With the expected surge in the healthcare sector, there are several companies that are expected to perform in tandem with the sector's uptrend. Healthcare as a sector is relatively safe for investment, as it is less sensitive to the economic upswings than some other highly volatile sectors. While these companies are benefiting from stock valuations, business intelligence reports and the latest market reports regarding recent acquisitions and partnerships, they also face formidable headwinds, such as heavy scrutiny of the products in their pipelines and existing range of products or services, and also the possibility of patent cliffs. I will take this opportunity to hone in on five healthcare companies that could potentially grow in tandem with the uptrend in this sector:
Intuitive Surgical, Inc. (ISRG) manufactures surgical instruments used for surgeries pertaining to gynecology, urology, neck, head and other specialized areas. The stock is currently trading at around $508, within its 52-weeks trading range of $516 and $315. With earnings per share of approximately $12.32, and price earnings of around $41, Intuitive Surgical, Inc. has a market capitalization of around $20 billion. The company has negligible competition in the arena of surgical robots, so the company will be able to keep good margins. Intuitive Surgical, Inc. participates in buying back its own shares, which aids the company in maintaining liquidity in cash balance as well as helping its investors to liquidate their stocks. The company has a strong balance sheet. The company's 'Da Vinci prostatectomy' technology is been extensively used for procedures involving hysterectomy, and is rightfully recognized as the company's primary growth driver. Moreover, the company maintains a sufficient cash balance to cover it during any unexpected volatility. In my opinion, Intuitive Surgical, Inc. should be bought at its current market price.
HCA Holdings Inc. (HCA) provides outpatient facilities through its hospital network across the U.S. The stock is currently trading at around $26, within its 52-week trading range of $35 and $17. With earnings per share of around $1 and price earnings of approximately $25, HCA Holding's market capitalization is poised at around $11. The expected growth in its earnings is approximately 10% per annum. I estimate a target price of around $32 in 12-month time period, if earning per share estimates in 2012 increase to around $4, coupled with price earnings estimate of around $7. The company's price earnings to growth ratio is $0.59. In my opinion, the stock looks undervalued at its current price level and should be purchased at its current price levels.
Smith & Nephew plc (SNN) is engaged with manufacturing of medical devices, catering to management of wounds. The stock is currently trading at around $50, within its 52-week range of 60.35 and 42.07. Having earnings per share of around $3, and price earnings of around $15, Smith & Nephew plc has a market capitalization of approximately $9 billion. The company has a healthy dividend yield of around 2.07%. The majority of company's top line projects have successfully outperformed their respective markets. The company's trailing twelve month gross margin and operating margin are around 80.38% and 21.89%, as compared to the industry gross and operating margin of 65.61% and 21.18% respectively. In order to launch new products in the market, the company invests significantly in its research and development. 'Verilast Knee' is a promising product from Smith & Nephew, which can impact the company's revenue growth to a great extent. Smith & Nephew is implementing certain strategic initiatives, such as getting into partnerships, so as to effect long term growth. I would recommend purchasing the company's stock at its current price levels.
Watson Pharmaceuticals, Inc. (WPI) is a well-known global pharmaceutical brand, catering to issues like women's health and urology. The company is involved in the manufacturing, marketing, as well as the distribution of its pharmaceutical products across the globe. The company is currently trading at around $61, within its 52-week range of $73 and $54, with earnings per share of around $2, and price earnings of $29 approximately. In 2011, the stock has gained approximately by 15.56%. The strategic outlook of the company appears to be strengthened due to its acquisition of Arrow Group. Watson Pharmaceuticals is expected to experience a boost in its performance as well as its generation of revenue, primarily through the authorized generic medications such as 'Concerta' and 'Lipitor.' In my opinion, this stock should be bought at its current price levels.
Valeant Pharmaceuticals International, Inc. (VRX) is a global company engaged in specialty pharmaceuticals. The stock is currently trading at around $48, within its 52-week range of $57.24 and $32. The market capitalization of Valeant Pharmaceuticals International, Inc. is around $14 billion, with an earnings per share of approximately $0.37, and price earnings of around $118. The company flaunts its quarterly and five-year growth rate, which is one of the best in the sector. Likewise, Valeant Pharmaceuticals International, Inc. has a quarterly growth rate of around 188%, while its five year growth rate is around 15%. The company's price target by 2013 should be around $70, wherein it should come within the range of the top 15 pharmaceutical companies functioning on the global platform. Valeant Pharmaceuticals International, Inc. has a wide array of well-diversified products in its portfolio, and it does not rely on any single product to be the basis of the company's revenue generator. In my opinion, this stock provides an excellent investment opportunity at its current market price.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.