There is a legitimate reason for the buzz around healthcare stocks. This is a sector that has steadily provided interesting investment opportunities. The winners, especially those in the small cap phase, tend to have a full tank of cash to fuel growth. Today, we have a list of small cap healthcare stocks that have plenty of cash on hand and a strong upward trajectory.
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 small cap healthcare stocks. We next screened for businesses 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%.
Do you think these small-cap stocks will go up in valuation? Use our list to help with your own analysis.
1) Akorn, Inc. (AKRX)
|Industry:||Drugs - Generic|
Akorn, Inc. has a Current Ratio of 3.34, a Quick Ratio of 2.09, and a 5-Year Projected Earnings Per Share Growth Rate of 45.39%. The short interest was 15.65% as of 07/26/2012. Akorn, Inc. engages in the manufacturing and marketing of diagnostic and therapeutic ophthalmic pharmaceuticals products, niche hospital drugs, and injectable pharmaceuticals in the United States and internationally. It offers products in various specialty areas, including ophthalmology, antidotes, anti-infectives, pain management, anesthesia, and vaccines. The company's Ophthalmic segment markets diagnostic products, including mydriatics and cycloplegics, anesthetics, topical stains, gonioscopic solutions, angiography dyes, and others primarily for use in the office setting.
2) Sequenom, Inc. (SQNM)
Sequenom Inc. has a Current Ratio of 5.18, a Quick Ratio of 4.89, and a 5-Year Projected Earnings Per Share Growth Rate of 27.50%. The short interest was 26.24% as of 07/26/2012. Sequenom, Inc. provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. The company operates in two segments, Molecular Diagnostics and Genetic Analysis. The Molecular Diagnostics segment researches, develops, and commercializes noninvasive molecular diagnostic tests for prenatal genetic disorders and diseases, women's health related disorders and diseases, ophthalmology, oncology, infectious diseases, and autoimmunity.
3) Insulet Corporation (PODD)
|Industry:||Medical Instruments & Supplies|
Insulet Corporation has a Current Ratio of 3.91, a Quick Ratio of 3.46, and a 5-Year Projected Earnings Per Share Growth Rate of 28.80%. The short interest was 21.42% as of 07/26/2012. Insulet Corporation, a medical device company, engages in the development, manufacture and marketing of insulin infusion systems for people with insulin-dependent diabetes in the United States. The company offers OmniPod Insulin Management System (OmniPod System), which consists of the OmniPod disposable insulin infusion device and the handheld wireless personal diabetes manager to provide diabetes management solution for people with insulin-dependent diabetes. It is also involved in the distribution of durable medical equipment, including blood glucose testing supplies, insulin pumps, pump supplies, pharmaceuticals, and other products for the management and treatment of diabetes.
4) Auxilium Pharmaceuticals, Inc. (AUXL)
|Industry:||Drug Related Products|
Auxilium Pharmaceuticals Inc. has a Current Ratio of 2.94, a Quick Ratio of 2.36, and a 5-Year Projected Earnings Per Share Growth Rate of 30.00%. The short interest was 9.77% as of 07/26/2012. Auxilium Pharmaceuticals, Inc., a specialty biopharmaceutical company, together with its subsidiaries, engages in developing and marketing pharmaceutical products primarily in the United States. It markets Testim, a testosterone gel for the treatment of hypogonadism; and XIAFLEX (collagenase clostridium histolyticum), an injectable collagenase enzyme for the treatment of Dupuytren's contracture in adult patients with a palpable cord. The company is also developing XIAFLEX, which is in Phase III clinical trial for the treatment of Peyronie's disease, in Phase IIa clinical trial for the treatment of Adhesive Capsulitis (frozen shoulder syndrome), and in Phase Ib clinical trial for the treatment of edematous fibrosclerotic panniculopathy indications.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.