It's no secret that the healthcare sector carries tons of growth opportunities, especially when considering the long-term, but it's not exactly clear where investors should start their search if they want to cash in. One good starting point is to look at healthcare stocks that have steadily built up strong stockpiles of liquid assets, and that are projected to grow over the next five years. We focus on this because if the cash reserves are spent wisely enough, that could translate into even greater future growth, which could produce a higher ROI for investors. If healthcare stocks that fit this bill sound interesting, you will like the list of companies we found.
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. From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). From here, we then looked for companies with estimated high-growth, with 5-year projected EPS growth above 25%. We did not screen out any market caps.
Do you think these stocks hold value that has yet to be priced in? Use our screened list as a starting point for your own analysis.
1) Corcept Therapeutics Incorporated (CORT)
Corcept Therapeutics Incorporated has a Current Ratio of 11.98, a Quick Ratio of 11.97, and a 5-Year Projected Earnings Per Share Growth Rate of 30.00%. The short interest was 5.11% as of 07/18/2012. Corcept Therapeutics Incorporated, a pharmaceutical company, engages in the discovery, development, and commercialization of drugs for the treatment of severe metabolic and psychiatric disorders. It focuses on disorders that are associated with a steroid hormone called cortisol. The company focuses on commercializing Korlym (mifepristone) 300 mg Tablet, a once-daily oral medication for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing's syndrome, who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery.
2) Isis Pharmaceuticals, Inc. (ISIS)
|Industry:||Drug Manufacturers - Other|
Isis Pharmaceuticals, Inc. has a Current Ratio of 5.63, a Quick Ratio of 5.55, and a 5-Year Projected Earnings Per Share Growth Rate of 30.00%. The short interest was 11.29% as of 07/18/2012. Isis Pharmaceuticals, Inc. engages in the discovery and development of antisense drugs using antisense drug discovery platform. Its product pipeline comprises 26 drugs to primarily treat cardiovascular, metabolic, severe, and rare diseases, as well as cancer. The company's flagship product, KYNAMRO, is an apo-B synthesis inhibitor in development for the reduction of low-density lipoprotein cholesterol.
3) Emergent BioSolutions, Inc. (EBS)
Emergent BioSolutions, Inc. has a Current Ratio of 5.57, a Quick Ratio of 5.17, and a 5-Year Projected Earnings Per Share Growth Rate of 32.00%. The short interest was 4.70% as of 07/18/2012. Emergent BioSolutions, Inc., a biopharmaceutical company, engages in the development, manufacture, and commercialization of vaccines and therapeutics for use in defense and commercial markets to healthcare providers and purchasers in the United States and internationally. It markets BioThrax, a vaccine for the prevention of anthrax disease. The company's products also include BioThrax PEP, which is in Phase III clinical trials; PreviThrax ands Anthrivig that are in Phase II clinical trials; and NuThrax and Thravixa, which are in Phase I clinical trials for the treatment of Anthrax.
4) MELA Sciences, Inc. (MELA)
|Industry:||Medical Instruments & Supplies|
MELA Sciences, Inc. has a Current Ratio of 15.14, a Quick Ratio of 14.88, and a 5-Year Projected Earnings Per Share Growth Rate of 32.50%. The short interest was 23.33% as of 07/18/2012. MELA Sciences, Inc., a medical device company, focuses on the design, development, and commercialization of a non-invasive point-of-care instrument to aid in the detection of melanoma under the MelaFind brand name. The company's MelaFind system consists of a hand-held component that employs high precision optics and multi-spectral illumination; a proprietary database of pigmented skin lesions; and lesion classifiers, which are mathematical algorithms that extract lesion feature information and classify lesions. Its hand-held component emits light of multiple wavelengths to capture digital data from clinically atypical pigmented skin lesions, which is then analyzed utilizing classification algorithms trained at its proprietary database of melanomas and benign lesions to provide information to assist in the management of the patient's disease, including information useful in the decision of whether to biopsy the lesion.
5) Pacific Biosciences of California, Inc. (PACB)
Pacific Biosciences of California, Inc. has a Current Ratio of 8.93, a Quick Ratio of 8.33, and a 5-Year Projected Earnings Per Share Growth Rate of 30.00%. The short interest was 6.33% as of 07/18/2012. Pacific Biosciences of California, Inc., a development stage company, develops, manufactures, and markets an integrated platform for genetic analysis. The company engages in developing a technology platform that enables single molecule, real-time (SMRT) for the detection of biological processes. It primarily focuses on the deoxyribonucleic acid sequencing market.
6) Cyberonics Inc. (CYBX)
|Industry:||Medical Appliances & Equipment|
Cyberonics Inc. has a Current Ratio of 6.99, a Quick Ratio of 6.37, and a 5-Year Projected Earnings Per Share Growth Rate of 28.33%. The short interest was 9.83% as of 07/18/2012. Cyberonics, Inc. engages in the design, development, marketing, and sale of implantable medical devices. It offers vagus nerve stimulation therapy (VNS Therapy), a neuromodulation therapy for the treatment of refractory epilepsy and treatment-resistant depression, and other device solutions for the management of epilepsy. Its proprietary VNS Therapy System includes an implantable pulse generator to provide stimulation to the vagus nerve; a lead that connects the generator to the vagus nerve; equipment to assist with the implant procedure; equipment to assist the treating physician with setting the stimulation parameters for each patient; instruction manuals; and magnets to temporarily suspend or induce stimulation manually.
*Company profiles were sourced from Finviz. Financial data was sourced from Google Finance and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.