10 Ways to Profit from Aging Boomers

03/09/2011 7:01 am EST

Focus: STOCKS

Those looking to play this major demographic shift should evaluate these health care stocks, each one outperforming industry peers in key fundamental measures of growth and competitiveness.

By the Staff at Kapitall.com

The following is a list of healthcare stocks that have excellent growth prospects, with higher projected earnings per share (EPS) growth rates than their industry competitors. In addition, all of the companies mentioned have boosted capital spending at a faster rate than their competitors. At least theoretically, this makes them more competitive over the coming years.

While we won’t be going to go into detailed analysis for each company, the goal here is to give growth-oriented investors a starting point for their own analysis.

The list has been sorted alphabetically by company name.

Bio-Reference Laboratories Inc. (BRLI): Medical laboratories and research industry. Market cap of $600.17 million.

  • EPS has grown by 26.52% over the last five years versus industry average of 16.24%
  • EPS is projected to grow by 18.75% over the next five years versus industry average of 12.63%
  • Revenue has grown by 22.82% over the last five years versus industry average of 12.42%
  • Capital spending has grown by 41.97% over the last five years versus industry average of 11.11%
  • The company's cash flow has grown by 27.78% over the last five years versus industry average of 18.83%
  • Short float is at 23.91%, which implies a short ratio of 27.11 days
  • The stock has gained 5.64% over the last year

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Other highlights: Institutional and mutual fund investors have been net purchasers of the company's shares over the last two quarters, suggesting that the smart money thinks there's more upside to the stock. Institutional investors have been net buyers of 831.3K shares during the most recent quarter, versus two million net shares purchased in the previous quarter. Mutual fund investors have also been optimistic about the stock. They were net buyers of 286.3K shares during the most recent quarter versus 240.6K net shares purchased in the previous quarter.

Dr. Reddy's Laboratories Ltd. (RDY): Drug manufacturer. Market cap of $5.75 billion.

  • EPS has grown by 36.08% over the last five years versus industry average of 5.27%
  • EPS is projected to grow by 54.95% over the next five years versus industry average of 5.81%
  • Revenue has grown by 28.38% over the last five years versus industry average of 8.35%
  •  Capital spending has grown by 18.03% over the last five years versus industry average of 1.79%
  • The company's cash flow has grown by 27.25% over the last five years versus industry average of 8.61%
  • Short float is at 4.11%, which implies a short ratio of 11.21 days
  • The stock has gained 39.45% over the last year

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Other highlights: Judging by trailing twelve-month (TTM) ratios like return on equity (ROE), return on assets (ROA), and return on invested capital (ROI), it's clear that the company's management is doing an excellent job. Trailing 12-month ROE is at 20.77%, higher than the industry average of 17.05%; trailing 12-month ROA is at 11.53% versus the industry average of 8.01%; and trailing 12-month ROI is at 16.26%, higher than the industry average of 11.9%. The company also outperformed its industry competitors in terms of the trailing 12-month return on sales ratio (13.04% versus industry average of -1.96%).

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Endo Pharmaceuticals Holdings Inc. (ENDP): Drug manufacturer. Market cap of $3.93 billion.

  • EPS has grown by 16.02% over the last five years versus industry average of 4.91%
  • EPS is projected to grow by 13.06% over the next five years versus industry average of 5.81%
  • Revenue has grown by 18.89% over the last five years versus industry average of 8.39%
  • Capital spending has grown by 5.18% over the last five years versus industry average of 1.77%
  • The company's cash flow has grown by 17.63% over the last five years versus industry average of 8.44%
  • Short float is at 5.44%, which implies a short ratio of 5.7 days
  • The stock has gained 55.09% over the last year

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Other highlights: The company has demonstrated rapid cash flow growth over the last five years, which may lower risk going forward. Five-year average cash flow growth stands at 17.63%, which is much higher than the industry average of 8.61%.

Express Scripts Inc. (ESRX): Health care plans industry. Market cap of $28.37 billion.

  • EPS has grown by 26.96% over the last five years versus industry average of 16.28%
  • EPS is projected to grow by 18.13% over the next five years versus industry average of 12.63%
  • Revenue has grown by 22.6% over the last five years versus industry average of 12.39%
  • Capital spending has grown by 14.85% over the last five years versus industry average of 11.8%
  • The company's cash flow has grown by 24.53% over the last five years versus industry average of 18.94%
  • Short float is at 1.45%, which implies a short ratio of 2.42 days
  • The stock has gained 22.4% over the last year

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Other highlights: The company has a track record of outperforming its competitors. Over the last five years, EPS grew by 26.96%, higher than the industry average of 16.24%, while revenues grew by 22.6%, outperforming the industry average of 12.42%.

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Herbalife Ltd. (HLF): Drug related products industry. Market cap of $4.56 billion.

  • EPS has grown by 64.17% over the last five years versus industry average of -2.86%
  • EPS is projected to grow by 12.0% over the next five years versus industry average of 10.99%
  • Revenue has grown by 12.16% over the last five years versus industry average of 5.28%
  • Capital spending has grown by 20.96% over the last five years versus industry average of 6.67%
  • The company's cash flow has grown by 55.13% over the last five years versus industry average of -2.12%
  • Short float is at 2.96%, which implies a short ratio of 3.63 days
  • The stock has gained 100.63% over the last year

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Other highlights: Insiders appear to be optimistic about the outlook for the company. On a net basis, they've purchased an average of 9,091 shares per year (over last two years).

