Healthcare is an issue that is on top of mind for many of us. This is an ever growing sector that provides unique investment opportunities. Because there is a plethora of companies presenting innovative devices and treatments, it is vital to go back to the basics when considering where to invest. Today we screened for companies that have a high level of liquidity - meaning they will be able to stay on the cutting edge. Then we selected the companies that have a track record of producing healthy profits. We think you will find the following list rather interesting.
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 the ability to meet current obligations using liquid assets).
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 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
We first looked for healthcare stocks. We then screened for businesses that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We next screened for businesses with strong profit margins (1-year operating margin >15%)(Net Margin [TTM] >10%). We did not screen out any market caps.
Do you think these stocks have a positive future in store? Use our list along with your own analysis.
1) Techne Corp. (TECH)
|Industry:||Medical Appliances & Equipment|
Techne Corp. has a Current Ratio of 9.97, a Quick Ratio of 8.65, an Operating Profit Margin of 52.35%, and a Net Margin of 36.13%. The short interest was 2.63% as of 07/28/2012.
Techne Corporation develops, manufactures, and sells biotechnology products, and hematology calibrators and controls worldwide. The company's Biotechnology segment offers proteins such as cytokines, and enzyme substrates and inhibitors; antibodies, including polyclonal and monoclonal antibodies; immunoassays comprising quantikine kits for the detection of human and animal proteins, and immunoassays that allow researchers to quantify a specific analyte in a biological fluids sample; clinical diagnostic immunoassay kits consisting of erythropoietin, transferrin receptor, and beta2-microglobulin immunoassays for use as in vitro diagnostic devices; flow cytometry products, such as fluorochrome labeled antibodies and kits; intracellular cell signaling products, including antibodies, phospho-specific antibodies, antibody arrays, active caspases, kinases, and phosphatases, and ELISA assays to measure the activity of apoptotic and signaling molecules; and natural and synthetic chemical compounds for use as agonists, antagonists, and inhibitors of various biological functions by investigators.
Its Hematology segment provides whole blood CBC controls controls and calibrators; linearity and reportable range controls for the assessment of the linearity of hematology analyzers for white blood cells, red blood cells, platelets, and reticulocytes; whole blood reticulocyte controls for manual and automated counting of reticulocytes; whole blood flow cytometry controls for the identification and quantification white blood cells; whole blood glucose/hemoglobin control to monitor instruments, which measure glucose and hemoglobin in blood; erythrocyte sedimentation rate control to monitor erythrocyte sedimentation rate tests; and multi-purpose platelet reference controls, such as Platelet-Trol II and Platelet-Trol Extended for use by automated and semi-automated analyzers, which monitor platelet levels. The company was founded in 1976 and is headquartered in Minneapolis, Minnesota.
2) ICU Medical, Inc. (ICUI)
|Industry:||Medical Instruments & Supplies|
ICU Medical, Inc. has a Current Ratio of 9.84, a Quick Ratio of 8.61, an Operating Profit Margin of 20.92%, and a Net Margin of 14.34%. The short interest was 19.18% as of 07/28/2012. ICU Medical, Inc. engages in the development, manufacture, and sale of medical technologies used in infusion therapy, oncology, and critical care applications. The company's product line includes custom infusion systems, closed delivery systems for hazardous drugs, needleless infusion connectors, catheters, and cardiac monitoring systems. Its products enhance patient outcomes by preventing bloodstream infections, protecting healthcare workers and patients from exposure to infectious diseases or hazardous drugs, and monitoring the cardiac output of critical care patients.
3) Osiris Therapeutics, Inc. (OSIR)
Osiris Therapeutics, Inc. has a Current Ratio of 9.88, a Quick Ratio of 9.79, an Operating Profit Margin of 26.08%, and a Net Margin of 26.21%. The short interest was 19.44% as of 07/28/2012. Osiris Therapeutics, Inc., 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.
4) Thoratec Corp. (THOR)
|Industry:||Medical Instruments & Supplies|
Thoratec Corp. has a Current Ratio of 7.30, a Quick Ratio of 6.36, an Operating Profit Margin of 27.57%, and a Net Margin of 18.14%. The short interest was 2.76% as of 07/28/2012. Thoratec Corporation engages in the development, manufacture, and marketing of proprietary medical devices used for circulatory support. The company's primary product lines include ventricular assist devices, such as HeartMate II, an implantable left ventricular assist device consisting of a rotary blood pump to provide intermediate and long-term mechanical circulatory support (MCS); and HeartMate XVE, an implantable and pulsatile left ventricular assist device for intermediate and longer-term MCS.
Its ventricular assist devices also comprise Paracorporeal Ventricular Assist Device, an external pulsatile ventricular assist device, which provides left, right, and biventricular MCS approved for bridge-to-transplantation (BTT), including home discharge, and post-cardiotomy myocardial recovery; and Implantable Ventricular Assist Device, an implantable and pulsatile ventricular assist device designed to provide left, right, and biventricular MCS approved for BTT comprising home discharge, and post-cardiotomy myocardial recovery. The company also provides CentriMag, an extracorporeal full-flow acute surgical support platform that offers support up to 30 days for cardiac and respiratory failure.
5) Atrion Corp. (ATRI)
|Industry:||Medical Instruments & Supplies|
Atrion Corp. has a Current Ratio of 9.23, a Quick Ratio of 6.23, an Operating Profit Margin of 30.95%, and a Net Margin of 21.11%. The short interest was 3.12% as of 07/28/2012. Atrion Corporation, 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 comprise 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 comprise contact lens disinfection cases; and a line of balloon catheters used in the treatment of nasolacrimal duct obstruction in children and adults.
*Company profiles were sourced from Yahoo Finance. 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.