Healthcare pick is Teva Pharmaceutical Industries Limited (Nasdaq: TEVA). Teva is an Israel-based global manufacturer of pharmaceuticals, focusing on generic drugs. This is a fundamentally strong company that looks poised to continue to gain ground in share price, following an intra-session low of $51.01 on June 28. |
The fundamentals for this stock are appealing. Whenever a patent is set to expire at a major pharmaceutical company, Teva stands to profit. The emphasis on lower health-care costs is another reason to like this industry leader in generics.
Here are some other factors:
The growth rate for total sales for the most recent quarter versus the same quarter a year ago is +16.1%. This compares with a growth rate in Teva's industry (biotechnology) of +15.0% and an average growth rate in the S&P 500 of +13.3%.
The growth rate for total sales for the trailing twelve months versus the trailing twelve months of a year ago is +23.5%, compared with an industry average growth rate of +8.5% and the S&P 500 average growth rate of +4.0%.
The growth rate in sales during the past five years for TEVA comes in at +23.7%, compared with +6.6% for the industry and +9.4% for the S&P 500.
The growth rate in earnings during the past five years is +35.0%, compared with +7.2% for the industry and +7.3% for the S&P 500.
TEVA's price-to-earnings ratio (P/E) of 21.7 makes it somewhat over-valued compared with its peers.
Teva is also generally strong from a technical perspective. Among the key considerations:
Teva trades in Zone 3 (see the chart above) and trending higher.
Average daily volume has been increasing for several months on increasing share price, which is a good sign that momentum is building in this stock.
Institutional ownership for Teva is 57%, which is inside my "sweet-spot" range of 30% to 60%.
Both the industry (biotechnology) and the sector (healthcare) are in bear-mode, but the time-cycle forecast is so strong for this segment of the economy that I expect these groupings to begin to move higher in the near future.
Here are some other factors:
The growth rate for total sales for the most recent quarter versus the same quarter a year ago is +16.1%. This compares with a growth rate in Teva's industry (biotechnology) of +15.0% and an average growth rate in the S&P 500 of +13.3%. The growth rate for total sales for the trailing twelve months versus the trailing twelve months of a year ago is +23.5%, compared with an industry average growth rate of +8.5% and the S&P 500 average growth rate of +4.0%. The growth rate in sales during the past five years for TEVA comes in at +23.7%, compared with +6.6% for the industry and +9.4% for the S&P 500. The growth rate in earnings during the past five years is +35.0%, compared with +7.2% for the industry and +7.3% for the S&P 500. TEVA's price-to-earnings ratio (P/E) of 21.7 makes it somewhat over-valued compared with its peers.Teva is also generally strong from a technical perspective. Among the key considerations:
Teva trades in Zone 3 (see the chart above) and trending higher. Average daily volume has been increasing for several months on increasing share price, which is a good sign that momentum is building in this stock. Institutional ownership for Teva is 57%, which is inside my "sweet-spot" range of 30% to 60%. Both the industry (biotechnology) and the sector (healthcare) are in bear-mode, but the time-cycle forecast is so strong for this segment of the economy that I expect these groupings to begin to move higher in the near future.Action to Take: Based on the analysis above, I believe TEVA is a good trade to put on now with the following trading parameters: Buy TEVA with a limit order at $53.98 (Good for the Week) Set an initial stop loss at $51.94 Target price = $64.00
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