Healthcare is an industry that doesn't seem to show any signs of slowing down. There is an ever-increasing number of companies introducing new devices and treatments to improve health and cure diseases. While many of the offerings are exciting, it can be difficult to determine which ones are worth an investment. Today, we employed two mechanisms to find healthcare stocks with potential: profitability and liquidity. If companies that are bringing in earnings and have significant cash on hand sound appealing, you may like the list of healthcare stocks that we came up with today.
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. 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).
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
Return on Assets (ROA) illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. Also, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue, very few can make very large profits with little investment.
We first looked for healthcare stocks. From here, we looked for companies that have a substantial amount of cash on hand (Current Ratio >2) (Quick Ratio >2). We then screened for businesses that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate >10%)(ROA [TTM] >10%). We did not screen out any market caps.
Do you think these stocks will go up in price? Please use our list to assist with your own analysis.
1) DUSA Pharmaceuticals Inc. (DUSA)
|Industry:||Drug Manufacturers - Other|
DUSA Pharmaceuticals Inc. has a Current Ratio of 6.61, a Quick Ratio of 6.03, Earnings Per Share Growth Rate of 149.09%, and a Return on Assets of 20.61%. The short interest was 5.08% as of 08/02/2012. 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.
2) Thoratec Corp. (THOR)
|Industry:||Medical Instruments & Supplies|
Thoratec Corp. has a Current Ratio of 7.30, a Quick Ratio of 6.36, Earnings Per Share Growth Rate of 21.29%, and a Return on Assets of 10.73%. The short interest was 3.02% as of 08/02/2012. 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.
3) SIGA Technologies, Inc. (SIGA)
SIGA Technologies, Inc. has a Current Ratio of 6.53, a Quick Ratio of 6.40, Earnings Per Share Growth Rate of 140.27%, and a Return on Assets of 25.51%. The short interest was 19.82% as of 08/02/2012. SIGA Technologies, Inc., a pharmaceutical company, engages in the development and commercialization of pharmaceutical solutions for smallpox, Ebola, dengue, Lassa fever, and other dangerous viruses. Its lead product is ST-246, an orally administered antiviral drug that targets orthopoxviruses. The company also has two drug series in the pre-clinical development stage against four serotypes of virus for dengue disease.
4) ICU Medical, Inc. (ICUI)
|Industry:||Medical Instruments & Supplies|
ICU Medical, Inc. has a Current Ratio of 9.84, a Quick Ratio of 8.61, Earnings Per Share Growth Rate of 46.05%, and a Return on Assets of 11.87%. The short interest was 18.31% as of 08/02/2012. 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.
5) Osiris Therapeutics, Inc. (OSIR)
Osiris Therapeutics, Inc. has a Current Ratio of 9.88, a Quick Ratio of 9.79, Earnings Per Share Growth Rate of 13.39%, and a Return on Assets of 15.78%. The short interest was 22.19% as of 08/02/2012. 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.
6) Atrion Corp. (ATRI)
|Industry:||Medical Instruments & Supplies|
Atrion Corp. has a Current Ratio of 9.23, a Quick Ratio of 6.23, Earnings Per Share Growth Rate of 24.21%, and a Return on Assets of 15.99%. The short interest was 3.00% as of 08/02/2012. 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 Google Finance and 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.