7 Liquid Small-Cap Healthcare Stocks Rated Buy Or Better By Analysts

by: ZetaKap

While some investors see small-cap healthcare stocks as full of potential for growth and gains, there are many people who prefer to keep an objective distance. These stocks tend to have more risk, but the flip side is that getting in on these stocks at the right time can produce substantial gains. To minimize the risk, we focused on finding healthcare stocks that have ample cash reserves. A high level of liquidity strengthens a company and positions it for growth as well as for maintaining during tougher times. In addition, our list includes companies that have a "Buy" or "Strong Buy" rating from industry analysts. Take a look at the list below of small cap healthcare stocks to begin your evaluation.

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 small-cap healthcare stocks. We then looked for companies with a large amount of cash on hand (Current Ratio>2) (Quick Ratio>2). From here, we then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3).

Do you think these small-cap stocks will trade at a higher valuation? Use this list as a starting-off point for your own analysis.

1) Volcano Corporation (NASDAQ:VOLC)

Sector Healthcare
Industry Medical Appliances & Equipment
Market Cap $1.49B
Beta 0.33

VOLC stock chart

Key Metrics

Current Ratio 5.77
Quick Ratio 5.06
Analysts' Rating 1.90
Short Interest 8.15%

Volcano Corporation designs, develops, manufactures, and commercializes intravascular ultrasound (IVUS) and fractional flow reserve (FFR) products used in the diagnosis and treatment of vascular and structural heart disease. The company provides IVUS products, including single-procedure disposable phased array and rotational IVUS imaging catheters; and additional functionality options comprising virtual histology tissue characterization, and ChromaFlo stent apposition analysis. It also offers FFR products, such as pressure and flow consoles, and single-procedure disposable pressure and flow guide wires used to measure the pressure and flow characteristics of blood around plaque enabling physicians to gauge the plaque's physiological impact on blood flow and pressure. In addition, the company develops and manufactures optical monitors for the telecommunication industry; laser and non-laser light sources; optical engines used in the medical OCT imaging systems and advanced photonic components; and sub-systems used in spectroscopy and other industrial applications. Its products under development include image-guided therapy device and micro and thrombectomy catheters. It sells its products through direct sales force and distributors, as well as through third parties supply and distribution agreements primarily in the United States, Japan, Europe, the Middle East, Africa, and internationally. The company was founded in 2000 and its headquarters is in San Diego, California.

2) SurModics Inc. (NASDAQ:SRDX)

Sector Healthcare
Industry Diagnostic Substances
Market Cap $330.63M
Beta 1.14

SRDX stock chart

Key Metrics

Current Ratio 16.60
Quick Ratio 16.00
Analysts' Rating 1.30
Short Interest 2.40%

SurModics, Inc. provides drug delivery and surface modification technologies to the healthcare industry. The company offers surface modification coating technologies to enhance access, deliverability, and predictable deployment of medical devices, as well as drug delivery coating technologies to provide site-specific drug delivery from the surface of a medical device for the coronary, peripheral, neuro-vascular, and urology markets. It also provides a range of drug delivery technologies for injectable therapeutics. In addition, the company provides in vitro diagnostic component products and technologies comprising microarray slide technologies, protein stabilization reagents, substrates, polymers and reagent chemicals, and antigens for diagnostic test kits and biomedical research applications. SurModics, Inc. markets its technologies and products worldwide through direct sales force consisting of sales professionals. The company was founded in 1979 and its headquarters is in Eden Prairie, Minnesota.

3) Hi Tech Pharmacal Co. Inc. (NASDAQ:HITK)

Sector Healthcare
Industry Drugs - Generic
Market Cap $467.71M
Beta 1.18

HITK stock chart

Key Metrics

Current Ratio 5.89
Quick Ratio 4.74
Analysts' Rating 2.30
Short Interest 5.44%

Hi Tech Pharmacal Co., Inc., a specialty pharmaceutical company, engages in developing, manufacturing, and marketing prescription, over-the-counter (OTC), and nutritional products in the United States. The company offers a range of products for various disease states, including glaucoma, asthma, bronchial disorders, dermatological disorders, allergies, pain, stomach, and oral care. Its generic pharmaceutical products include oral solutions and suspensions, topical creams and ointments, and nasal sprays. The company also manufactures liquid ophthalmic, otic, and inhalation products. In addition, it markets a line of OTC branded products, such as Diabetic Tussin, DiabetiDerm, Multi-betic, Mag-Ox, Choice DM, and DiabetiSweet primarily for people with diabetes; capsaicin products under the Zostrix name for pain management of conditions comprising arthritis and foot pain; Nasal Ease homeopathic allergy reliever; and Sinus Buster homeopathic sinus congestion reliever. Further, the company markets and distributes branded prescription pharmaceutical products to treat various disease states. Hi Tech Pharmacal Co., Inc. markets its products to chain drug stores, drug wholesalers, managed care purchasing organizations, federal government agencies, generic distributors, mass merchandisers, and mail order pharmacies. The company was founded in 1982 and is based in Amityville, New York.

