5 Health Care Stocks Hurting From The Affordable Care Act
Many of the Affordable Care Act (ACA) measures were implemented at the beginning of 2014. As anticipated, these measures affected the heath care sector.
Below are five of the least prosperous health care stocks since January 2014:
- Align Technology, Inc. (NASDAQ: ALGN)
- Bio-Rad Laboratories, Inc. (NYSE: BIO)
- Covance Inc. (NYSE: CVD)
- Seattle Genetics, Inc. (NASDAQ: SGEN)
- WellCare Health Plans, Inc. (NYSE: WCG)
This dental and orthodontic device maker posted better-than-expected third-quarter results last week on strong demand for its Invisalign line.
The market capitalization is more than $4 billion and its long-term earnings per share (EPS) growth forecast is more than 18 percent, with a return on equity of over 22 percent.
Note that seven of the 12 analysts surveyed by Thomson/First Call recommend buying shares, with five of them rating the stock a Strong Buy.
They see about 18 percent potential upside, even though the share price already is up about 16 percent in the past two weeks. Align is still down about 8 percent year-to-date.
Products and supplies for laboratories are a focus of this company, which had a management shakeup in early October. Bio-Rad has a market cap of more than $3 billion, but note that its price-to-earnings (P/E) ratio is much greater than the industry average, and its return on equity is less than 3 percent.
Only two analysts were polled, with one recommending holding shares and the other rating the stock a Strong Buy.
Shares sank to a 52-week low in mid-October but are up about 6 percent since then.
The Princeton, New Jersey-based drug development services company sold off its Antibody Services Business unit in September. Its market cap is more than $4 billion, and the long-term EPS growth forecast is more than 14 percent.
The operating margin here is much better than the industry average.
For at least three months, the consensus analyst recommendation has been to buy Covance shares, and a move to their mean price target would be a gain of about 15 percent. Year to date, shares are down more than 9 percent, despite being about 3 percent higher than two weeks ago.
Third-quarter results from this biotech company focused on cancer treatments that were better-than-expected in last week's report. It sports a market cap of more than $4 billion.
Seattle Genetics' operating margin and return on equity are both in the red, and short interest is more than 13 percent of float. Nine of the 15 surveyed analysts recommend buying shares, and only three rate the stock at Underperform.
Their mean price target is more than 19 percent higher than the current share price, which is almost 6 percent higher than two weeks ago.
WellCare Health Plans
Lastly, this Tampa, Florida-based company offers managed care services for government-sponsored health care programs.
Shares tanked in July on disappointing earnings and guidance, and earnings expectations are low for next week's report.
Eight of the 16 analysts surveyed recommend buying shares, but only one rates the stock as an Underperform. WellCare's share price is up more than 12 percent in the past month and is now less than 4 percent lower than at the beginning of the year.
At the time of this writing, the author had no position in the mentioned equities.
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