When a company of the small cap size has significant debt and minimal reserves, the cards are not in their favor. Not only will they have obstacles to achieve growth, but they are not well prepared to overcome economic fluctuations. To find small caps that are well positioned for growth in the healthcare industry, we looked for companies with these two properties: minimal long-term debt and a stock load of cash. If these traits appeal to you then you will like our list of small cap stocks.
The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for small cap healthcare stocks. We then looked for companies that operate with little to no long term debt (Long Term D/E Ratio<.1). We then looked for businesses that operate with little to no debt (D/E Ratio<.1). We then looked for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2).
Do you think these small-cap stocks hold value that has yet to be priced in? Use our list to help with your own analysis.
1) Cyberonics Inc. (CYBX)
| Sector | Healthcare |
| Industry | Medical Appliances & Equipment |
| Market Cap | $1.21B |
| Beta | 0.75 |
Key Metrics
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Current Ratio | 6.99 |
| Quick Ratio | 6.37 |
| Short Interest | 8.09% |
Cyberonics, Inc. engages in the design, development, marketing, and sale of implantable medical devices. It offers vagus nerve stimulation therapy (VNS Therapy), a neuromodulation therapy for the treatment of refractory epilepsy and treatment-resistant depression, and other device solutions for the management of epilepsy. Its proprietary VNS Therapy System includes an implantable pulse generator to provide stimulation to the vagus nerve; a lead that connects the generator to the vagus nerve; equipment to assist with the implant procedure; equipment to assist the treating physician with setting the stimulation parameters for each patient; instruction manuals; and magnets to temporarily suspend or induce stimulation manually. The company sells its VNS Therapy System to hospitals and ambulatory surgery centers. It sells its products directly, as well as through independent distributors in Europe, Canada, Mexico, Australia, parts of Central and South America, the Middle East, China, Japan, and other parts of Asia. The company was founded in 1987 and is headquartered in Houston, Texas.
2) Haemonetics Corp. (HAE)
| Sector | Healthcare |
| Industry | Medical Instruments & Supplies |
| Market Cap | $1.85B |
| Beta | 0.38 |
Key Metrics
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.01 |
| Current Ratio | 4.43 |
| Quick Ratio | 3.39 |
| Short Interest | 3.74% |
Haemonetics Corporation develops and manufactures automated blood component collection and surgical blood salvage devices for plasma fractionators, blood collectors, and hospitals. The company's medical device systems automate the collection and processing of donated blood components, assess likelihood for blood loss, salvage and process blood from surgery patients, and dispense and track blood inventory. Its plasma products include PCS brand plasma collection equipment and consumables, plasma collection containers, and intravenous solutions, as well as information technology platforms for plasma customers to manage their donors, operations, and supply chain. The company's blood center products comprise MCS automated platelet system to collect one or more therapeutic doses of platelets during a single donation by a volunteer blood donor; SafeTrace and El Dorado Donor donation and blood unit management systems to automate and track blood center operations; Hemasphere software solution to support blood drive planning; and Donor Doc and e-Donor software to enhance recruitment and retention. Its hospital products include TEG Thrombelastograph Hemostasis Analyzer that measures patient's hemostasis and ability to form and maintain blood clots; and surgical blood salvage systems, such as Cell Saver for rapid and high-volume blood loss cardiovascular surgeries, Cell Saver Elite to minimize allogeneic blood use for medium to high blood loss surgeries, cardioPAT system for lower blood loss cardiovascular procedures, and OrthoPAT system for lower and slower blood loss orthopedic procedures. The company also provides SafeTrace TX and BloodTrack products that manage blood product inventory, patient cross-matching, and transfusion; and IMPACT Online, which monitors and measures hospital's blood management practices. Haemonetics Corporation markets its products through direct sales force and distributors. The company was founded in 1971 and is based in Braintree, Massachusetts.
3) DexCom, Inc. (DXCM)
| Sector | Healthcare |
| Industry | Medical Instruments & Supplies |
| Market Cap | $853.90M |
| Beta | 1.08 |
Key Metrics
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Current Ratio | 4.95 |
| Quick Ratio | 4.52 |
| Short Interest | 9.10% |
DexCom, Inc., a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring systems for ambulatory use by people with diabetes, and for use by healthcare providers in the hospital for the treatment of both diabetic and non-diabetic patients. The company offers FDA approved SEVEN, which includes a disposable sensor that can be inserted by a patient and used continuously for up to seven days; a transmitter; and a small handheld receiver. Its SEVEN system also received CE Mark approval for commercialization in the European Union and the countries in Asia and Latin America that recognize the CE Mark. The company also provides the SEVEN PLUS, which incorporates additional user interface and algorithm enhancements that are intended to make its glucose monitoring function customizable. Its SEVEN PLUS has FDA and CE Mark approvals. DexCom has a collaboration agreement with Edwards Lifesciences LLC to develop products for continuously monitoring blood glucose levels in patients hospitalized for various conditions. It also has development agreement with Insulet Corporation to integrate its continuous glucose monitoring technology into Insulet's wireless, handheld OmniPod System Personal Diabetes Manager; and a joint development agreement with Animas Corporation to integrate its continuous glucose monitoring technology into Animas insulin pumps. The company was founded in 1999 and is headquartered in San Diego, California.
