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.
With the proliferation of companies in the healthcare sector, it can be a daunting endeavor to stay on top of the latest developments in research, treatments and devices. To remain competitive, many healthcare companies have to be both nimble and creative which can incur large and sometimes unanticipated costs. For our list today we wanted to find healthcare companies that are providing innovative products while maintaining sound finances. We first screened for companies that have a track record of profitability. From there we only included those that have minimal long-term debt. The dual assets of low debt and strong profits are shared by all of the healthcare companies in our list below. Review the findings for yourself to see if any of these stocks pique your interest.
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.
The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it with others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
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.
We first looked for healthcare stocks. We then looked for companies that have strong bottom line profitability (Net Margin [TTM]>10%) (ROA > 10%). Next, we then screened for businesses that have maintained a sound long term capital structure (Long Term D/E Ratio<.1). We then looked for businesses that have maintained a sound capital structure (D/E Ratio<.1). We did not screen out any market caps.
Do you think these stocks will offer healthy returns? Use this list as a starting-off point for your own analysis.
1) POZEN Inc. (POZN)
| Sector | Healthcare |
| Industry | Drug Manufacturers - Other |
| Market Cap | $182.34M |
| Beta | 1.36 |
Key Metrics
| Net Margin | 50.55% |
| Return on Assets | 52.71% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 8.19% |
POZEN Inc., a pharmaceutical company, develops products for the treatment of acute and chronic pain, and other pain-related conditions in the United States. Its products include Treximet for acute treatment of migraine attacks with or without aura in adults; and VIMOVO for the relief of the signs and symptoms of osteoarthritis, rheumatoid arthritis, and ankylosing spondylitis, as well as to decrease the risk of developing gastric ulcers in patients at risk of developing non-steroidal anti-inflammatory drugs (NSAID)-associated gastric ulcers.
It has collaborations with GlaxoSmithKline for the development and commercialization of proprietary combinations of a triptan and a long-acting NSAID; and with AstraZeneca AB for the development and commercialization of proprietary fixed dose combinations of the proton pump inhibitor esomeprazole magnesium with the NSAID naproxen. The company was founded in 1996 and its headquarters is in Chapel Hill, North Carolina.
2) Taro Pharmaceutical Industries Ltd. (TARO)
| Sector | Healthcare |
| Industry | Drug Manufacturers - Other |
| Market Cap | $1.92B |
| Beta | 0.29 |
Key Metrics
| Net Margin | 39.20% |
| Return on Assets | 30.61% |
| Long Term Debt/Equity Ratio | 0.04 |
| Debt/Equity Ratio | 0.06 |
| Short Interest | 0.05% |
Taro Pharmaceutical Industries Ltd., a science-based pharmaceutical company, together with its subsidiaries, engages in the research, development, production and marketing of pharmaceutical products primarily in the United States, Canada, and Israel. It offers prescription and over-the-counter pharmaceutical products focusing on primary areas comprising topical creams and ointments, liquids, capsules, and tablets principally in the dermatological and topical, cardiovascular, neuropsychiatric, and anti-inflammatory therapeutic categories. The company also develops and manufactures active pharmaceutical ingredients for use in its finished dosage form products. Taro Pharmaceutical Industries sells and distributes its products to drug industry wholesalers, drug distributors, drug store chains, food stores, mass merchandisers, healthcare institutions, and private pharmacies. The company was founded in 1959 and is based in Haifa Bay, Israel. Taro Pharmaceutical Industries Ltd. is a subsidiary of Sun Pharmaceutical Industries Ltd.
3) Momenta Pharmaceuticals Inc. (MNTA)
| Sector | Healthcare |
| Industry | Biotechnology |
| Market Cap | $758.66M |
| Beta | 1.39 |
Key Metrics
| Net Margin | 26.87% |
| Return on Assets | 11.02% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 10.16% |
Momenta Pharmaceuticals, Inc., a biotechnology company, specializes in the structural characterization, process engineering, and biologic systems analysis of complex molecules. These complex molecules include polysaccharides, polypeptides, and proteins and antibodies. Its technologies are used to develop a product portfolio of complex generic, follow-on biologic, and novel therapeutics. It offers Enoxaparin sodium injection, a generic version of Lovenox to prevent and treat deep vein thrombosis, and to support the treatment of acute coronary syndromes. Momenta Pharmaceuticals, Inc. has collaboration agreements with Sandoz AG; Baxter International, Inc.; Baxter Healthcare Corporation; and Baxter Healthcare SA. The company was formerly known as Mimeon, Inc. and changed its name to Momenta Pharmaceuticals, Inc. in September 2002. Momenta Pharmaceuticals, Inc. was founded in 2001 and is based in Cambridge, Massachusetts.
4) BioDelivery Sciences International, Inc. (BDSI)
| Sector | Healthcare |
| Industry | Biotechnology |
| Market Cap | $162.87M |
| Beta | 1.73 |
Key Metrics
| Net Margin | 28.32% |
| Return on Assets | 29.75% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 5.88% |
BioDelivery Sciences International, Inc., a specialty pharmaceutical company, focuses on developing and commercializing therapeutics in the areas of pain management and oncology supportive care. The company uses its patented BioErodible MucoAdhesive (BEMA) drug delivery technology that consists of a small, bi-layered erodible polymer film for application to the buccal mucosa in the development of its products. Its pain franchise consists of products utilizing the patented BEMA technology, including ONSOLIS, a fentanyl buccal soluble film for the management of pain in opioid tolerant adult patients with cancer. The company also develops BEMA Granisetron for the prevention of nausea and vomiting associated with cancer therapies. It has a licensing and development agreement with Endo Pharmaceuticals, Inc. to develop, manufacture, market, and sell BEMA Buprenorphine. BioDelivery Sciences International, Inc. was founded in 1997 and its headquarters is in Raleigh, North Carolina.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/13/2012.
Source: http://seekingalpha.com/article/867721-4-low-debt-healthcare-stocks-raking-in-profits?source=feed
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