In the healthcare sector, it seems especially fitting for investors to look for companies that exude well being. We consider high profits and a strong level of liquidity to exemplify what a healthy company looks like. Profits demonstrate that a company has solid management in place and liquidity provides the company with the means to fund growth strategies and to cover unforeseen expenses. Take a look at our list of profitable healthcare stocks that have cash substantial cash reserves to see if any spark your intrigue.
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.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
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 companies with strong profit margins (1-year operating margin>15%)(Net Margin [TTM]>10%). We then screened for businesses that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps.
Do you think these stocks have a strong outlook? Use our list along with your own analysis.
1) Techne Corp. (TECH)
|Industry||Medical Appliances & Equipment|
|Operating Profit Margin||51.80%|
TECHNE Corporation develops, manufactures, and sells biotechnology products, and hematology calibrators and controls worldwide. The company's Biotechnology segment offers proteins, such as cytokines, and enzyme substrates and inhibitors; antibodies, including polyclonal and monoclonal antibodies; immunoassays comprising quantikine kits for the detection of human and animal proteins, and immunoassays that allow researchers to quantify a specific analyte in a biological fluids sample; clinical diagnostic immunoassay kits consisting of erythropoietin, transferrin receptor, and beta2-microglobulin immunoassays for use as in vitro diagnostic devices; flow cytometry products, such as fluorochrome labeled antibodies and kits; intracellular cell signaling products, including antibodies, phospho-specific antibodies, antibody arrays, active caspases, kinases, and phosphatases, and ELISA assays to measure the activity of apoptotic and signaling molecules; and natural and synthetic chemical compounds for use as agonists, antagonists, and inhibitors of various biological functions by investigators. Its Hematology segment provides whole blood CBC controls and calibrators; linearity and reportable range controls for the assessment of the linearity of hematology analyzers for white blood cells, red blood cells, platelets, and reticulocytes; whole blood reticulocyte controls for manual and automated counting of reticulocytes; whole blood flow cytometry controls for the identification and quantification white blood cells; whole blood glucose/hemoglobin control to monitor instruments, which measure glucose and hemoglobin in blood; erythrocyte sedimentation rate control to monitor erythrocyte sedimentation rate tests; and multi-purpose platelet reference controls, such as Platelet-Trol II and Platelet-Trol Extended for use by automated and semi-automated analyzers, which monitor platelet levels. The company was founded in 1976 and is headquartered in Minneapolis, Minnesota.
2) China Kanghui Holdings (KH)
|Industry||Medical Appliances & Equipment|
|Operating Profit Margin||39.44%|
China Kanghui Holdings, through its subsidiaries, engages in the development, manufacture, and sale of orthopedic implants and associated instruments for trauma, spine, cranial maxillofacial, and craniocerebral. The company offers 36 product series of orthopedic implants and associated instruments for trauma and spine indications under the Kanghui and Libeier brand names. Its trauma products used in the surgical treatment of bone fractures include a range of nails, plates and screws, and cranial maxillofacial plate and screw systems; and spine products used in the surgical treatment of spine disorders consist of screws, meshes, interbody cages, and fixation systems. The company also manufactures implants, implant components, and instruments for original equipment manufacturers based on their product designs and specifications. In addition, it is involved in the development, manufacture, and sale of implants and instruments for knee joint prosthesis; and titanium alloy and cobalt alloy hip joint prosthesis. The company sells its proprietary orthopedic implants to third-party distributors, who then sell those products to hospitals directly or through sub-distributors. As of March 31, 2012, it had a network of 335 domestic distributors covering 30 provinces, municipalities, and autonomous regions in China; and a network of 41 international distributors that sell products in 29 countries across Asia, Europe, South America, Africa, and Australia. China Kanghui Holdings was founded in 1996 and is headquartered in Changzhou, the People's Republic of China.
