My 5 Favorite Health Care Growth Picks of the Next 5 Years

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Nov 02, 2012
I like health care companies because the sector is a long-term growth area due to the ongoing aging population. The sector is a $46.1 trillion bet on stronger-than-expected health diseases with a current dividend yield of 3.20 percent. We know that the sector is very politically driven because heath is a question of cost and money. Eighty percent of the world's population cannot finance a solid medical aid, medical care or even old-age care. The best dividend stocks within the sector still come from the major drug manufacturing industry as well as from the medical practitioners industry.

I made a little screen of the best large-capitalized stocks with the highest expected earnings per share growth for the next five years. The industry with the biggest earnings forecast is definitely the biotechnology industry, followed by medical appliances and equipment stocks. But those companies pay no dividends. I focused on stocks with a positive yield and a double-digit earnings growth. Finally, 14 companies remained of which all are currently recommended to buy. The mostly represented companies are from the health care plans industry.

Here are my favorite stocks:

WellPoint (WLP) has a market capitalization of $20.07 billion. The company employs 37,700 people, generates revenue of $60.71 billion and has a net income of $2.65 billion. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $4.72 billion. The EBITDA margin is 7.78 percent (the operating margin is 6.52 percent and the net profit margin 4.36 percent).

Financial Analysis: The total debt represents 18.83 percent of the company's assets and the total debt in relation to the equity amounts to 42.06 percent. Due to the financial situation, a return on equity of 11.24 percent was realized. Twelve trailing months earnings per share reached a value of $7.32. Last fiscal year, the company paid $1.00 in the form of dividends to shareholders. The earnings per share are expected to grow by 10.10 percent yearly over the next five years.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 8.43, the P/S ratio is 0.33 and the P/B ratio is finally 0.90. The dividend yield amounts to 1.86 percent and the beta ratio has a value of 0.95.

Novo Nordisk (NVO) has a market capitalization of $102.86 billion. The company employs 33,501 people, generates revenue of $11.51 billion and has a net income of $2.97 billion. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $4.31 billion. The EBITDA margin is 37.48 percent (the operating margin is 33.72 percent and the net profit margin 25.77 percent).

Financial Analysis: The total debt represents 1.32 percent of the company's assets and the total debt in relation to the equity amounts to 2.28 percent. Due to the financial situation, a return on equity of 45.95 percent was realized. Twelve trailing months earnings per share reached a value of $6.38. Last fiscal year, the company paid $2.43 in the form of dividends to shareholders. The earnings per share are expected to grow by 16.45 percent yearly over the next five years. The company has the biggest eps growth forecast of all healthcare dividend stocks.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 24.81, the P/S ratio is 6.21 and the P/B ratio is finally 13.52. The dividend yield amounts to 1.59 percent and the beta ratio has a value of 0.55.

UnitedHealth Group (UNH) has a market capitalization of $58.17 billion. The company employs 99,000 people, generates revenue of $101.86 billion and has a net income of $5.14 billion. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $9.59 billion. The EBITDA margin is 9.41 percent (the operating margin is 8.31 percent and the net profit margin 5.05 percent).

Financial Analysis: The total debt represents 17.14 percent of the company's assets and the total debt in relation to the equity amounts to 41.14 percent. Due to the financial situation, a return on equity of 19.00 percent was realized. Twelve trailing months earnings per share reached a value of $5.25. Last fiscal year, the company paid $0.61 in the form of dividends to shareholders. The earnings per share are expected to grow by 11.20 percent yearly over the next five years.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 10.84, the P/S ratio is 0.57 and the P/B ratio is finally 2.09. The dividend yield amounts to 1.49 percent and the beta ratio has a value of 0.93.

Zimmer Holdings (ZMH) has a market capitalization of $11.45 billion. The company employs 8,500 people, generates revenue of $4.45 billion and has a net income of $760.00 million. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.38 billion. The EBITDA margin is 31.09 percent (the operating margin is 23.00 percent and the net profit margin 17.07 percent).

Financial Analysis: The total debt represents 20.19 percent of the company's assets and the total debt in relation to the equity amounts to 31.22 percent. Due to the financial situation, a return on equity of 13.49 percent was realized. Twelve trailing months earnings per share reached a value of $4.28. Last fiscal year, the company paid no dividends to shareholders. The earnings per share are expected to grow by 10.40 percent yearly over the next five years.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 15.32, the P/S ratio is 2.57 and the P/B ratio is finally 2.12. The dividend yield amounts to 1.10 percent and the beta ratio has a value of 1.01.

Thermo Fisher Scientific (TMO) has a market capitalization of $22.82 billion. The company employs 39,000 people, generates revenue of $11.73 billion and has a net income of $1.02 billion. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $2.11 billion. The EBITDA margin is 17.98 percent (the operating margin is 10.62 percent and the net profit margin 8.70 percent).

Financial Analysis: The total debt represents 26.19 percent of the company's assets and the total debt in relation to the equity amounts to 46.73 percent. Due to the financial situation, a return on equity of 6.71 percent was realized. Twelve trailing months earnings per share reached a value of $3.13. Last fiscal year, the company paid $0.13 in the form of dividends to shareholders. The earnings per share are expected to grow by 11.36 percent yearly over the next five years.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 19.92, the P/S ratio is 1.95 and the P/B ratio is finally 1.54. The dividend yield amounts to 0.83 percent and the beta ratio has a value of 0.78.

Take a closer look at the full table of the best healthcare growth picks. The average price to earnings ratio (P/E ratio) amounts to 16.51 and forward P/E ratio is 11.91. The dividend yield has a value of 1.36 percent. Price to book ratio is 3.78 and price to sales ratio 2.32. The operating margin amounts to 18.28 percent. The average stock is low leveraged and has a debt to equity ratio of 0.50.

Related stock ticker symbols:

NVO, AGN, PRGO, TMO, UNH, AMGN, STJ, FMS, ZMH, AET, HUM, COV, WLP, SYK

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Healthcare Dividend Stocks with Highest Expected EPS Growth Researched by "long-term-investments.blogspot.com."