4) Conceptus, Inc. (NASDAQ:CPTS)

Sector Healthcare
Industry Medical Instruments & Supplies
Market Cap $578.13M
Beta 0.76

CPTS stock chart

Key Metrics

Current Ratio 5.93
Quick Ratio 5.64
Analysts' Rating 2.30
Short Interest 8.57%

Conceptus, Inc. designs, develops, and markets minimally invasive devices for reproductive medical applications primarily in the United States, France, and rest of Europe. It primarily provides Essure, a permanent birth control system that delivers an insert into a woman's fallopian tubes. The company sells its products through direct sales personnel and distributors primarily to physicians and hospitals. Conceptus, Inc. was founded in 1992 and its headquarters is in Mountain View, California.

5) Isis Pharmaceuticals, Inc. (ISIS)

Sector Healthcare
Industry Drug Manufacturers - Other
Market Cap $1.39B
Beta 0.91

ISIS stock chart

Key Metrics

Current Ratio 6.36
Quick Ratio 6.23
Analysts' Rating 2.40
Short Interest 10.43%

Isis Pharmaceuticals, Inc. engages in the discovery and development of antisense drugs using antisense drug discovery platform. Its product pipeline comprises 26 drugs to primarily treat cardiovascular, metabolic, severe, and rare diseases, as well as cancer. The company's flagship product, KYNAMRO, is an apo-B synthesis inhibitor in development for the reduction of low-density lipoprotein cholesterol. The company has collaboration agreements with Biogen Idec to develop and commercialize ISIS-SMNRx for the treatment of spinal muscular atrophy; Bristol-Myers Squibb to discover, develop, and commercialize antisense drugs targeting proprotein convertase subtilisin/kexin type 9; and Ortho-McNeil-Janssen Pharmaceuticals, Inc. to discover, develop, and commercialize antisense drugs to treat metabolic diseases, including type-2 diabetes. It also has a strategic relationship with Eli Lilly and Company for the development of LY2181308, an antisense inhibitor of survivin; and a strategic alliance with GlaxoSmithKline to develop new drugs against targets for rare and serious diseases. The company was founded in 1989 and its headquarters is in Carlsbad, California.

6) Neogen Corp. (NASDAQ:NEOG)

Sector Healthcare
Industry Diagnostic Substances
Market Cap $941.34M
Beta 0.70

NEOG stock chart

Key Metrics

Current Ratio 7.20
Quick Ratio 5.45
Analysts' Rating 2.20
Short Interest 6.88%

Neogen Corporation, together with its subsidiaries, develops, manufactures, and markets various products for food and animal safety worldwide. The company's Food Safety segment offers diagnostic test kits and complementary products to detect dangerous and/or unintended substances in human food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, genetic modifications, ruminant by-products, drug residues, pesticide residues, and general sanitation concerns. Its products also comprise AccuPoint, a bioluminescence-based sanitation test for adenosine triphosphate, a chemical found in living cells. The company's Animal Safety segment provides pharmaceuticals, rodenticides, disinfectants, vaccines, veterinary instruments, topicals and diagnostic products, and genetic testing services to the animal safety market. This segment's products are also used to maintain sanitary conditions and limit the potential hazards of bacteria, fungi, and viruses. In addition, it offers various products for researchers to detect biologically-active substances; and proprietary substrates for other diagnostic test kit manufacturers. The company sells its products directly, as well as through distributors and retail chains. Neogen Corporation was founded in 1981 and its headquarters is in Lansing, Michigan.

7) InterMune Inc. (NASDAQ:ITMN)

Sector Healthcare
Industry Biotechnology
Market Cap $534.47M
Beta 2.21

ITMN stock chart

Key Metrics

Current Ratio 10.07
Quick Ratio 9.85
Analysts' Rating 2.10
Short Interest 19.90%

InterMune, Inc., a biotechnology company, engages in the research, development, and commercialization of therapies in pulmonology and orphan fibrotic diseases. The company focuses on therapies for the treatment of idiopathic pulmonary fibrosis (IPF), a progressive and fatal lung disease. It markets Pirfenidone, an orally active small molecule drug for the treatment of adults with mild to moderate IPF under the Esbriet name in the European Union. The company's Pirfenidone is also in Phase III clinical trials for the treatment of IPF in the United States. In addition, it offers Pirfenidone under the Pirespa trade name for the treatment of IPF in Japan; Pirfenex trade name in India; and Shanghai Genomics in China. InterMune, Inc. was founded in 1998 and its headquarters is in Brisbane, California.

Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/28/2012.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

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