3) Spectrum Pharmaceuticals, Inc. (SPPI)
|Operating Profit Margin||31.55%|
Spectrum Pharmaceuticals, Inc., a biotechnology company, engages in acquiring, developing, and commercializing prescription drug products primarily in the areas of hematology and oncology. It offers ZEVALIN, a prescribed form of cancer therapy which combines a source of radiation with an antibody; and FUSILEV for patients with osteosarcoma after high-dose methotrexate therapy, as well as to diminish the toxicity and counteract the effects of impaired methotrexate elimination or inadvertent overdose of folic acid antagonists. The company also develops apaziquone that is under Phase 3 clinical trials for non-muscle invasive bladder cancer; and belinostat, which is under Phase 2 registrational trial for relapsed or refractory peripheral T-cell lymphoma. In addition, it develops ozarelix that is under randomized phase 2 clinical trial in prostate cancer patients; ortataxel, which has completed Phase 2 studies in solid tumor patients; lucanthone an orally administered small-molecule that has completed preclinical tests; SPI-1620, which has completed Phase 1 study is a peptide agonist of endothelin B receptors; and RenaZorb, a lanthanum-based nanoparticle phosphate binding agent; and SPI-2012, a drug for the treatment of chemotherapy induced neutropenia. It has strategic collaborations with Allergan, Inc., Nippon Kayaku Co. Ltd., and Handok Pharmaceuticals Co. Ltd. for the development and commercialization of apaziquone; with TopoTarget A/S for the development and commercialization of belinostat; and a co-development and commercialization agreement with Hanmi Pharmaceutical Company for SPI-2012. The company was formerly known as NeoTherapeutics, Inc. and changed its name to Spectrum Pharmaceuticals, Inc. in December 2002. Spectrum Pharmaceuticals, Inc. was founded in 1987 and is based in Henderson, Nevada.
4) Intuitive Surgical, Inc. (ISRG)
|Industry||Medical Appliances & Equipment|
|Operating Profit Margin||40.35%|
Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its da Vinci surgical system consists of a surgeon's console or consoles, a patient-side cart, a 3-D vision system, Firefly fluorescence imaging product, da Vinci skills simulator, and proprietary wristed' instruments. The company's da Vinci surgical system translates the surgeon's natural hand movements on instrument controls at the console into corresponding micro-movements of instruments positioned inside the patient through small puncture incisions, or ports. It also manufactures EndoWrist instruments consisting of forceps, scissors, electrocautery, scalpels, and other surgical tools, which incorporate wrist joints for natural dexterity for various surgical procedures. In addition, the company offers da Vinci single-site instruments and accessories that allow da Vinci Si surgical systems to work through a single incision than multiple incisions; and EndoWrist one vessel sealer, a wristed single-use instrument intended for bipolar coagulation and mechanical transection of vessels up to 7 mm in diameter and tissue bundles that fit in the jaws of the instrument. Further, it sells various vision and accessory products for use in conjunction with the da Vinci surgical system as surgical procedures are performed. The company's accessory products include sterile drapes used to ensure a sterile field during surgery; and vision products, such as replacement 3-D stereo endoscopes, camera heads, light guides, and other items. It markets its products through sales representatives in the United States, and through sales representatives and distributors in international markets. The company was founded in 1995 and is headquartered in Sunnyvale, California.
5) United Therapeutics Corporation (UTHR)
|Industry||Drug Manufacturers - Other|
|Operating Profit Margin||45.82%|
United Therapeutics Corporation, a biotechnology company, engages in the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases in the United States and internationally. It offers Remodulin, Tyvaso, and Adcirca for the treatment of pulmonary arterial hypertension (PAH). The company also develops Oral Treprostinil (UT-15C), a new drug application filed with the United States Food and Drug Administration for the treatment of PAH. Its development products under Phase III clinical trials include Oral Treprostinil (UT-15C) Combination Therapy for PAH; Ch14.18 monoclonal antibody (MAB) targeting Neuroblastoma; and Remodulin for the treatment of PAH in the United States, the United Kingdom, France, Germany, Italy, and Japan. The company's development products under Phase I clinical trials comprise Beraprost-MR for PAH in North America, Europe, Mexico, South America, Egypt, India, South Africa, and Australia; 8H9 MAb targeting Metastatic brain cancer; and IW001 for the treatment of Idiopathic pulmonary fibrosis and primary graft dysfunction. Its pre-clinical stage products consist of Glycobiology Antiviral Agents for viral infectious diseases; PLacental eXpanded cells targeting PAH; and pulmonary tissue replacement and remodeling products for the treatment of end-stage lung disease. The company serves pharmaceutical wholesalers through specialty pharmaceutical distributors and other distributors. United Therapeutics Corporation was founded in 1996 and is headquartered in Silver Spring, Maryland.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/29/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.