Some people crave adventure, while others are more content to view the excitement from the grandstands. Investors who prefer the high growth opportunities found in small cap stocks may find themselves relating to the former. Taking certain precautions to minimize risk is necessary for both successful investing and adventure. Some ways to slice off the risk with small cap stocks is to focus on companies that have EPS growth rates above 25% and significant cash reserves. When these two are well paired, a company has the resources to encourage growth or simply maintain during market fluctuations. We think you will find this list of small-cap healthcare stocks worthy of further investigation.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
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 businesses with projected high growth, measured by 1-year projected EPS growth above 25%. We then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2).
Do you think these small-cap stocks have strong fundamentals? Use this list as a starting-off point for your own analysis.
1) Sagent Pharmaceuticals, Inc. (NASDAQ:SGNT)
|Industry||Drugs - Generic|
|1-Year Projected Earnings Per Share Growth Rate||153.20%|
Sagent Pharmaceuticals, Inc., a specialty pharmaceutical company, develops, sources, and markets pharmaceutical products, principally injectable-based generic equivalents to branded products in the United States. It offers a range of products across anti-infective, oncolytic, and critical care indications in various presentations, including single-and multi-dose vials, pre-filled ready-to-use syringes, and premix bags. The company's anti-infective products include Levofloxacin, a fluoroquinolone antibacterial for the treatment of various infections caused by susceptible bacteria in adults of age 18 years or older; and Cefepime, an antibiotic used to treat infections of the urinary tract, and skin and skin structure, as well as moderate to severe pneumonia, intra-abdominal infections, and as empiric therapy for febrile neutropenic patients.
Its oncology products comprise Gemcitabine, a nucleoside metabolic inhibitor used for the treatment of ovarian, breast, lung, and pancreatic cancers; and Topotecan, a topoisomerase inhibitor for small cell lung cancer sensitive disease. The company also offers critical care products consisting of Adenosine, an antiarrhythmic used for the treatment of cardiac rhythm disturbances; and Heparin, an anticoagulant used to prevent and treat blood clotting during and after surgery and dialysis.
As of December 31, 2011, it marketed 33 generic injectable products; and had a new product pipeline that included 36 products represented by 63 Abbreviated New Drug Applications (ANDAs). The company sells its products to pharmaceutical wholesale companies, which then distribute the products to end-user hospitals, long-term care facilities, alternate care sites, and clinics. The company was formerly known as Sagent Holding Co. and changed its name to Sagent Pharmaceuticals, Inc. in April 2011. Sagent Pharmaceuticals, Inc. was founded in 2006 and is headquartered in Schaumburg, Illinois.
2) Navidea Biopharmaceuticals, Inc (NYSEMKT:NAVB)
|Industry||Medical Appliances & Equipment|
|1-Year Projected Earnings Per Share Growth Rate||60.90%|
Navidea Biopharmaceuticals, Inc., a biopharmaceutical company, engages in the development and commercialization of precision diagnostics and radiopharmaceutical agents. The company's radiopharmaceutical development programs include Lymphoseek, a radiopharmaceutical agent for determining the spread of solid tumor cancers into the lymphatic system; AZD4694 intended for use in the imaging and evaluation of patients with signs or symptoms of cognitive impairment, such as Alzheimer's disease; and RIGScan, a tumor antigen-specific targeting agent intended to help surgeons locate cancerous or disease-involved tissue during colorectal cancer surgeries.
It has a biopharmaceutical development and supply agreement with Laureate Biopharmaceutical Services, Inc. to support manufacturing process development work, initial evaluation of the CC49 master working cell bank, and the initial steps in re-validating the clinical grade and commercial production process for a humanized version of the RIGScan antibody. The company was formerly known as Neoprobe Corporation and changed its name to Navidea Biopharmaceuticals, Inc. on January 05, 2012. Navidea Biopharmaceuticals, Inc. was founded in 1983 and is headquartered in Dublin, Ohio.
3) Sequenom Inc. (NASDAQ:SQNM)
|1-Year Projected Earnings Per Share Growth Rate||48.40%|
Sequenom, Inc. provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. The company operates in two segments, Molecular Diagnostics and Genetic Analysis. The Molecular Diagnostics segment researches, develops, and commercializes noninvasive molecular diagnostic tests for prenatal genetic disorders and diseases, women's health related disorders and diseases, ophthalmology, oncology, infectious diseases, and autoimmunity.
This segment markets diagnostic technology for prenatal diagnostics under the trademark SEQureDx. The Genetic Analysis segment designs and markets MassARRAY system, a nucleic acid analysis platform that comprises hardware, software applications, consumable chips, and reagents to measure genetic target material and variations. This segment offers its MassARRAY system for various DNA/RNA analysis applications, including single nucleotide polymorphism, genotyping, detection of mutations, analysis of copy number variants, and other structural genome variations, as well as quantitative gene expression analysis, quantitative methylation marker analysis, comparative sequence analysis of haploid organisms, SNP discovery, and oligonucleotide quality control. It also provides iPLEX multiplexing assay, which permits multiplexed SNP analysis and somatic mutation analysis. The company offers its products through direct sales, and sales and distribution partners to clinical research laboratories, bio-agriculture, bio-technology and pharmaceutical companies, academic institutions, and various government agencies worldwide. Sequenom, Inc. was founded in 1994 and is headquartered in San Diego, California.
4) Insulet Corporation (NASDAQ:PODD)
|Industry||Medical Instruments & Supplies|
|1-Year Projected Earnings Per Share Growth Rate||66.70%|
Insulet Corporation, a medical device company, engages in the development, manufacture, and marketing of insulin infusion systems for people with insulin-dependent diabetes in the United States. The company offers OmniPod Insulin Management System (OmniPod System), which consists of the OmniPod disposable insulin infusion device and the handheld wireless personal diabetes manager to provide diabetes management solution for people with insulin-dependent diabetes. It is also involved in the distribution of durable medical equipment, including blood glucose testing supplies, insulin pumps, pump supplies, pharmaceuticals, and other products for the management and treatment of diabetes. The company sells its OmniPod System directly to patients through referrals from healthcare professionals and through patient leads, as well as through third-party distributors; and delivers durable medical equipment to endocrinologists, insurers, and clients. Insulet Corporation was founded in 2000 and is headquartered in Bedford, Massachusetts.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/31/2012.
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.