Moves in Smaller Health Care Stocks (GMED, SEM, UAM, VRTX)
Some smaller health care companies saw unusual movement in their stocks on Friday. And not just in Globus Medical (NYSE: GMED), Select Medical Holdings (NYSE: SEM), Universal American (NYSE: UAM) and Vertex Pharmaceuticals (NASDAQ: VRTX), which are discussed below. But also ICON (NYSE: ICLR), which rose more than nine percent on an analyst upgrade on Thursday following better-than- expected earnings, LifePoint Hospitals (NASDAQ: LPNT), which fell about 2.5 percent on an analyst's downgrade, and Brookdale Senior Living (NYSE: BKD), which slipped more than two percent after it posted a wider-than-expected net loss.
Shares of this medical device maker plunged more than 18 percent despite solid third-quarter results and an analyst's suggestion to buy on the weakness. The Audubon, Pennsylvania-based company sports a market capitalization near $1.3 billion. Its long-term EPS growth forecast is more than 14 percent, and the operating margin is healthier than the industry average. The forward earnings multiple is less than the industry average price-to-earnings (P/E) ratio. Short interest is more than one percent of the float. All seven analysts surveyed by Thomson/First Call who follow the stock recommend buying shares. The upside potential, based on the analysts' mean price target, is now more than 25 percent, though that is a bit less than the post-IPO high. Because of the share price's fall on Friday, the stock has underperformed the broader markets since the initial public offering in early August.
Select Medical Holdings
This Mechanicsburg, Pennsylvania-based hospital and clinic operator announced a special dividend of $1.50 per share along with its third-quarter results, and its shares ended the day more than five percent higher. The company has a market cap of about $1.6 billion, and the long-term EPS growth forecast is about 11 percent. The P/E ratio is less than the industry average and the return on equity is more than 17 percent. But none of the nine analysts surveyed by Thomson/First Call recommend buying shares. The mean price target, or where analysts expect the share price to go, is still almost 12 percent higher than the current share price, but less than the 52-week high. Shares have traded mostly between $10 and $12 since late June. Yet over the past six months, the stock has outperformed competitors HealthSouth (NYSE: HLS) and Kindred Healthcare (NYSE: KND).
This specialty health and life insurance company reported better-than-expected third-quarter earnings and announced a special dividend of $1 per share. The stock ended the day about 6.6 percent higher. The company is headquartered in Rye Brook, New York and has a market cap near $800 million. The forward earnings multiple is less than the industry average P/E ratio. But the long-term EPS growth forecast is near zero and the return on equity is only about two percent. Of the nine analysts polled, six recommend holding shares, though two rate the stock at Strong Buy. Analysts feel the stock has some room to grow, as their mean price target is almost 20 percent higher than the current share price. However, the share price is down about 25 percent year to date, even after the pop on Friday. The stock has underperformed larger competitors Humana (NYSE: HUM) and UnitedHealth Group (NYSE: UNH) over the past six months
Shares of this biotech company fell by nearly 11 percent on a downgrade by Goldman Sachs (NYSE: GS) to sell from neutral after Vertex offered disappointing third-quarter earnings on Thursday. The $9.7 billion market cap company is headquartered in Cambridge, Massachusetts. Its long-term EPS growth forecast is about 19 percent and the return on equity is more than 60 percent. The operating margin is better than the industry average. Short interest is a little more than three percent of the float. Of 26 analysts surveyed, 21 recommend buying shares, and their mean price target indicates potential upside of about 33 percent, a level the stock has not seen in more than a decade. The current share price is about 40 percent higher year to date despite Friday's pullback. Over the past six months, the stock has outperformed larger competitors Bristol-Myers Squibb (NYSE: BMY) and Merck (NYSE: MRK).
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