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I wanted to take a look at four major pharmaceutical companies that have demonstrated profit margins of at least 13%. For this particular screen, I established four criteria that should attract both income and growth driven investors. Each company must have:

  • Minimum Return On Equity (ROE) of 9.50%
  • Minimum Return On Assets (ROA) of 6.25%
  • Minimum Profit Margin (PM) of 13.00%
  • Minimum Dividend Yield (YLD) of 3.00%

Symbol

Price

ROE

ROA

PM

YLD

MRK

$44.19

12.42%

6.36%

14.46%

3.90%

PFE

$23.62

9.55%

6.40%

14.45%

3.80%

GSK

$45.44

54.09%

12.63%

18.44%

4.80%

ABT

$66.46

20.32%

8.39%

13.01%

3.10%

Merck: Shares of MRK closed trading at $44.19/share at the close of Tuesday's session, making the stock very attractive at current levels. Trading in a 52-week range of $29.47/share (52 week low) and $44.37/share (52 week high), Merck has surpassed analysts in each of the last four quarters by an average of 1.6% and is estimated to grow 6.3% for the quarter and 1.3% for the year.

There are several reasons why I'm attracted to Merck. The company demonstrated a profit margins of 14.46%, which ranks second of the four companies screened and has also demonstrated a reasonable ROE (12.42%) and ROA (6.36%). If growth continues at a very conservative pace through the second half of 2012, potential investors could see the stock begin to trade in the high 40s or even the low 50s. The income investor should find the company's 3.9% yield very attractive, considering it carries the third highest yield of the Dow 30 stocks.

Pfizer: Shares of PFE closed trading at $23.62/share at the close of Tuesday's session, making the stock pretty attractive at current levels. Trading in a 52-week range of $16.63/share (52 week low) and $23.73/share (52 week high), Pfizer has surpassed analysts in each of the last four quarters by an average of 5.6% and is estimated to grow 5.4% for the year.

There are several reasons why I'm attracted to Pfizer at current levels. First, the company has demonstrated profit margins of 14.45% and has a reasonable ROE (9.55%) and ROA (6.40%). If growth continues at a moderate pace through the second half of 2012, potential investors could see the stock begin to trade in the high 20s or even the low 30s. The income investor should find the company's 3.8% yield very attractive, considering it carries the fifth highest yield of the Dow 30 stocks.

GlaxoSmithKline: Shares of GSK closed trading at $45.44/share at the close of Tuesday's session, making the stock pretty attractive at current levels. Trading in a 52-week range of $38.76/share (52 week low) and $47.48/share (52 week high), GlaxoSmithKline is expected to grow 31.0% for the quarter and 31.7%, which is roughly 3.13 times that of the S&P for the quarter and 3.56 times that of the S&P 500 for the year.

There are several reasons why I'm attracted to GSK, especially at current levels. First, the company has demonstrated profit margins of 18.44%, which ranks first of the four companies screened and has demonstrated a very nice ROE (54.09%) as well as ROA (12.63%). If growth continues at its current pace through the second half of 2012, potential investors could see the stock begin to trade in the high 40s or even the low 50s. The income investor should find the company's 4.8% yield very attractive, considering it is one of the highest among the major pharmaceutical companies.

Abbott Laboratories: Shares of ABT closed trading at $66.46/share at the close of Tuesday's session, making the stock pretty attractive at current levels. Trading in a 52-week range of $46.29/share (52 week low) and $66.61/share (52 week high), Abbott Labs announced very strong second earnings today, as the company surpassed estimates by $0.01/share, and demonstrated a 9.8% increase over the same period last year.

There are several reasons why I'm attracted to ABT, especially at current levels. First, the company has demonstrated profit margins of 13.01%, and a very nice ROE (20.32%) as well as ROA (8.39%). If growth continues at a reasonable pace through the second half of 2012, potential investors could see the stock begin to trade in the higher 60s or even the low 70s. The income investor should find the company's 3.1% yield moderately attractive, when compared to that of the other companies in the screen.

Source: 4 Major Pharma Plays With Attractive Profit Margins