Health Care Industry Research & Analysis

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Short Term Rating

Long Term Rating

HOLD

Value Indicators

Strengths + Opportunities = 137

Threats + Weaknesses = 87

When strengths & opportunities substantially exceed threats & weaknesses, an investment in the health care industry has great long term potential.

Health Care Industry Research Report

When to Buy Each Industry

6. Industrial
8. Technology
9. Energy
10. Utility
11. Material

1. Staples
2. Discretionary
3. Health Care
4. Financial
5. Telecom

Health Care Industry Profile _ (edit/improve) The health care industry involves providing health care services to those who need medical care. This industry can take many forms, including pharmaceutical companies, health care real estate investment trusts (REIT's), for profit hospitals, medical device makers, home health aides, and over-the-counter drugs. These industries are often heavily regulated and require compliance with a number of different agencies, including medicare and medicaid, the food and drug administration (FDA), and other local and state agencies. Many companies within the health care industry provide ever improving products, often protected by patents, that may lead to additional risks as the drugs or products come off of patent. Owning a diverse number of health care stocks may lead to improved financial performance and stability of earnings as a result when selecting an health care investment.

Health Care Industry Research & Analysis: The health care industry depends on the care of health-related services by professionals for the benefit of patients. Medical device markers, insurance companies, pharmaceutical drug developers and government institutions are major participants in the treatment of sick, injured and disabled patients. Health Care Trading Strategy: Health Care stocks tend to be less sensitive to economic changes. Look for undervalued health care investments at any point in the business cycle when stock prices are low. However, biotech, employment staffing and insurance companies may all decrease during recessions for different reasons. Government intervention is another important factor in health care investments, since government spending in health care is a very large portion of overall health care spending. When governments change spending plans, different sub-sectors in the industry are significantly affected. Upward sloping stock charts and financial news may indicate a selling opportunity while the opposite means that stocks are becoming undervalued.

Health Care Industry Analysis, Research & Ratios ► (edit / improve)

Industry Analysis evaluates the major industry characteristics that affect investments. Company specific factors drive the performance of individual companies, but macro-economic factors can affect the performance, stock prices, growth rates, and chart movements of any stock, currency, or commodity. Review industry research before trading.

▼ More Information

Industry Statistics	Stat	Notes
Stock Research Rating	Hold	…
Potential (safety margin)	38%	…
WACC Discount Rate	7%	Low ~ Good for investors
Comparative Multiples	Stat	Notes
Revenue EV Multiple	2.8x	High ~ Bad for investors
EBITDA EV Multiple	9.4x	High ~ Bad for investors
EBIT EV Multiple	12.9x	…
Cash Flow EV Multiple	12.8x	…
Book Value EV Multiple	1.0x	Low ~ Good for investors
Discounted Cash Flow (DCF)	Ratios	Notes
Revenue Growth	13%	High ~ Good for investors
EBITDA Margin	26%	High ~ Good for investors
EBIT Margin	22%	High ~ Good for investors
Cash Flow Margin	14%	High ~ Good for investors
Taxes Rate	21%	…
Debt-Equity Ratio	15%	Low ~ Good for investors
ROIC	5%	Low ~ Bad for investors
Reinvestment Rate	13%	High ~ Bad for investors
WACC Discount Rate	Rates	Notes
Risk Free Rate	4%	Low ~ Good for Investors
Cost of Debt	7%	Low ~ Good for Investors
Equity Risk Premium	5%	…
Debt Required Return of Debt	5%	Low ~ Good for Investors
Required Return of Equity	7%	Low ~ Good for Investors

¹ WikiWealth only uses the largest 30 companies in each industry for the basis of these financial measures. Each statistic is the market weighted average of the 30 companies.

² Investment potential (margin of safety) is a weighted average of the discounted cash flow (DCF), the enterprise value (EV) market multiple, and the Warren Buffett investment methods.

Description: The health care industry depends on the care of health-related services by professionals for the benefit of patients. Medical device markers, insurance companies, pharmaceutical drug developers and government institutions are major participants in the treatment of sick, injured and disabled patients (see full health care description: competitors, industry ratios, best stocks, market leaders, aggregate SWOT Analysis, and streaming industry news).

Profit Analysis: The best way to profit from health care stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street on left side), and have high Main Street Common Sense investment ratings (see Main Street on right side). When an economic recovery occurs, different sectors of health care stocks will perform better or worse than the general stock market. Consumers generally maintain health care spending during recessions, but don't increase purchases during economic expansions. Eventually other stock investments become overvalued, because profits and stock prices increase past their fair values. During the last stages of an economic business cycle, just before a recession, it is best to buy health care stocks if you must invest in the stock market, because they are the least risky equity investments in a declining stock market. As investors search for safe (less risky) stock investments, they tend to buy health care stocks. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments.

Biotech stocks behave very differently from other health care stocks. Before drugs companies become profitable, they are constantly worried about their cash balance. For unprofitable biotechnology companies, the ability to raise cash is easiest during positive economic conditions, but difficult during recessions; the stock price rises and falls accordingly to the cash raising environment and drug pipeline potential. It is generally unwise to invest in biotechnology companies, because much of what drives the stock price is speculation about the drug pipeline, test results and government intervention. Unless the biotechnology is large and profitable and you have extensive industry experience (10 plus years), the only way to make a non-speculative investment in biotechnology is if you have insider information, which is illegal (see Martha Stewart). Warren Buffett does not own biotechnology companies for these specific reasons.

Trends
In the next 10 years, the healthcare market will focus on early diagnosis, digitized patient information that can be accessed from numerous locations, and “total solution” selling that contributes to healthcare productivity gains.
Early diagnosis and prevention is enabled by emerging diagnostic technologies. For example, positron emission tomography (PET) is used to detect many kinds of cancer with great accuracy.
A “paperless” hospital is another emerging trend. Digital patient records enable doctors to access patients’ records—wherever the doctor is. In a digitized hospital, healthcare providers do not have to wait days for an x-ray to “come back from the lab” because the x-ray machine is digital and the image is instantly available.
Hospitals are also moving away from purchasing point solutions and toward buying equipment from different vendors that is interoperable and that has a uniform user interface. Hospitals are developing internal networks that connect all diagnostic equipment that feeds all patient information (e.g., computed tomography (CT) scans, x-rays, positron emission tomography (PET) scans) over a network to data storage servers for instant access. This drives medical equipment vendors to develop interoperable equipment that has a uniform user interface. In effect, vendors are beginning to sell complete solutions that include not only the diagnostic equipment but also the data storage servers as well as the interface software.
All these trends lead to an increase in healthcare productivity—this means more patients can be put through the healthcare system by using better, faster diagnostic equipment, which leads to early ailment diagnosis and treatment. When the paperless hospital becomes a reality, productivity is further enhanced because of instant patient test results and records access.

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Health Care Industry Research & Analysis

Health Care Industry Research Report

When to Buy Each Industry

Health Care Industry Analysis, Research & Ratios ► (edit / improve)

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