The healthcare sector is generally considered a growth sector, primarily because it includes the biotech industry. However some healthcare names exhibit value company characteristics such as large dividends.
For a closer look into healthcare, we ran a screen. We began by screening for those names outperforming the market over the last quarter, with over 20% quarterly return.
We then ran a DuPont analysis on these names to find those companies with the strongest sources of profitability. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered positive things, DuPont focuses on companies with these 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)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these companies will continue to see such strong profitability? Use this list as a starting point for your own analysis.
List sorted by performance over the last quarter.
1. Integramed America Inc. (INMD): A specialty healthcare services company, manages outpatient centers offering products and services to patients and providers in the fertility and vein care segments of the health industry in the United States. Market cap at $143.52M. Price at $12.19. Performance over the last quarter at 48.27%. MRQ net profit margin at 2.61% vs. 1.39% y/y. MRQ sales/assets at 0.45 vs. 0.429 y/y. MRQ assets/equity at 1.759 vs. 1.78 y/y.
2. ZOLL Medical Corp. (ZOLL): Develops, manufactures and markets resuscitation devices and related software solutions worldwide. Market cap at $2.07B. Price at $92.83.Performance over the last quarter at 43.96%. MRQ net profit margin at 4.96% vs. 3.45% y/y. MRQ sales/assets at 0.281 vs. 0.257 y/y. MRQ assets/equity at 1.288 vs. 1.374 y/y.
3. Anika Therapeutics Inc. (ANIK): Develops, manufactures and commercializes therapeutic products for tissue protection, healing and repair. Market cap at $180.44M. Price at $13.98. Performance over the last quarter at 37.21%. MRQ net profit margin at 15.62% vs. 9.17% y/y. MRQ sales/assets at 0.139 vs. 0.114 y/y. MRQ assets/equity at 1.402 vs. 1.514 y/y.
4. Impax Laboratories Inc. (IPXL): Engages in the development, manufacture and marketing of bioequivalent pharmaceutical products. Market cap at $1.64B.Price at $24.18.Performance over the last quarter at 21.81%. MRQ net profit margin at 13.79% vs. 12.53% y/y. MRQ sales/assets at 0.2 vs. 0.143 y/y. MRQ assets/equity at 1.317 vs. 1.365 y/y.
5. Mine Safety Appliances Co. (MSA): Develops, manufactures and supplies health and safety products used by workers in the fire service, homeland security, construction and other industries, as well as the military. Market cap at $1.48B. Price at $39.46. Performance over the last quarter at 20.21%. MRQ net profit margin at 5.57% vs. 4.08% y/y. MRQ sales/assets at 0.273 vs. 0.241 y/y. MRQ assets/equity at 2.571 vs. 2.652 y/y.
*Accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.