit margins increased from 68.5% to 69.99% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 69.99% to 72.67% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 72.67% to 72.92% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.97%, current ratio at 2.03, and quick ratio at 1.85. The stock has had a good month, gaining 11.88%.

3. Eli Lilly & Co. (LLY): Develops, manufactures, and sells pharmaceutical products worldwide. Market cap of $47.17B. Gross profit margins increased from 77.2% to 78.52% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 78.52% to 80.55% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 80.55% to 81.08% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.81%, current ratio at 1.77, and quick ratio at 1.47. The stock has had a good month, gaining 10.68%.

4. Biogen Idec Inc. (BIIB): Develops, manufactures, and markets therapeutics in the areas of neurology, immunology, hemophilia, and oncology in the United States and internationally. Market cap of $26.72B. Gross profit margins increased from 89.43% to 90.19% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 90.19% to 91.27% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 91.27% to 91.51% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). The stock has gained 61.8% over the last year.

5. Covidien plc (COV): Develops, manufactures, and sells healthcare products for use in clinical and home settings in the United States and internationally. Market cap of $20.66B. Gross profit margins increased from 53.57% to 54.96% during the first time interval (52 weeks ending 2009-09-25 vs. 52 weeks ending 2008-09-26). For the second time interval, gross margins increased from 54.96% to 55.66% (52 weeks ending 2010-09-24 vs. 52 weeks ending 2009-09-25). And for the final time interval, gross margins increased from 55.66% to 56.83% (53 weeks ending 2011-09-30 vs. 52 weeks ending 2010-09-24). The stock has lost 5.24% over the last year.

6. Intuitive Surgical, Inc. (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 $16.85B. Gross profit margins increased from 68.95% to 70.95% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 70.95% to 71.38% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 71.38% to 72.89% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). The stock has gained 59.74% over the last year.

7. HCA Holdings, Inc. (HCA): Offers health care services in the United States. Market cap of $9.27B. Gross profit margins increased from 83.64% to 83.72% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 83.72% to 83.8% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 83.8% to 83.83% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). The stock has performed poorly over the last month, losing 15.25%.

8. Smith & Nephew plc (SNN): Develops, manufactures, markets, and sells medical devices in the orthopaedics, endoscopy, and advanced wound management sectors worldwide. Market cap of $7.90B. Gross profit margins increased from 70.5% to 71.67% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 71.67% to 72.69% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 72.69% to 73.98% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). The stock has lost 12.71% over the last year.

9. Edwards Lifesciences Corp. (EW): Offers products and technologies designed to treat advanced cardiovascular disease worldwide. Market cap of $7.71B. Gross profit margins increased from 65.34% to 66.1% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 66.1% to 69.8% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 69.8% to 71.78% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). The stock has lost 19.79% over the last year.

10. Watson Pharmaceuticals, Inc. (WPI): Engages in the development, manufacturing, marketing, sale, and distribution of generic and brand pharmaceutical products focused on urology and women's health in the United States, western Europe, Canada, Australasia, South America, and South Africa. Market cap of $7.59B. Gross profit margins increased from 39.73% to 40.73% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 40.73% to 42.83% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 42.83% to 43.97% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). The stock has gained 15.56% over the last year.

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

Source: 10 Healthcare Stocks With Consistently Rising Gross Profits