5 High-Growth Healthcare Stocks Fueled By Large Cash Reserves

by: ZetaKap

It's no secret that the healthcare industry is full of growth opportunities. But where to start your search? One place to look is for the healthcare stocks that have amassed sizeable cash reserves, and that are projected for growth over the long term. The idea is that cash reserves used wisely could both accelerate and greaten the company's future growth, which could translate to higher ROI for investors. If stocks with these traits pique your interest, you will probably like the list of healthcare companies that we came up with.

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).

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 5-Year Expected EPS Growth Rate is a long term annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.

We first looked for healthcare stocks. We next screened for businesses that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We then looked for businesses that have expected earnings per share growth of more than 25 percent for the next five years(5-year projected EPS Growth Rate>25%). We did not screen out any market caps.

Do you think these stocks have strong enough fundamentals to move higher? Use our list along with your own analysis.

1) Volcano Corporation (VOLC)

Sector: Healthcare
Industry: Medical Appliances & Equipment
Market Cap: $1.58B
Beta: 0.32
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Volcano Corporation has a Current Ratio of 5.93, a Quick Ratio of 5.21, and a 5-Year Projected Earnings Per Share Growth Rate of 26.00%. The short interest was 8.39% as of 07/08/2012. Volcano Corporation designs, develops, manufactures, and commercializes intravascular ultrasound (IVUS) and fractional flow reserve (FFR) products used in the diagnosis and treatment of vascular and structural heart disease. It offers multi-modality consoles, which are marketed as stand-alone units that can be integrated into hospital-based interventional surgical suites, such as catheterization laboratories. The company provides IVUS products, including single-procedure disposable phased array and rotational IVUS imaging catheters; and additional functionality options comprising virtual histology tissue characterization, and ChromaFlo stent apposition analysis.

2) DUSA Pharmaceuticals Inc. (DUSA)

Sector: Healthcare
Industry: Drug Manufacturers - Other
Market Cap: $132.63M
Beta: 0.80
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DUSA Pharmaceuticals Inc. has a Current Ratio of 6.61, a Quick Ratio of 6.03, and a 5-Year Projected Earnings Per Share Growth Rate of 27.00%. The short interest was 5.76% as of 07/08/2012. DUSA Pharmaceuticals, Inc., a vertically integrated dermatology company, develops and markets Levulan photodynamic therapy (PDT) and other products for common skin conditions primarily in the United States, Canada, and Korea. The company's marketed products include Levulan Kerastick 20% Topical Solution with PDT, as well as the BLU-U brand light source for the treatment of non-hyperkeratotic actinic keratoses of the face or scalp. It also markets the BLU-U without Levulan PDT for the treatment of moderate inflammatory acne vulgaris and general dermatological conditions.

3) ZELTIQ Aesthetics, Inc. (ZLTQ)

Sector: Healthcare
Industry: Medical Appliances & Equipment
Market Cap: $193.91M
Beta: -
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ZELTIQ Aesthetics, Inc. has a Current Ratio of 6.05, a Quick Ratio of 5.69, and a 5-Year Projected Earnings Per Share Growth Rate of 30.00%. The short interest was 3.47% as of 07/08/2012. ZELTIQ Aesthetics, Inc., a medical technology company, engages in developing and commercializing non-invasive products for the selective reduction of fat. The company offers CoolSculpting System, which utilizes proprietary controlled-cooling technology to selectively reduce stubborn fat bulges that may not respond to diet or exercise. It sells its products through a network of distributors, as well as direct sales force to dermatologists, plastic surgeons, and aesthetic specialists in North America and internationally.

4) Dendreon Corp. (DNDN)

Sector: Healthcare
Industry: Biotechnology
Market Cap: $1.08B
Beta: 3.91
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Dendreon Corp. has a Current Ratio of 7.35, a Quick Ratio of 6.49, and a 5-Year Projected Earnings Per Share Growth Rate of 27.50%. The short interest was 22.63% as of 07/08/2012. Dendreon Corporation, a biotechnology company, engages in the discovery, development, and commercialization of novel therapeutics to enhance cancer treatment options for patients. The company's product portfolio includes active cellular immunotherapy and small molecule product candidates to treat a range of cancers. The company offers PROVENGE (sipuleucel-T), an autologous cellular immunotherapy for the treatment of asymptomatic or minimally symptomatic, metastatic, castrate-resistant (hormone-refractory), and prostate cancer. Its product candidates under development comprise DN24-02, an investigational cellular immunotherapy targeted towards HER2/neu for the treatment of patients with bladder, breast, ovarian, and other solid tumors; carbonic anhydrase 9, an antigen expressed in renal cell carcinoma; carcinoembryonic antigen, an antigen expressed in colorectal and other cancers; and TRPM8, a small molecule to treat multiple cancers in advanced cancer patients.

5) Palomar Medical Technologies Inc. (PMTI)

Sector: Healthcare
Industry: Medical Appliances & Equipment
Market Cap: $168.35M
Beta: 1.35
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Palomar Medical Technologies Inc. has a Current Ratio of 8.02, a Quick Ratio of 6.47, and a 5-Year Projected Earnings Per Share Growth Rate of 34.00%. The short interest was 4.59% as of 07/08/2012. Palomar Medical Technologies, Inc., together with its subsidiaries, designs, manufactures, markets, and sells lasers and other light-based products, and related disposable items and accessories for use in dermatology and cosmetic procedures. It provides a range of products based on proprietary technologies that address various cosmetic issues, including hair removal; body sculpting comprising laser-assisted liposuction; removal of vascular lesions, such as rosacea, spider veins, port wine stains, and hemangiomas; wrinkle reduction; removal of leg veins; removal of benign pigmented lesions, including age and sun spots, freckles, and melasma; tattoo removal; acne treatment; skin resurfacing; treatment of red pigmentation in hypertrophic and keloid scars; treatment of verrucae, skin tags, and seborrheic keratosis; skin tightening through soft tissue coagulation; scars comprising acne scars, stretch marks, and warts; and soft tissue coagulation. The company's proprietary technology products include EsteLux pulsed light system, Palomar MediLux pulsed light system, StarLux 300 and StarLux 500 pulsed light and laser systems, Aspire body sculpting system and SlimLipo handpiece, Artisan Platform facial rejuvenation system, Palomar Icon aesthetic system, Acleara acne clearing system, Adivive fat transfer system, SkinTel melanin reader, Palomar Q-YAG 5 system, and Palo Via skin renewing laser.

*Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.