Health Care Sector

mutebabiesΒιοτεχνολογία

6 Δεκ 2012 (πριν από 4 χρόνια και 8 μήνες)

309 εμφανίσεις

Health Care Sector

Matt Diffley

Marc Travis


Recommendation


Short
-

Term


Underweight compared to the S&P


Currently
-
1.78% weight


Keep at current weight


Long
-

Term


Potential for increased growth


Overweight in the future

Sector Overview


49 stocks


14.93% of the S&P 500 ( 2
nd

largest)


1.89% Equipment & Supplies


1.81% Providers & Services


1.09% Biotechnology


10.14% Pharmaceuticals


Market Cap: $1,210,350.78


Largest Co. : Pfizer, Johnson and
Johnson, King, Abbott, Amgen (50%Mkt.)

Current SIM Stocks


MDT Meditronic


CDH Cardinal Health


ABC AmerisourceBergen


AMGN Amgen


JNJ Johnson and Johnson




Business Analysis


Phase of Life Cycle: Growth


Sector


Growth/ Defensive


Effect of the economic environment?


Perform independently of economic market


Steady rate of growth

External Factors


Government Influence


FDA: standards for releasing new products
creates high R&D cost, long time horizon


Subsidies: affect the direction of research by
health care companies


Rising Demand


Elderly People




Growing Demand


Overweight People



Sector Concentration


Heavily weighted in Pharmaceuticals


Pharm. Market cap: $822,301.79 ( 68%)


Pfizer, Johnson & Johnson, Merck, Abbott


market cap: $475,047 (44%)




Porter’s Five Forces


Barrier to entry: High


Cost of R&D, patent limitations


Competition: High


First mover advantage ( patents)


Power of supplier: low


Power of buyer: low


Substitutes: low

Financial Analysis


Gross margins in decline
(last 5 years) from 54%
-
48.5%


SG&A expenses also in
decline.


R&D costs relatively
stable (6.5
-
6.8% of sales)


Net Margins steadily
increasing


Ranging from 9
-
10%


Earnings per share nearly
doubled

Gross Margin
45.0%
46.0%
47.0%
48.0%
49.0%
50.0%
51.0%
52.0%
53.0%
54.0%
55.0%
1997
1998
1999
2000
2001
Year
Percent of Revenues
Gross Margin
Financial Analysis


Return on Equity shows steady growth


DuPont Analytics
S&P HEALTH CARE SECTOR COMPOSITE ADJ (SP-35) M-Wtd
StockVal ®
Price 37.712 02/07/03 FYE Dec
INT
TAX
ASSET
MARGIN%
BURDEN
BURDEN%
TURN
LEVERAGE
EBIT
EBT
T
Sales
Assets
-------
-------
1 - ----
-------
-------
ROE
Acct
ROE
Sales
EBIT
EBT
Assets
Equity
Rpt%
Adj%
Adj%
2001
14.24
0.93
71.83
0.89
2.81
25.15
12.09
37.23
2000
14.19
0.92
69.23
0.86
2.91
22.43
11.69
34.12
1999
14.58
0.91
69.98
0.80
2.97
23.73
8.97
32.70
1998
14.49
0.91
67.61
0.74
2.93
21.05
8.41
29.46
1997
15.59
0.91
69.40
0.72
2.93
19.59
8.48
28.07
1996
16.37
0.91
69.17
0.72
2.78
21.44
6.59
28.03
1995
18.24
0.90
68.73
0.79
2.32
20.85
7.86
28.71
1994
18.32
0.93
69.17
0.94
1.89
23.49
5.25
28.74
1993
14.85
0.92
71.95
1.02
1.69
16.67
10.37
27.03
1992
16.44
0.91
70.60
1.08
1.54
17.11
11.35
28.46
1991
16.29
0.89
70.01
1.09
1.51
18.88
6.77
25.66
1990
20.55
0.92
69.48
1.01
1.51
21.52
5.20
26.72
1989
18.45
0.92
69.49
1.01
1.50
21.10
5.90
27.00
1988
20.68
0.93
68.27
0.98
1.54
22.39
5.94
28.33
1987
18.94
0.91
59.17
0.83
1.49
17.55
7.18
24.72
1986
18.43
0.92
66.78
0.84
1.39
20.68
1.04
21.73
1985
17.54
0.90
63.29
0.88
1.51
14.06
5.90
19.96
1984
18.85
0.89
64.09
0.97
1.70
16.81
1.69
18.50
Expectations


High Growth Sector


Low payouts, dividend yields


High levels of reinvestment


Revenue Growth of 13
-
14% expected from
2003
-
2010


Earnings Growth of 12.5%


Second highest earnings growth rate of any
sector during this 7
-
year period


Positive earnings surprises in 5 of last 7 quarters


Growth

Equipment and

Supplies


Industry
-

orange

S&P
-

green



Providers and

Services

Industry
-

orange

S&P
-

green




Growth

Biotechnology

Amgen
-

red

Industry
-

orange

S&P
-

green


Pharmaceuticals

Pfizer
-

red

Industry
-

orange

S&P
-

green

Ratio Analysis


S&P

Sector

Equip.
&Supplies

Providers&
Services

Biotech.

