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What are we looking for?

U.S. health care stocks showing strong earnings growth.

Health care shares are on the move. The Health Care Select Sector SPDR Fund (XLV) is up more than 9 per cent over the past five days, with health care providers pushing up the sector the most. The materials and industrial sectors are following closely behind.

The screen

We will be using Trading Central Strategy Builder to search for U.S. health care stocks with below average valuations and a history of positive earnings growth.

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We begin by setting a minimum market capitalization threshold of US$2-billion to focus on larger, more stable and established companies in the sector. Next, we will select only stocks with price-to-earnings ratios below 25 in order to screen for stocks with the best value relative to the S&P 500 health care sector, which has an average P/E of 25.9, and S&P 500 index, average P/E of 26.7. We will also look for stocks that have average annual earnings growth over the past five years of at least 5 per cent to identify companies with a history of earnings growth.

We have also included dividend yield as well as one-year and year-to-date share price performance for your reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener is available through leading retail brokers in Canada and worldwide.

What we found

Our screener ranks the list based on all performance criteria.

Topping our list is AbbVie Inc., a company that researches and develops pharmaceutical products with a major focus on chronic autoimmune diseases. AbbVie has the highest five-year historical EPS growth rate on our list at 36.9 per cent and the highest dividend yield at 5.9 per cent.

CVS Health Corp., a “consumer-centric” health company that owns the CVS pharmacy chain, has the lowest P/E on our list at 9.2. The stock has the worst performance on our list with a decline of 18.7 per cent year to date, which may be of interest to “bottom feeders” if the sector continues to gain upside momentum. The company is expected to report third-quarter earnings on Friday before the market opens.

UnitedHealth Group Inc., which offers health care products and insurance services, has the largest market cap on our list at US$305-billion. The stock price on Wednesday touched an intraday record high. With the stock’s P/E of 17.9 remaining well below the health care sector average, we may see a continuation of the uptrend.

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The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

U.S. health care stocks showing strong earnings growth

RankCompanyTickerMkt. Cap. (US$ Bil.) P/E5Y EPS Grwth. Rate (%)Div. Yld. (%)YTD Perf. (%)1Y Perf. (%)Recent Price (US$)
1AbbVie Inc.ABBV-N155.019.836.95.96.715.1093.99
2AmerisourceBergenABC-N20.913.128.31.723.523.90108.95
3Humana Inc.HUM-N56.015.522.30.623.348.20451.41
4UnitedHealth GroupUNH-N305.017.920.21.620.641.50358.32
5Eli Lilly and Co.LLY-N125.021.631.92.313.130.50147.74
6Quest DiagnosticsDGX-N17.015.410.51.817.824.40128.23
7Ensign Group Inc.ENSG-Q3.422.420.40.338.049.3063.37
8Anthem Inc.ANTM-N73.014.415.51.48.618.20332.27
9Amgen Inc.AMGN-Q128.017.014.02.9-4.56.40233.39
10Pfizer Inc.PFE-N201.023.415.14.2-4.7-0.7036.96
11Cigna Corp.CI-N67.512.411.40.03.015.00215.92
12CVS Health Corp.CVS-N77.89.25.13.4-18.7-14.9062.41
13Encompass HealthEHC-N6.323.69.51.8-7.2-8.3065.01

Trading Central

Gary Christie is head of North American research at Trading Central in Ottawa.

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