Investing in healthcare stocks in one way to cash in on the aging baby-boomer demographic. Healthcare companies that have reached the large-cap stage have demonstrated prowess in making smart acquisitions and keeping on trend with new research. Today, we have a list of companies that are consistently earning profits. In addition, these companies have notable reserves of cash on hand to maintain their growth and stay on the cutting edge. We think you will find this broad list of companies in the healthcare arena well worth further research.
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.
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 large-cap healthcare stocks. We then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then screened for businesses with strong profit margins (1-year operating margin >15%)(ROA >10%).
Do you think these large-cap stocks hold value that has yet to be priced in? Please use our list to assist with your own analysis.
1) Gilead Sciences Inc. (NASDAQ:GILD)
Gilead Sciences Inc. has Analysts' Rating of 1.90, an Operating Profit Margin of 42.19%, and a Return on Assets of 15.66%. The short interest was 2.35% as of 07/27/2012. Gilead Sciences, Inc., a biopharmaceutical company, discovers, develops, and commercializes human therapeutics for the treatment of life threatening diseases worldwide. Its products include Atripla, Truvada, Viread, Complera/Eviplera, and Emtriva for the treatment of human immunodeficiency virus (HIV) infection in adults; Viread and Hepsera oral formulations for the treatment of chronic hepatitis B; Letairis, an oral formulation for pulmonary arterial hypertension; Ranexa, a tablet for chronic angina; Lexiscan/Rapiscan, a test that detects and characterizes coronary artery disease; Cayston, an inhaled antibiotic for the treatment of respiratory systems in cystic fibrosis patients; Tamiflu, a capsule for the treatment and prevention of influenza A and B. The company also provides other products, such as AmBisome, an antifungal agent to treat serious invasive fungal infections; Vistide, an antiviral medication for the treatment of cytomegalovirus retinitis in patients with AIDS; and Macugen, an anti-angiogenic oligonucleotide to treat neovascular macular degeneration.
2) Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
Vertex Pharmaceuticals Incorporated has Analysts' Rating of 1.90, an Operating Profit Margin of 20.58%, and a Return on Assets of 15.71%. The short interest was 3.51% as of 07/27/2012. Vertex Pharmaceuticals Incorporated engages in discovering, developing, manufacturing, and commercializing small molecule drugs for the treatment of serious diseases worldwide. Its products include telaprevir, a prescription medicine used for the treatment of patients with genotype 1 hepatitis C virus (HCV) infection; and Ivacaftor, a prescription medicine used for the treatment of cystic fibrosis. The company markets its products under the INCIVEK brand name in the United States and Canada; INCIVO brand in the United Kingdom, Germany, France, Sweden, Austria, Finland, Denmark, Switzerland, and Norway; KALYDECO brand in the United States; and TELAVIC brand in Japan.
3) Becton, Dickinson and Company (NYSE:BDX)
|Industry:||Medical Instruments & Supplies|
Becton, Dickinson and Company has Analysts' Rating of 2.50, an Operating Profit Margin of 21.09%, and a Return on Assets of 11.08%. The short interest was 3.84% as of 07/27/2012. Becton, Dickinson and Company, a medical technology company, develops, manufactures and sells medical devices, instrument systems, and reagents worldwide. The company's BD Medical segment produces medical devices that are used in various healthcare settings. This segment's products include needles, syringes, and intravenous catheters for medication delivery; prefilled IV flush syringes; syringes, pen needles, and other drugs to treat diabetes; prefillable drug delivery systems; anesthesia needles and trays; sharps disposal containers; and closed-system transfer devices.
4) Stryker Corp. (NYSE:SYK)
|Industry:||Medical Appliances & Equipment|
Stryker Corp. has Analysts' Rating of 2.00, an Operating Profit Margin of 20.94%, and a Return on Assets of 11.76%. The short interest was 2.16% as of 07/27/2012. Stryker Corporation, together with its subsidiaries, operates as a medical technology company. The company operates in three segments: Reconstructive, MedSurg, and Neurotechnology and Spine. The Reconstructive segment offers orthopedic reconstructive (hip and knee) and trauma implant systems, as well as other related products. The MedSurg segment provides surgical equipment and surgical navigation systems, endoscopic and communications systems, patient handling and emergency medical equipment, reprocessed and remanufactured medical devices, and other medical device products.
5) Allergan Inc. (NYSE:AGN)
|Industry:||Drug Manufacturers - Other|
Allergan Inc. has Analysts' Rating of 2.00, an Operating Profit Margin of 26.57%, and a Return on Assets of 11.84%. The short interest was 1.49% as of 07/27/2012. Allergan, Inc. operates as a multi-specialty healthcare company primarily in the United States, Europe, Latin America, and the Asia Pacific. The company discovers, develops and commercializes specialty pharmaceutical, biologics, medical device, and over-the-counter products for the ophthalmic, neurological, medical aesthetics, medical dermatological, breast aesthetics, obesity intervention, urological, and other specialty markets worldwide. It operates in two segments: Specialty Pharmaceuticals and Medical Devices.
6) Medtronic Inc. (NYSE:MDT)
|Industry:||Medical Appliances & Equipment|
Medtronic Inc. has Analysts' Rating of 2.30, an Operating Profit Margin of 25.61%, and a Return on Assets of 10.71%. The short interest was 0.94% as of 07/27/2012. Medtronic Inc. manufactures and sells device-based medical therapies worldwide. It provides products for the diagnosis, treatment, and management of heart rhythm disorders and heart failure, including implantable cardiac pacemakers, implantable cardioverter defibrillators, cardiac resynchronization therapy devices, arctic front cardiac cryoablation catheter, arctic front cardiac cryoablation catheter, and patient management tools. The company also offers cardio vascular products, such as percutaneous coronary intervention, which is used for the treatment of patients with coronary artery disease; renal denervation for the treatment of chronic uncontrolled hypertension; endovascular stent grafts to treat abdomen and thoracic regions of the aorta; and heart valves, arrested and beating heart surgery, and surgical ablation system.
*Company profiles were sourced from Finviz. Financial data was sourced from Google Finance and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.