The market outlook for the healthcare sector looks attractive for 2012. There are several prominent global companies in the healthcare sector that provide excellent opportunities for investment. In the following article, I will analyze four of these companies that are all benefiting from positive drivers such as strong drug pipelines and low pressure from competition due to highly specialized products. I found that these four companies are excellent candidates for investment. I will go into detail below:
Eli Lilly and Company (LLY) is one of the prominent healthcare companies in the global arena, having its key products cater to the area of bio-medicines, animal health, oncology, diabetes, and to emerging markets. The company is currently trading at around $38.49, within the 52-week range of $33.46 and $42.03. The company has a market capitalization of around $44.56 billion, with a PE of around 10 coming from $3.90 in earnings per share.
Eli Lilly and Company has a dividend yield of around 5%, reflecting its strong dividend payout made consistently over the years. Currently, the company is trading at a multiple of 10 relative to its past fiscal year's earnings, and at a multiple of around 10.6 relative to its projected forward earnings. The main driver of revenue growth for the company has been Cymbalta, which will continue propelling the company's performance in my opinion.
Eli Lilly and Company is also planning to implement a reduction in its cost structure to a great extent. As the company expects to face a patent cliff in the road ahead, Eli Lilly and Company will have to work towards protecting its specialized array of pharmaceutical products. In my opinion, this stock could be purchased on dips, at around $30, with a long term perspective. This is a good investment for investors who value price appreciation with dividend payouts.
Bristol-Myers Squibb Company (BMY) is currently trading at approximately $31, within its 52-week low and high of $24.97 and $35.44, respectively. With a market capitalization of around $53.97 billion, the company has a price to earnings ratio of around 14.8 coming from earnings per share of $2.16. The company has a dividend yield of around 1.36%. Relative to the 2010 full fiscal year, Bristol-Myers Squibb has shown an increase in 2011 revenue of approximately 9% to $21.2 billion.
Nearing its 52-week highs, coupled with what I think will be a strong demographic uptrend in the healthcare sector as hundreds of thousands of baby boomers retire every day, Bristol-Myers Squibb looks quite attractive for investment at the current price. However, as with other pharmaceutical companies, it is pertinent for investors to keep an eye on the company's patent expiration hurdles. This will enable investors to develop a better understanding as to how well the company is ready for the future.
Moreover, the drugs in its pipeline are very well diversified to add to its top-line range of pharmaceutical products. In my opinion, the stock should be purchased at its current market price, with a long term perspective.
Baxter International Inc.(BAX) has a market price of around $56, within its 52-week range of $47.55 and $62.50. It has a market capitalization of around $32 billion, with price earnings of approximately 14.7 and earnings per share of around $3.88. The company has a decent dividend yield of around 2.35%.
The company is well placed on a global platform manufacturing pharmaceutical products. Baxter International has shown an increase in its most recent quarter net profit margin to 16.56%. The current market price of the stock is up approximately by 10.49% over the past year.
As the company engages in the manufacturing of a non-generic range of pharmaceutical products, it has little competition in the market. Also, the company's strong investment in research and development has in fact strengthened its existing product portfolio as well as its pipeline. Its bio-science division comprises several sub-segments which show lot of potential for the company's growth. In particular, Baxter's micro-fluidic device R&D could yield big payouts down the road. In my opinion, Baxter International should be bought at current levels, with a long term perspective.
Alexion Pharmaceuticals, Inc. (ALXN) is a biopharmaceutical manufacturer of a range of products catering to chronic and rare ailments in the human body. It is currently trading at around $83, nearing its 52-week high of $85.48. The company has a price to earnings ratio of approximately 93, while its earnings per share is $0.91. Alexion Pharmaceuticals has a market capitalization of around $15.4 billion.
The company's key revenue driver is 'Soliris', a treatment to combat two rare disorders. The drug has achieved global recognition, having been approved in more than 35 countries to treat PNH (a genetic blood disorder), as well as in Europe and the U.S. for treating aHUS (a genetic disorder of the complement system). In my opinion, the company's top-line looks very attractive due to the growth potential of Soliris.
Alexion Pharmaceuticals is also implementing certain plans to restructure its costs, in order to decrease the company's level of debt. Although the company caters to a highly specialized segment of ultra-rare diseases, it faces negligible competition. In my opinion, Alexion Pharmaceuticals, Inc. should be purchased at its current market price, as a long term investment.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.