To many people, the healthcare sector is considered a higher risk category. With this in mind, we searched for healthcare companies that have traits that help diminish the perceived risk. We focused on companies that have not over-leveraged assets to grow the business while bringing in reliable and impressive earnings. By keeping debt to a minimum, these companies have not compromised their infrastructure. Their strong profits also point to solid management that has maintained fiscal control. Take a look at the list of healthcare companies below to see if any spark your curiosity.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
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
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 businesses that have maintained a sound capital structure (D/E Ratio<.1). From here, we then looked for companies with strong profitability (Net Margin [TTM] >10%) (ROA [TTM]>10%). We did not screen out any market caps.
Do you think these stocks have strong operations? Use our list along with your own analysis.
1) MEDNAX, Inc. (MD)
|Industry||Specialized Health Services|
|Return on Assets||10.20%|
MEDNAX, Inc., together with its subsidiaries, provides neonatal, maternal-fetal, other pediatric sub-specialties, and anesthesia physician services in the United States and Puerto Rico. It offers neonatal care services, including clinical care to babies born prematurely or with complications within specific units at hospitals through neonatal physician sub-specialists, neonatal nurse practitioners, and other pediatric clinicians. The company also provides maternal-fetal care services comprising outpatient and inpatient clinical care to expectant mothers and their unborn babies through affiliated maternal-fetal medicine sub-specialists, obstetricians, and other clinicians.
In addition, it offers pediatric cardiology care services consisting inpatient and outpatient pediatric cardiology care of the fetus, infant, child, and adolescent patients with congenital heart defects and acquired heart disease, as well as adults with congenital heart defects through pediatric cardiologist sub-specialists, pediatric nurse practitioners, echocardiographers, diagnostic technicians, and exercise physiologists. The company's other pediatric sub-specialty care services include care of critically ill or injured children and adolescents; and clinical services in other areas of hospitals, primarily in labor and delivery area, and nursery and pediatric department.
Further, the company provides anesthesia care services and acute and chronic pain management services. As of December 31, 2011, its network comprised 1,839 affiliated physicians. MEDNAX, Inc. was founded in 1979 and is based in Sunrise, Florida.
2) SciClone Pharmaceuticals, Inc. (SCLN)
|Industry||Drug Manufacturers - Other|
|Return on Assets||21.53%|
SciClone Pharmaceuticals, Inc. provides therapies for the treatment of oncology, infectious diseases, cardiovascular, urological, respiratory, and central nervous system disorders in the People's Republic of China and internationally. Its principal product is ZADAXIN, which is used for the treatment of hepatitis B and hepatitis C viruses, and certain cancers, as well as for use as a vaccine adjuvant, and as a chemotherapy adjuvant for cancer patients with weakened immune systems. ZADAXIN has approval in approximately 30 countries, which include China, the Pacific Rim, Latin America, eastern Europe, and the Middle East. The company markets and sells ZADAXIN through distribution arrangements, local importers and distributors.
It also offers Tramadol for use in the treatment of moderate to severe pain; and is developing SCV-07, which is in Phase IIb clinical trials for the treatment of oral mucositis and hepatitis C virus. In addition, the company markets partnered products in China. It holds license, promotion, distribution, or marketing agreements for other products. SciClone Pharmaceuticals, Inc. was founded in 1989 and its headquarters is in Foster City, California.
3) Young Innovations Inc. (YDNT)
|Industry||Medical Instruments & Supplies|
|Return on Assets||10.36%|
Young Innovations, Inc., together with its subsidiaries, engages in the development, manufacture, and marketing of supplies and equipment used by dentists, dental hygienists, dental assistants, and consumers in the United States, Canada, Europe, South America, Central America, and the Pacific Rim. It offers consumable dental products, which include preventive products; infection control products; disposable micro-applicators and bristle brush applicators; homecare kits and toothbrushes; and endodontic products consisting of ultrasonic systems and gun-type heat-softened gutta percha delivery systems.
The company also provides diagnostic dental products comprising digital imaging systems, such as PC-4000 integrated digital panoramic imaging system and 1000-DR digital conversion kit; film X-ray systems, including PC-1000 film-type panoramic X-ray system, factory-refurbished film machines, and cephalometric attachments; and dental X-ray supplies and accessories comprising films, film cassettes and intensifying screens, processing chemicals, and darkroom supplies. In addition, it engages in the rental of PC-1000 film-type machine; and provision of service and repair for its panoramic X-ray systems. The company markets its products primarily through a network of dental product distributors to dental professionals, as well as directly to dental providers, dental hygiene schools, veterans administration healthcare facilities, and the United States military bases. Young Innovations, Inc. was founded in 1995 and its headquarters is in Earth City, Missouri.
4) Smith & Nephew plc (SNN)
|Industry||Medical Appliances & Equipment|
|Return on Assets||14.94%|
Smith & Nephew plc develops, manufactures, markets, and sells medical devices in orthopaedics, endoscopy and advanced wound management sectors worldwide. The company operates in three segments: Orthopaedics, Endoscopy and Advanced Wound Management. The Orthopaedics segment offers reconstruction implants as well as ancillary products. This segment also provides trauma fixation products consisting of internal and external devices, and shoulder fixation and orthobiological materials used in the stabilization of fractures and deformity correction procedures; and clinical therapies products comprising bone growth stimulation, joint fluid therapies, and outpatient spine products.
The Endoscopy segment develops and commercializes minimally invasive surgery techniques, educational programs, and value-added services for surgeons to treat and repair soft tissue and articulating joints. It offers specialized devices and fixation systems to repair damaged tissues; fluid management equipment for surgical access; digital cameras, digital image capture, scopes, light sources, and monitors to assist with visualization; radiofrequency wands, electromechanical and mechanical blades, and hand instruments for resecting damaged tissues.
The Advanced Wound Management segment provides a range of initial wound bed preparation and full wound closure products. This segment's products are targeted at chronic wounds associated with the older population and products for the treatment of wounds. Its products include the ALLEVYN and DURAFIBER brand products; and infection management and negative pressure wound therapy products. The company primarily serves medical and surgical service providers. Smith & Nephew plc was founded in 1856 and its headquarters is in London, the United Kingdom.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/03/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.