LHC Group, Inc. (LHCG): Home health care industry. Market cap of $551.06 million.

  • EPS has grown by 26.85% over the last five years versus industry average of 16.24%
  • EPS is projected to grow by 15.75% over the next five years versus industry average of 12.63%
  • Revenue has grown by 34.03% over the last five years versus industry average of 12.42%
  • Capital spending has grown by 14.73% over the last five years versus industry average of 11.11%
  • The company's cash flow has grown by 37.17% over the last five years versus industry average of 18.83%
  • Short float is at 9.97%, which implies a short ratio of 9.2 days
  • The stock has lost 3.91% over the last year

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Other highlights: When comparing the company's price relative to earnings, it's clearly undervalued. The price/earnings (P/E) ratio, based on the most recent quarterly earnings, stands at 10.1, lower than the industry average of 18.07, while the P/E ratio based on trailing twelve-month earnings stands at 10.73, which is lower than the industry average of 16.95.The company also appears to be undervalued relative to projected earnings growth. Price to earnings growth (PEG) ratio is at 0.68 versus an industry average of 1.19.

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Mindray Medical International Limited (MR): Medical instruments and supplies industry. Market cap of $2.99 billion.

  • EPS has grown by 37.53% over the last five years versus industry average of 16.28%
  • EPS is projected to grow by 19.39% over the next five years versus industry average of 12.41%
  • Revenue has grown by 49.71% over the last five years versus industry average of 12.27%
  • Capital spending has grown by 75.42% over the last five years versus industry average of 8.73%
  • The company's cash flow has grown by 47.43% over the last five years versus industry average of 14.61%
  • Short float is at 20.72%, which implies a short ratio of 21.57 days
  • The stock has lost 28.85% over the last year

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Other highlights: Institutional and mutual fund investors have been net purchasers of the company's shares over the last two quarters, suggesting that the smart money thinks there's more upside to the stock. Institutional investors have been net buyers of 6.4 million shares during the most recent quarter, versus 974.3K net shares purchased in the previous quarter. Mutual fund investors have also been optimistic on the stock. They were net buyers of 316.7K shares during the most recent quarter versus 4.2 million net shares purchased in the previous quarter.

Shire plc (SHPGY): Drug manufacturer. Market cap of $15.18 billion.

  • EPS has grown by 4.97% over the last five years versus industry average of 4.91%
  • EPS is projected to grow by 13.88% over the next five years versus industry average of 5.81%
  • Revenue has grown by 16.76% over the last five years versus industry average of 8.39%
  • Capital spending has grown by 30.52% over the last five years versus industry average of 1.77%
  • The company's cash flow has grown by 11.41% over the last five years versus industry average of 8.44%
  • Short float is at 1.13%, which implies a short ratio of 4.97 days
  • The stock has gained 28.44% over the last year

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Other highlights: When compared to industry competitors, the company reported better-than-average profit margins during the most recent quarter. Gross margins came in at 87%, higher than the industry average of 62.73% (most recent quarter, annualized). Operating margin came in at 21.99%, higher than the industry average of 8.33%, while net profit margin came in at 21.99% versus the industry average of 8.33%.

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Teva Pharmaceutical Industries Limited (TEVA): Drug manufacturer. Market cap of $47.5 billion.

  • EPS has grown by 18.21% over the last five years versus industry average of 4.91%
  • EPS projected to grow by 14.33% over the next five years versus industry average of 5.81%
  • Revenue has grown by 25.15% over the last five years versus industry average of 8.39%
  • Capital spending has grown by 18.02% over the last five years versus industry average of 1.77%
  • The company's cash flow has grown by 27.1% over the last five years versus industry average of 8.44%
  • Short float at 1.15%, which implies a short ratio of 1.31 days
  • The stock has lost 13.81% over the last year

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Other highlights: The company has a track record of outperforming its competitors. Over the last five years, EPS grew by 18.21%, higher than the industry average of 5.27%, while revenues grew by 25.15%, outperforming the industry average of 8.35%.

Thoratec Corp. (THOR): Medical instruments and supplies industry. Market cap of $1.58 billion.

  • EPS has grown by 47.58% over the last five years versus industry average of 16.28%
  • EPS is projected to grow by 19.8% over the next five years versus industry average of 12.41%
  • Revenue has grown by 16.76% over the last five years versus industry average of 12.27%
  • Capital spending has grown by 15.26% over the last five years versus industry average of 8.73%
  • The company's cash flow has grown by 17.6% over the last five years versus industry average of 14.61%
  • Short float is at 10.32%, which implies a short ratio of 4.06 days
  • The stock has lost 5.16% over the last year

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Other highlights: During the last 12 months, the company generated higher earnings and revenue growth rates than its industry competitors. EPS grew by 31.25% during the most recent quarter (last quarter compared to the same quarter last year), higher than the industry average of -55.15%, while quarterly revenues decreased by -6.59%, lower than the industry average of 6.26%. Over the last 12 months, the company's EPS grew by 90.38% versus the industry average of -67.43%, while revenues grew by 26.2%, higher than the industry average of 9.15%.

By the Staff at Kapitall.com

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