Top-Performing Dividend Payers in Health Care with the Most Upside Potential (AET, ENSG, QCOR)
It is not unusual for stocks on a tear to overrun their mean price targets, which is a signal of how far analysts on average expect the share price to climb.
Some of the top-performing health care stocks over the past six months that pay dividends, such as Becton, Dickinson (NYSE: BDX), Bristol-Myers Squibb (NYSE: BMY) and Cooper Companies (NYSE: COO), have done just that. Others are at or near their mean price targets.
But analysts believe that Aetna (NYSE: AET), Ensign Group (NASDAQ: ENSG) and Questcor Pharmaceuticals (NASDAQ: QCOR) still have some room to run, despite rising more than 34 percent in the past six months.
This Hartford, Connecticut-based health care benefits company sports a market capitalization of more than $19 billion. It has a dividend yield of about 1.3 percent. The long-term earnings per share (EPS) growth forecast is more than 10 percent. Its price-to-earnings (P/E) ratio is less than that of peer Cigna (NYSE: CI).
The short interest in Aetna was more than four percent of the float as of the May 15 settlement date, after plunging more than 76 percent from the previous period to the lowest number of shares sold short since last August. The days to cover declined from about nine to less than two in the period.
Of the 20 analysts that follow the stock and were polled by Thomson/First Call, 12 recommend buying shares and none recommend selling. The mean price target indicates about 11 percent potential upside, relative to the current share price. That target represents a new multiyear high for Aetna shares.
The share price is up more than 30 percent since the beginning of the year, though it has pulled back more than three percent from a recent 52-week high. Over the past six months, the stock has outperformed Cigna and UnitedHealth Group (NYSE: UNH), as well as the broader markets.
This operator of long-term nursing and rehabilitative care facilities has a market cap near $785 million and a dividend yield of about 0.7 percent. The P/E ratio is higher than the industry average, but the long-term EPS growth forecast is about 15 percent. And note that the return on equity is less than six percent.
The short interest in this Mission Viejo, California-based company was more than two percent of the total float at mid-May, after retreating more than 14 percent in the previous month to the lowest number of shares sold short since January. But the days to cover declined from almost nine to more than seven in the period.
Of the eight analysts surveyed, five of them rate the stock at Strong Buy; none recommend selling shares. And the analysts think shares have plenty of headroom, as their mean price target is more than 10 percent higher than the current share price. Here too, the consensus target would be a new multiyear high.
The share price is more than 27 percent higher than at the beginning of the year, though it has retreated about four percent from a recent 52-week high. Over the past six months, the stock has outperformed the broader markets and competitors Kindred Healthcare (NYSE: KND) and Skilled Healthcare Group (NYSE: SKH).
This biopharmaceutical company is headquartered in Anaheim, California, and it has a market cap of about $2 billion. Its dividend yield is near 2.9 percent. The long-term EPS growth forecast is about 28 percent, and the P/E ratio is lower than the industry average. The return on equity is more than 92 percent.
However, note that the number of shares sold short as of the most recent settlement date represented more than 42 percent of the total float, even though short interest has declined somewhat in the past two periods. And the days to cover dropped from almost 19 in the previous period to less than nine.
Seven of the 10 analysts polled recommend buying shares; none recommend selling them. The mean price target indicates that the analysts see about 25 percent more upside potential. But note that their target is much less than the 52-week high reached last July.
Though the share price is more than 39 percent higher year-to-date, it has yet to recover fully from a 64 percent plunge last September. Still, over the past six months the stock has outperformed the likes of Novartis (NYSE: NVS) and Sanofi (NYSE: SNY), as well as the broader markets.
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