With four potential Covid-19 vaccine candidates from Moderna Inc. (MRNA, Financial), Pfizer Inc. (PFE, Financial), AstraZeneca PLC (AZN, Financial) and Johnson & Johnson (JNJ, Financial) now in late-stage human trials, and many others still in development, consumers and investors alike are continuing to carefully watch the health care space.
As a result of this progress, value opportunities may be found among health care companies that outperformed the Standard & Poor's 500 Index over the past year. As of Sept. 25, the GuruFocus All-in-One Screener, a Premium feature, found several stocks that with a market cap over $5 billion that had a higher return relative to the index for the period. It also looked for stocks trading below Peter Lynch value.
Based on these criteria, health care stocks that outperformed the S&P 500 by at least 15% over the last 12 months are Bio-Rad Laboratories Inc. (BIO, Financial), DaVita Inc. (DVA, Financial) and Molina Healthcare Inc. (MOH, Financial). The S&P 500 Index has returned around 9.4% over the same period.
Bio-Rad Laboratories
Having climbed nearly 45% over the past year, Bio-Rad Laboratories has a $14.66 billion market cap; its shares were trading around $493.46 on Friday morning with a price-earnings ratio of 7.62, a price-book ratio of 1.98 and a price-sales ratio of 6.46.
Despite having a low price-earnings ratio, the GuruFocus Value Line indicates that the stock is significantly overvalued.
The medical device manufacturer, which is headquartered in Hercules, California, has a GuruFocus financial strength rating of 8 out of 10. In addition to adequate interest coverage, the company is supported by a robust Altman Z-Score of 5.41. The return on invested capital, however, is eclipsed by the weighted average cost of capital, suggesting the company does not generate good returns on its projects.
Bio-Rad's profitability scored a 7 out of 10 rating, driven by operating margin expansion, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6, which implies business conditions are stable. The company also has a predictability rank of one out of five stars despite recording a slowdown in revenue per share growth. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% annually over a 10-year period.
Of the gurus invested in Bio-Rad as of the end of the second quarter, Ken Fisher (Trades, Portfolio) has the largest holding with 0.66% of outstanding shares. John Rogers (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Mario Gabelli (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) also have positions in the stock.
DaVita
With a gain of nearly 48% over the past year, DaVita has a market cap of $10.11 billion; its shares were trading around $82.75 on Friday with a price-earnings ratio of 13.07, a price-book ratio of 4.69 and a price-sales ratio of 0.95.
The GF Value Line suggests the stock is fairly valued.
The Denver-based company, which provides kidney dialysis services, has a financial strength rating of 4 out of 10 from GuruFocus. While the company has issued $522.07 million in new long-term debt over the past three years, it is still at a manageable level due to having sufficient interest coverage. The low Altman Z-Score of 1.49, however, suggests it could be at risk of going bankrupt.
The company's profitability fared better, scoring an 8 out of 10 rating on the back of strong margins and returns that outperform a majority of industry peers. DaVita also has a high Piotroski F-Score of 7, which implies business conditions are healthy, and consistent earnings and revenue growth that contribute to a predictability rank of 3.5 out of five stars. According to GuruFocus, companies with this rank post an average return of 9.3% annually.
With a 29.59% stake, Warren Buffett (Trades, Portfolio) is the company's largest guru shareholder. Other top guru investors as of June 30 include Larry Robbins (Trades, Portfolio), Simons' firm, Greenblatt, Pioneer, First Eagle Investment (Trades, Portfolio), Ainslie, Jones, Francis Chou (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).
Molina Healthcare
Posting a gain of 46% for the past year, Molina Healthcare has a $9.39 billion market cap; its shares were trading around $159.28 on Friday with a price-earnings ratio of 12.18, a price-book ratio of 4.67 and a price-sales ratio of 0.56.
The GF Value Line implies the stock is modestly overvalued despite the low price-earnings ratio.
Headquartered in Long Beach, California, the managed care company's financial strength and profitability were both rated 7 out of 10 by GuruFocus. In addition to comfortable interest coverage, Molina has a robust Altman Z-Score of 4.8 that indicates it is in good standing. The ROIC also surpasses the WACC, suggesting good returns on its investments.
The company is also being supported by an expanding operating margin, strong returns that outperform a majority of competitors and a high Piotroski F-Score of 8. Despite recording a decline in revenue per share over the past five years, Molina also has a one-star predictability rank.
Simons' firm has the largest stake in Molina with 6.2% of outstanding shares. Andreas Halvorsen (Trades, Portfolio), the Vanguard Health Care Fund (Trades, Portfolio), Robbins, Pioneer Investments (Trades, Portfolio), Cohen, Ken Heebner (Trades, Portfolio) and Greenblatt also own the stock.
Disclosure: No positions.
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