For a healthcare company to stay in front of the competition, they have to be engaged in research and development. These are costly, but necessary endeavors. A high level of liquidity provides the company with the means to fund these strategies and to withstand unanticipated expenses. The healthcare stocks we chose to evaluate today all have strong cash reserves and recent " Strong Buy" ratings from industry analysts. Use our findings as a starting point for your own analysis.
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).
We first looked for healthcare stocks. We then looked for businesses that analysts rate as "Strong Buy" (mean recommendation < 2). We then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps.
Do you think these stocks are worth more than their current valuations? Use this list as a starting-off point for your own analysis.
1) Horizon Pharma, Inc. (HZNP)
|Industry||Drug Manufacturers - Major|
Horizon Pharma, Inc., a biopharmaceutical company, through its subsidiaries, develops and commercializes medicines for the treatment of arthritis, pain, and inflammatory diseases. The company offers DUEXIS for the relief of signs and symptoms of rheumatoid arthritis and osteoarthritis, and to decrease the risk of developing upper gastrointestinal ulcers in patients who are taking ibuprofen for these indications; and LODOTRA/RAYOS for the treatment of moderate to severe active rheumatoid arthritis in adults when accompanied by morning stiffness. It also develops LODOTRA/RAYOS, which is under Phase 2 clinical trial for the treatment of polymyalgia rheumatica. The company was founded in 2005 and is headquartered in Deerfield, Illinois.
2) Derma Sciences Inc. (DSCI)
|Industry||Medical Instruments & Supplies|
Derma Sciences, Inc. operates as a medical technology company. The company provides advanced wound care products, including Medihoney dressings that are used for the management of non-chronic and hard-to-heal wounds, such as chronic ulcers, burns, and post-operative wounds; Bioguard dressings that are used for prophylactic use in the prevention of hospital or community acquired infections through wound sites; Algicell Ag, antimicrobial dressings; Xtrasorb dressings that convert fluid within the dressings to a gel and lock the exudates into the dressings; TCC-EZ, a dressing system for the management of diabetic foot ulcers; and occlusive dressings, such as hydrocolloids, foams, hydrogels, alginates, additional silver antimicrobial dressings, cleansers, and Dermagran products. It also offers traditional wound care products, such as of gauze sponges and bandages, non-adherent impregnated dressings, retention devices, paste bandages, and other compression devices, as well as adhesive bandages and related first aid products. In addition, the company provides pharmaceutical wound care products, including DSC127, an angiotensin analog for use in wound healing and scar reduction. It markets wound closure strips, nasal tube and catheter fasteners, barrier creams and ointments, antibacterial cleansing foams and sprays, shampoos and body washes, hand sanitizers, bath additives, body oils, and moisturizers to doctors, clinics, nursing homes, hospitals, home healthcare agencies, and other institutions. The company sells its products to health care providers, such as wound care centers, extended care facilities, acute care facilities, home health care agencies, and physicians' offices through direct sales representatives in the United States, Canada, and the United Kingdom; retail channels; manufacturers' representatives and independent distributors in international markets. Derma Sciences, Inc. was founded in 1984 and is headquartered in Princeton, New Jersey.
3) Trinity Biotech plc (TRIB)
Trinity Biotech plc acquires, develops, manufactures, distributes, and sells diagnostic test kits and instrumentation for the clinical laboratory and point-of-care segments of the diagnostic market. It offers clinical laboratory products, including diagnostic tests and instrumentation, which detect autoimmune, infectious, and sexually transmitted diseases; diabetes and hemoglobin disorders; and disorders of the liver and intestine. The company also provides UniGold HIV, a point of care diagnostic test, which are carried out in the presence of the patient to diagnose the presence of HIV antibodies in the patient. In addition, it sells raw materials to the life sciences industry and research institutes. Further, the company offers in-vitro diagnostic tests for haemoglobin A1c (HbA1c) used in the monitoring and diagnosis of diabetes; and Hb Variants for the detection of Hemoglobinapothies. Its customers include hospitals, clinical and reference laboratories, public health facilities, and other outreach facilities. The company sells its products directly in the United States, Germany, France, and the United Kingdom; and through a network of independent distributors and strategic partners in approximately 75 countries worldwide. Trinity Biotech plc was founded in 1992 and is headquartered in Bray, Ireland.
4) Nanosphere, Inc. (NSPH)
|Industry||Medical Instruments & Supplies|
Nanosphere, Inc. develops, manufactures, and markets molecular diagnostics platform, the Verigene System that enables genomic and protein testing on a single platform. Its Verigene System includes a bench-top molecular diagnostics workstation with nanoparticle technology that provides the ability to run multiple tests simultaneously on the same sample. The Verigene System is used for testing infectious disease assays, human and pharmacogenetic assays, and ultra-sensitive protein assays. The company serves hospital-based laboratories and academic research institutions in the United States. Nanosphere, Inc. was founded in 1998 and is headquartered in Northbrook, Illinois.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/25/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.