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5 Healthcare Stocks You Should Know About

March 31, 2012 | About:
Healthcare stocks prove to be great investments, as most companies in the industry have relatively low Betas and provide reliable growth rates. Moreover, and more favorable for investors, healthcare cost continue to rise, while baby boomers require additional medical service, procedures and products. During the previous recession personal and institutional investors found refuge in defensive healthcare companies such as Johnson and Johnson (JNJ) and GlaxoSmithKline (GSK).

In the article I will discuss 5 lesser known healthcare companies; each of the companies provides investors with the security and stability of the industry, a healthy dividend and upside potential.

Teleflex (TFX) shares are trading above $62 a share, approaching its 52-week high of $63 and up almost 25% from its 52 week low of $49. The company pays investors an annual dividend of $1.36, which yields 2.2%. Teleflex designs and manufactures medical devices and equipment. Teleflex is trading a discount to its competitors and the industry, medical instruments & supplies. Shares are trading at a price to earnings ratio of 10.7, its largest competitors CareFusion Corp (CFN) and CR Bard (BCR), and the industry are trading at multiples of 20.2, 25.5 and 17.3, respectively. The company is also trading cheap using the price to sales metric, at a multiple of 1.4 compared to its competitors multiple of 1.6, 2.8 and the industry average of 2.1.

Revenues and profits have grown each quarter on a year over year basis at a rate of 8% and 97%, respectively. Telefax has a beta of 0.82, a market cap of $2.5 billion and an enterprise value of $3.2 billion. The company has $370 million of total cash on hand and $1 billion of total debt outstanding.

National HealthCare (NHC) shares are currently trading above $46, between its 52-week low and high of $30 and $53, respectively. The company pays investors an annual dividend of $1.2, which yields 2.6% to the current share price. National HealthCare operates and manages assisted living and long-term health care centers, in addition to hospice services in the United States. The company is trading relatively cheap to its competitor Kindred Healthcare (KND); shares are trading at a price to earnings multiple of 11.6, whereas as Kindred is trading at a multiple of 13.7 and the industry average is 14.1.

Revenues have grown modestly at just under 3% each quarter for the last four quarters on a year over year basis. However, the long term outlook for the company and the industry, Long-Term care facilities is encouraging. National Healthcare share prices have been extremely stable and consistent; the company has a beta of 0.56, a market cap of $640 million and an enterprise of $546 million. The company has a mere $10 million of total debt outstanding and $280 million of total of cash on hand.

Medtronic (MDT) shares are trading near $39, between its 52-week low and high of $30 and $43, respectively. The company also pays investors an annual dividend of $.97 a share, which yields 2.4%. Medtronic manufactures device-based medical therapies such as pacemakers and defibrillators globally. Medtronic is trading relatively cheap in comparison to its competitors and the industry. Shares are trading at a price to earnings ratio of 12.3, in comparison its competitors Boston Scientific Corp (BSX) and Johnson & Johnson (JNJ) are trading at multiples of 20.6 and 18.6, respectively.

The company has performed well throughout the previous quarters; revenues have grown at 6%, and earnings have grown 54% on a year over year basis. The company has a beta of .95, a market cap of $41 billion and an enterprise value of $50 billion. Medtronic has $2.2 billion of cash on hand and $10.3 billion of total debt outstanding.

Zimmer Holdings (ZMH) shares are trading above $61, 30% above its 52-week low of $4 and 13% below its 52-week high of $70. The company pays out an annual dividend of $0.72 a share, which yields 1.2% to the current share price. Zimmer designs and manufactures orthopedic reconstructive implants, spinal and trauma devices and dental implants. Shares of Zimmer are trading at a price to earnings ratio of 15.2, cheaper than the industry average of 22.9.

Revenues have grown modestly at 3%, whereas earnings have grown at 350% during the last four quarters on a year over year basis. The stock price has a beta of 0.91; the company has a market cap of $11 billion and an enterprise value of 11.5 billion. The company has $1.2 billion of total cash on hand, and $1.7 billion of total debt outstanding.

Owens & Minor (OMI) shares are trading near $31, halfway between its 52-week low and high of $26 and $36. The company pays an annual dividend of $.88, which yields 2.90%. The company provides distribution and third-party logistics to healthcare providers and surgical & medical products to acute-care markers. Owens & Minor is trading at a discount to the market; shares are trading at a price to earnings multiple of 16.9, compared to the industry average of 21.4. Furthermore, shares are trading at a price to sales multiple of 0.22, whereas the industry average is 0.60.

Owens & Minor is a growing company, revenue and profits have grown at respective rates of 6.1% and 10%, on a year over year basis. The share price is less volatile than the market; the company has a beta of 0.62, a market cap of $1.9 billion and an enterprise value of $2 billion. The company has $136 million of cash on hand and $213 million of total debt outstanding.

About the author:

StockCroc
I'm mostly interested in income investing using dividends, preferred stocks and other debt instruments, and pair trading.

I fundamentally analyze every business from the top down.

In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.

Visit StockCroc's Website


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