If you are an experienced investor who prefers companies that have reliable records of producing profits for shareholders, you are probably familiar with the process of analyzing return on equity and return on assets. These numbers can provide insight into how a company has done over time. When a company maintains profitability through market highs and lows, it is often an indicator of sound business acumen. Today, we specifically searched for healthcare companies with track records of producing solid earnings. Additionally, these companies have all received recent "Strong Buy" ratings by industry analysts. Take a look at our list to see if any of these companies spark your curiosity.
Return on Equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
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. As well, 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. We then looked for companies that analysts rate as "Strong Buy" (mean recommendation < 2). We then looked for companies that have been able to maintain a sound level of profitability for shareholders (ROE [TTM] > 30%)(ROA > 10%). We did not screen out any market caps.
Do you think these stocks will outperform? Use our list to help with your own analysis.
1) DUSA Pharmaceuticals Inc. (DUSA)
|Industry:||Drug Manufacturers - Other|
DUSA Pharmaceuticals Inc. has Analysts' Rating of 1.30, a Return on Equity of 33.94%, and a Return on Assets of 24.27%. The short interest was 4.99% as of 08/15/2012. 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) Immunomedics Inc. (IMMU)
Immunomedics Inc. has Analysts' Rating of 1.20, a Return on Equity of 33.18%, and a Return on Assets of 27.16%. The short interest was 14.08% as of 08/15/2012. Immunomedics, Inc., a biopharmaceutical company, engages in the research, development, manufacture, and marketing of monoclonal, antibody-based products for the treatment of cancer, autoimmune, and other serious diseases in the United States and Europe. The company's products include epratuzumab, a Phase III clinical trial product for the treatment of systemic lupus erythematosus and non-Hodgkin's lymphoma; Veltuzumab, a Phase I/II clinical study completed product for the treatment of patients with non-Hodgkin's lymphoma, immune thrombocytopenic purpura, and chronic lymphocytic leukemia; Yttrium Y 90 Clivatuzumab tetraxetan, a humanized monoclonal antibody for pancreatic cancer that is in Phase Ib/II clinical trial; and Yttrium Y 90 epratuzumab tetraxetan, a Phase I/II clinical study product for patients with non-Hodgkin's lymphoma. Its early phase clinical trial products comprise Milatuzumab, a transmembrane protein product for antibody-drug conjugate therapy.
3) Herbalife Ltd. (HLF)
|Industry:||Drug Related Products|
Herbalife Ltd. has Analysts' Rating of 1.20, a Return on Equity of 104.97%, and a Return on Assets of 31.05%. The short interest was 11.24% as of 08/15/2012. Herbalife Ltd., a network marketing company, sells weight management, nutritional supplement, energy, sports and fitness, and personal care products worldwide. It offers science-based products in four principal categories: weight management; targeted nutrition; energy, sports, and fitness; and outer nutrition. The weight management product portfolio includes meal replacement shakes, weight-loss enhancers, and appetite suppressors, as well as a range of healthy snacks.
4) Questcor Pharmaceuticals, Inc. (QCOR)
Questcor Pharmaceuticals, Inc. has Analysts' Rating of 1.30, a Return on Equity of 99.26%, and a Return on Assets of 71.38%. The short interest was 34.81% as of 08/15/2012. Questcor Pharmaceuticals, Inc., a biopharmaceutical company, provides prescription drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications.
5) BioDelivery Sciences International, Inc. (BDSI)
BioDelivery Sciences International, Inc. has Analysts' Rating of 1.50, a Return on Equity of 67.09%, and a Return on Assets of 29.75%. The short interest was 6.44% as of 08/15/2012. BioDelivery Sciences International, Inc., a specialty pharmaceutical company, focuses on developing and commercializing therapeutics in the areas of pain management and oncology supportive care. The company uses its patented BioErodible MucoAdhesive (BEMA) drug delivery technology that consists of a small, bi-layered erodible polymer film for application to the buccal mucosa in the development of its products. Its pain franchise consists of products utilizing the patented BEMA technology, including ONSOLIS, a fentanyl buccal soluble film for the management of pain in opioid tolerant adult patients with cancer; and BEMA Buprenorphine that has completed a Phase III trial for the treatment of moderate to severe chronic pain in a mixed opioid nave and opioid experienced population, as well as BEMA Buprenorphine/Naloxone, which is in development stage for the treatment of opioid dependence.
*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.