4) ArthroCare Corporation (ARTC)
| Sector | Healthcare |
| Industry | Medical Appliances & Equipment |
| Market Cap | $807.77M |
| Beta | 1.60 |
Key Metrics
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Current Ratio | 6.23 |
| Quick Ratio | 5.36 |
| Short Interest | 4.63% |
ArthroCare Corporation, a medical device company, develops, manufactures, and markets surgical products primarily based on its minimally invasive patented Coblation technology in the Americas and internationally. The company's Sports Medicine business provides energy-based systems and fixation technologies used to treat soft tissue injuries in the shoulders, knees, and hips. It offers ArthroWands product line that features Coblation based specialized disposable energy-based surgical wands designed for single patient use to treat orthopedic conditions, including shoulder, knee, hip, foot, ankle, elbow, and wrist injuries; and Soft-Tissue Fixation products comprising a line of specialized implants and instruments, such as knotless and traditional anchors for rotator cuff and labrum repairs in shoulder; screws for ligament reconstruction in knee; a range of arthroscopic suture passers; and reusable hand-held instruments, procedural kits, and accessories. The company's Ear Nose and Throat (ENT) business provides surgical products used to treat conditions performed by ENT healthcare professionals. It offers various products for general head, neck, and oral surgical procedures, including sinus surgery, snoring treatment, nasal turbinates reduction, and adenoid and tonsil removal. The company also provides surgical products for the treatment of spine related and other conditions. Its products include SpineWand devices used to treat soft tissue conditions in spine; Plasma Disc Decompression products for treating contained herniated discs; Cavity SpineWand that reduces the size of malignant lesions in the vertebrae of patients suffering from spinal compression fractures; and WoundWand for acute and chronic wound debridement, and wound cleansing. ArthroCare sells its products to surgeons and specialized medical professionals through sales representatives, and independent sales agents and distributors. The company was founded in 1993 and is headquartered in Austin, Texas.
5) AMAG Pharmaceuticals, Inc. (AMAG)
| Sector | Healthcare |
| Industry | Diagnostic Substances |
| Market Cap | $321.06M |
| Beta | 0.63 |
Key Metrics
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Current Ratio | 7.35 |
| Quick Ratio | 6.95 |
| Short Interest | 5.42% |
AMAG Pharmaceuticals, Inc., a biopharmaceutical company, engages the development and commercialization of a therapeutic iron compound to treat iron deficiency anemia (IDA). The company's principal product includes Feraheme (ferumoxytol) injection for intravenous (IV) use, which was approved for marketing in the United States in June 2009 by the U.S. Food and Drug Administration, for use as an IV iron replacement therapy for the treatment of IDA in adult patients with chronic kidney disease (CKD). It sells Feraheme primarily to authorized wholesalers and specialty distributors. The company also has marketing approval for Feraheme in Canada. In addition, it is pursuing marketing applications in the European Union and Switzerland for Feraheme for the treatment of IDA in CKD patients. Further, the company provides GastroMARK, an oral contrast agent for delineating the bowel in magnetic resonance imaging in the United States, as well as internationally under the Lumirem name. The company has a license, development, and commercialization agreement with Takeda to develop and commercialize Feraheme. AMAG Pharmaceuticals, Inc. was founded in 1981 and is based in Lexington, Massachusetts.
6) Masimo Corporation (MASI)
| Sector | Healthcare |
| Industry | Medical Appliances & Equipment |
| Market Cap | $1.27B |
| Beta | 0.84 |
Key Metrics
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Current Ratio | 3.55 |
| Quick Ratio | 2.93 |
| Short Interest | 8.25% |
Masimo Corporation, a medical technology company, develops, manufactures, and markets noninvasive patient monitoring products worldwide. The company offers Masimo Signal Extraction Technology (SET), which provides the capabilities of measure-through motion and low perfusion pulse oximetry to address the primary limitations of conventional pulse oximetry; and Masimo rainbow SET products that monitor multiple blood measurements, including oxygen content, carboxyhemoglobin, methemoglobin, hemoglobin, pleth variability index, respiration rate, Halo Index, and In Vivo Adjustment. It develops, manufactures, and markets a family of patient monitoring solutions comprising circuit boards, monitors and devices, sensors, and cables; Masimo SafetyNet, a remote monitoring and clinician notification system; and software for Rainbow measurements, as well as other future measurements or features. The company sells its products to hospitals and the emergency medical response organizations through its direct sales force and distributors, as well as to original equipment manufacturer partners in the United States, Europe, the Middle East, Asia, Latin America, Canada, and Australia. Masimo Corporation was founded in 1989 and is headquartered in Irvine, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/24/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.
Source: http://seekingalpha.com/article/826891-6-low-debt-and-liquid-small-cap-healthcare-stocks?source=feed
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