Pharm.

P/E

23.2

19.87

31.66

18.44

41.81

20.90

PE Comparison for Companies


Low variance between companies


Providers and Services


19.72
-

16.47


Pharmaceuticals


24.05
-

17.35


Wide variance between companies


Equipment and supplies


40.97
-

13.85


Biotechnology


77.53
-

19.08

S&P HLTH CARE & EQPT SUP IND IDX (S35A)
S
tock
V
al
®
PRICE 338.7
DATE 02-10-2003
1998
1999
2000
2001
2002
2003
215
215
225
225
240
240
255
255
270
270
285
285
300
300
320
320
335
335
355
355
375
375
395
395
420
420
445
470
The Ohio State University
Fisher College of Business
PRICE MOMENTUM INDEX (OVERBOUGHT/OVERSOLD)
-2
-2
-1
-1
0
0
+1
+1
+2
+2
S&P HLTH CARE PROV & SVC IND IDX (S35B)
S
tock
V
al
®
PRICE 125.9
DATE 02-10-2003
1998
1999
2000
2001
2002
2003
72
72
78
78
84
84
90
90
98
98
106
106
114
114
122
122
132
132
144
144
154
154
166
166
180
180
194
210
The Ohio State University
Fisher College of Business
PRICE MOMENTUM INDEX (OVERBOUGHT/OVERSOLD)
-2
-2
-1
-1
0
0
+1
+1
+2
+2
S&P BIOTECHNOLOGY INDUSTRY INDEX (S35C)
S
tock
V
al
®
PRICE 637.9
DATE 02-10-2003
1998
1999
2000
2001
2002
2003
160
160
180
180
220
220
260
260
300
300
340
340
400
400
460
460
540
540
620
620
720
720
840
840
980
980
1140
1320
The Ohio State University
Fisher College of Business
PRICE MOMENTUM INDEX (OVERBOUGHT/OVERSOLD)
-2
-2
-1
-1
0
0
+1
+1
+2
+2
S&P PHARMACEUTICALS INDUSTRY IDX (S35D)
S
tock
V
al
®
PRICE 316.3
DATE 02-10-2003
1998
1999
2000
2001
2002
2003
265
265
280
280
295
295
310
310
325
325
345
345
360
360
380
380
400
400
420
420
445
445
465
465
490
490
520
545
The Ohio State University
Fisher College of Business
PRICE MOMENTUM INDEX (OVERBOUGHT/OVERSOLD)
-2
-2
-1
-1
0
0
+1
+1
+2
+2
S&P HEALTH CARE SECTOR COMPOSITE ADJ M-Wtd (SP-35)
S
tock
V
al
®
PRICE 38.0
DATE 02-10-2003
1998
1999
2000
2001
2002
2003
32
32
34
34
36
36
38
38
40
40
42
42
44
44
46
46
48
48
50
50
54
54
56
56
58
62
The Ohio State University
Fisher College of Business
PRICE MOMENTUM INDEX (OVERBOUGHT/OVERSOLD)
-2
-2
-1
-1
0
0
+1
+1
+2
+2
Technical Analysis


Upward trend


Biotechnology


Care & Equipment


Pharmaceuticals


Downward trend


Providers & Services


Overall upward trend



Overall Evaluation


Overweight this sector by 2%


Business


Positive potential demand


Porter’s five forces= favorable market position


Financial


Strong earnings growth


Steadily increasing ROE


Valuation


Upward growth Momentum trend


Strong relation between PE and momentum


Market Prediction


Expected S&P growth rate: 10.5% (2003
-
2010)


Expected Health Care growth rate: 12.5% (2003
-
2010
)


Only information technology has a higher expected
growth rate (12.6%)


Weighting by Industry


Equipment & Supplies


Current growth low


Momentum upward


PE high relative to market


Decision: overweight



Weighting by Industry


Providers and Services


Current growth low


Momentum stagnant


PE high in comparison to the S&P


Conclusion:


Industry overvalued


Underweight this industry

Weighting by Industry


Biotechnology



Currently low growth


Upward momentum


Very high PE


Conclusion


Earnings will go up


Overweight

Weighting by Industry


Pharmaceuticals


Low growth


Upward momentum


PE even with the market


Decision:


Hold the current weighting

Potential Risks


Analysts predict negative future


Lowering earnings predictions


Patent Risk:


Majority of large pharmaceuticals will lose
patent protection


Current Growth Rate


Lower than historical figures


Questions?