Many investors are aware of the aging baby-boomer demographic in the US, but not everyone knows how to cash in on it. Healthcare companies with strong profits and large cash reserves is one way to invest in the inverting population model. When healthcare companies can build up their cash, they gain the ability to make smart investments and acquisitions, as well as fund new research and development. Today we focused on healthcare companies of this nature, and we think you'll find our list rather interesting.
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time, this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than their competitors.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability.
Net Margin = Net Income/Total Revenue
The Current Ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a Current Ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick Ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The Quick Ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the Current Ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for small cap healthcare stocks. Next, we screened for businesses with strong profit margins (1-year operating margin>15%)(Net Margin [TTM]>10%). We next screened for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2).
Do you think these small cap stocks will go up in price? Please use our list to assist with your own analysis.
1) Hi Tech Pharmacal Co. Inc. (NASDAQ:HITK)
|Industry:||Drugs - Generic|
Hi Tech Pharmacal Co. Inc. has a Operating Profit Margin of 33.74%, a Net Margin of 23.17%, a Current Ratio of 6.94, and a Quick Ratio of 5.44. The short interest was 8.08% as of 06/21/2012. Hi Tech Pharmacal, a specialty pharmaceutical company, engages in developing, manufacturing, and marketing generic and prescription, over-the-counter (OTC), and nutritional products in liquid and semi-solid dosage forms in the United States. The company offers a range of products for various disease states, including glaucoma, asthma, bronchial disorders, dermatological disorders, allergies, pain, stomach, and oral care. Its generic pharmaceutical products include oral solutions and suspensions, topical creams and ointments, and nasal sprays.
2) Osiris Therapeutics, Inc. (NASDAQ:OSIR)
Osiris Therapeutics, Inc. has a Operating Profit Margin of 26.08%, a Net Margin of 26.21%, a Current Ratio of 9.88, and a Quick Ratio of 9.79. The short interest was 16.49% as of 06/21/2012. Osiris Therapeutics, a stem cell company, focuses on the development and marketing of therapeutic products to treat various medical conditions in the inflammatory, cardiovascular, orthopedic, and wound healing markets. It operates in two segments, Therapeutics and Biosurgery. The Therapeutics segment focuses on developing biologic stem cell drug candidates from a readily available and non-controversial source, adult bone marrow. Osiris' Biosurgery segment harnesses the ability of cells and novel constructs to promote the body's natural healing to improve surgical outcomes and offer better treatment options for patients and physicians.
3) AmSurg Corp. (NASDAQ:AMSG)
AmSurg Corp. has a Operating Profit Margin of 30.75%, a Net Margin of 24.27%, a Current Ratio of 2.94, and a Quick Ratio of 2.69. The short interest was 4.50% as of 06/21/2012. AmSurg, through its subsidiaries, engages in the development, acquisition, and operation of ambulatory surgery centers (NYSE:ASC) in partnership with physicians in the United States. The company's surgery centers perform colonoscopy and other endoscopy procedures in the areas of gastroenterology; cataracts and retinal laser surgeries in the area of ophthalmology; and knee and shoulder arthroscopy and carpal tunnel repair in the area of orthopedics. As of December 31, 2011, AmSurg operated 228 ASCs in 35 states and the District of Columbia of the United States, including 146 centers for gastrointestinal endoscopy procedures, 36 centers for ophthalmology surgery procedures, 39 multi-specialty centers, and 7 centers for orthopedic procedures.
4) Cyberonics Inc. (NASDAQ:CYBX)
|Industry:||Medical Appliances & Equipment|
Cyberonics Inc. has a Operating Profit Margin of 27.89%, a Net Margin of 16.51%, a Current Ratio of 6.99, and a Quick Ratio of 6.37. The short interest was 9.67% as of 06/21/2012. Cyberonics, a neuromodulation company, engages in the design, development, sale, and marketing of implantable medical devices that provide vagus nerve stimulation (VNS) therapy for the treatment of refractory epilepsy and treatment-resistant depression. Its proprietary VNS therapy system consists of a generator to provide the stimulation to the vagus nerve; a lead that connects the generator to the vagus nerve; associated equipment to assist with implantation surgery; equipment to assist with setting the stimulation parameters particular to the patient; instruction manuals; and magnets to suspend or induce stimulation manually. The company sells its products through a direct sales force in the United States, as well as through a combination of direct sales representatives and independent distributors internationally.
5) China Kanghui Holdings (KH)
|Industry:||Medical Appliances & Equipment|
China Kanghui Holdings has a Operating Profit Margin of 39.22%, a Net Margin of 37.35%, a Current Ratio of 5.03, and a Quick Ratio of 4.14. The short interest was 10.91% as of 06/21/2012. China Kanghui Holdings, through its subsidiaries, engages in the development, manufacture, and sale of orthopedic implants and associated instruments for trauma, spine, cranial maxillofacial, and craniocerebral. The company offers 36 product series of orthopedic implants and associated instruments for trauma and spine indications under the Kanghui and Libeier brand names. Its trauma products, used in the surgical treatment of bone fractures, include a range of nails, plates and screws, and cranial maxillofacial plate and screw systems; and spine products used in the surgical treatment of spine disorders consist of screws, meshes, interbody cages, and fixation systems.
6) ATRION Corp. (NASDAQ:ATRI)
|Industry:||Medical Instruments & Supplies|
ATRION Corp. has a Operating Profit Margin of 30.95%, a Net Margin of 21.11%, a Current Ratio of 9.23, and a Quick Ratio of 6.23. The short interest was 3.30% as of 06/21/2012. ATRION, together with its subsidiaries, develops and manufactures fluid delivery devices, and ophthalmic and cardiovascular products primarily for medical applications in the United States, Canada, and internationally. The company's fluid delivery products include luer syringe check valves and one-way valves; tubing clamps; and specialized intravenous sets for use in anesthesia and oncology applications. Its cardiovascular products include MPS2 Myocardial Protection System that delivers essential fluids and medications to the heart during open-heart surgery; cardiac surgery vacuum relief valves; silicone vessel loops for retracting and occluding vessels in minimally invasive surgical procedures; and inflation devices for balloon catheter dilation, stent deployment, and fluid dispensing, as well as products used in heart bypass surgery to make a precision opening in the heart for attachment of the bypass vessels. The company's ophthalmic products include contact lens disinfection cases; and a line of balloon catheters used in the treatment of nasolacrimal duct obstruction in children and adults.
*Company profiles and financial data were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.