As the general population ages, the healthcare industry continues to try to keep pace with the ever evolving landscape of conditions and subsequent treatments. To find the companies that are leading the pack, we ran a scan to find those that are turning in reliable and impressive profits. We then narrowed the field to include stocks that have received a recent thumbs up from industry analysts - either a 'Buy' or 'Strong Buy' rating. If analysts on the whole are confident in the stocks, it can suggest that the fundamentals and management of the company are sound on levels other than profit. With these ideas in mind, we came up with a list that warrants more research and analysis.
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.
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.
We first looked for healthcare stocks. We then looked for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then looked for companies that have posted strong earnings growth for shareholders over an extended period of time (1-year fiscal EPS growth rate>10%)(1-year operating margin>15%). We did not screen out any market caps.
Do you think these stocks will offer healthy returns? Use our list along with your own analysis.
1) Baxter International Inc. (BAX)
|Industry:||Medical Instruments & Supplies|
Baxter International Inc. has an Analysts' Rating of 2.20, an Earnings Per Share Growth Rate of 62.36%, and an Operating Profit Margin of 20.12%. The short interest was 0.89% as of 08/07/2012. Baxter International Inc., through its subsidiaries, develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions.
The company operates in two segments, BioScience and Medical Products. The BioScience segment processes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions; products for regenerative medicine, such as biosurgery products; and certain vaccines.
2) Medtronic, Inc. (MDT)
|Industry:||Medical Appliances & Equipment|
Medtronic, Inc. has an Analysts' Rating of 2.30, an Earnings Per Share Growth Rate of 14.08%, and an Operating Profit Margin of 25.61%. The short interest was 1.01% as of 08/07/2012. Medtronic, Inc. manufactures and sells device-based medical therapies worldwide. It provides products for the diagnosis, treatment, and management of heart rhythm disorders and heart failure, including implantable cardiac pacemakers, implantable cardioverter defibrillators, cardiac resynchronization therapy devices, arctic front cardiac cryoablation catheters, arctic front cardiac cryoablation catheters, and patient management tools.
The company also offers cardio vascular products, such as percutaneous coronary intervention device, which is used for the treatment of patients with coronary artery disease; renal denervation for the treatment of chronic uncontrolled hypertension; endovascular stent grafts to treat abdomen and thoracic regions of the aorta; peripheral vascular intervention that encompasses various procedures to treat patients with peripheral vascular disease; surgical valve replacement and repair products for damaged or diseased heart valves; transcatheter heart valves; a line of blood-handling products used in arrested heart surgeries; positioning and stabilization technologies that assist physicians performing beating heart surgery; and surgical ablation system, which allows cardiac surgeons to create ablation lines during cardiac surgery.
3) Biogen Idec Inc. (BIIB)
Biogen Idec Inc. has an Analysts' Rating of 2.10, an Earnings Per Share Growth Rate of 27.93%, and an Operating Profit Margin of 33.02%. The short interest was 1.08% as of 08/07/2012. Biogen Idec Inc. discovers, develops, manufactures, and markets therapies for the treatment of neurodegenerative diseases, hemophilia, and autoimmune disorders in the United States and internationally. Its marketed products include the AVONEX for the treatment of relapsing multiple sclerosis (MS); RITUXAN for treating relapsed or refractory, CD20-positive, and B-cell Non-Hodgkin's lymphoma (NHL); TYSABRI to treat relapsing MS; FUMADERM for the treatment of severe plaque psoriasis in adult patients; and FAMPYRA, an oral compound for the improvement of walking in adult patients with MS with walking disability.
4) Thoratec Corp. (THOR)
|Industry:||Medical Instruments & Supplies|
Thoratec Corp. has an Analysts' Rating of 2.20, an Earnings Per Share Growth Rate of 21.29%, and an Operating Profit Margin of 26.37%. The short interest was 3.01% as of 08/07/2012. 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) Momenta Pharmaceuticals Inc. (MNTA)
Momenta Pharmaceuticals Inc. has an Analysts' Rating of 2.40, an Earnings Per Share Growth Rate of 337.21%, and an Operating Profit Margin of 26.22%. The short interest was 10.27% as of 08/07/2012. Momenta Pharmaceuticals, Inc., a biotechnology company, specializes in the structural characterization, process engineering, and biologic systems analysis of complex molecules. These complex molecules include polysaccharides, polypeptides, and proteins and antibodies. Its technologies are used to develop a product portfolio of complex generic, follow-on biologic, and novel therapeutics.
6) Varian Medical Systems Inc. (VAR)
|Industry:||Medical Appliances & Equipment|
Varian Medical Systems Inc. has an Analysts' Rating of 2.10, an Earnings Per Share Growth Rate of 16.15%, and an Operating Profit Margin of 21.16%. The short interest was 6.10% as of 08/07/2012. Varian Medical Systems, Inc. designs, manufactures, sells, and services equipment and software products for treating cancer with radiotherapy, stereotactic radiotherapy, stereotactic body radiotherapy, stereotactic radiosurgery, and brachytherapy worldwide. Its Oncology Systems segment offers products, such as linear accelerators, brachytherapy afterloaders, treatment simulation and verification equipment, and accessories; and information management, treatment planning, and image processing software. This segment serves university research and community hospitals, private and governmental institutions, healthcare agencies, doctors' offices, and cancer care clinics.
7) Salix Pharmaceuticals Ltd. (SLXP)
|Industry:||Drugs - Generic|
Salix Pharmaceuticals Ltd. has an Analysts' Rating of 2.10, an Earnings Per Share Growth Rate of 405.37%, and an Operating Profit Margin of 21.89%. The short interest was 10.70% as of 08/07/2012. Salix Pharmaceuticals, Ltd. acquires, develops, and markets prescription drugs and medical devices used in the treatment of various gastrointestinal diseases in the United States. The company's marketing products include XIFAXAN tablets for the treatment of patients with travelers' diarrhea, as well as for overt hepatic encephalopathy; MOVIPREP, OSMOPREP, and VISICOL, which are used for cleansing of the colon as a preparation for colonoscopy in adults; RELISTOR for the treatment of opioid-induced constipation (OIC) in patients with advanced illness; APRISO for the maintenance of remission of ulcerative colitis; SOLESTA for the treatment of fecal incontinence; DEFLUX for the treatment of vesicoureteral reflux; and METOZOLV ODT for the treatment of symptomatic documented gastroesophageal reflux disease (GERD) that fails to respond to conventional therapy, as well as relief of symptoms of acute and recurrent diabetic gastroparesis. Its products also comprise AZASAN Azathioprine Tablets, which are used as an adjunct for the prevention of rejection in renal homotransplantations and to reduce signs and symptoms of severe active rheumatoid arthritis; ANUSOL-HC and PROCTOCORT for the relief of the inflammatory and pruritic manifestations of corticosteroid-responsive dermatoses; and PEPCID for the short-term treatment of GERD, active duodenal ulcer, active benign gastric ulcer, erosive esophagitis due to GERD, and peptic ulcer diseases.
*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.