Number Cruncher

Twelve quality U.S. health care stocks for market uncertainty

By December 4, 2018 No Comments

In the filter created this week for The Globe and Mail, we screened for Quality US-listed Health Care companies

The health care industry is viewed as a defensive sector and as a hedge during market uncertainty. Today we look for quality U.S.-listed companies in that sector. To do that, we screened the U.S. health care universe, including American depositary receipts, by focusing on the following criteria:

  • Positive three-month and 24-month change in the economic value-added (EVA) metric – a positive figure shows us that the company’s profits are increasing at a faster and greater pace than the costs of capital. The EVA is the economic profit generated by the company and is calculated as the net operating profit after tax minus capital expenses;
  • Economic performance index (EPI) – the ratio of return on capital to cost of capital – must be greater than one;
  • Average five-year return on capital (ROC) must be greater than 10 per cent and the 12-month change in return on capital must be positive;
  • Future growth value/market value (FGV/MV). This ratio represents the proportion of the market value of the company that is made up of future growth expectations rather than the actual profit generated. The higher the percentage, the higher the baked-in premium for expected growth and the higher the risk.

Read more in this article written by Noor Hussain, Analyst & Account Executive at Inovestor Inc.