The Costs Of Being Obese

By Kapitall | May 01, 2012 AAA


Written by Danny Guttridge

Numbers released by the Mayo Clinic suggest obesity costs more than smoking. The data shows that smokers' medical costs were $1,275 more than the average non-smoking person, but obese people cost an additional $1,275, and morbidly obese people cost up to $5,500 more each year, according to Business Insider. Mayo's James Naessens said that smoking added about 20% a year to medical costs with obesity being similar, but morbid obesity added about 50% a year.

Sharon Begley at Reuters reports that obesity costs twice what was previously estimated due to remodeling to accommodate obese people. For example, a billion gallons more gasoline is burned each year (more fuel to carry more weight) than what would be if people weighed the same as in 1960. Reuters also mentions that the United States healthcare reform of 2010 allows employers to charge obese patients 30 to 50% more if they don't participate in a wellness program.

It was also stated that obese employees are less productive than healthy-weighted employees because they tend to miss more days of work. The lower productivity has an affect on income as well, according to a study led by Timothy Judge at the University of Florida and published by the American Psychological Association.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below.



Business Section: Investing Ideas
The money from increased costs in healthcare for obesity has to go somewhere.


Below is a list of healthcare companies that are undervalued by leveraged free cash flow. Do you think these names will see some of that money? (Click here to access free, interactive tools to analyze these ideas.)

1. Pfizer Inc. (NYSE:PFE): A biopharmaceutical company, offers prescription medicines for humans and animals worldwide. Market cap is at $173.96B, and the most recent closing price is at $22.99. Levered free cash flow is at $20.90B versus enterprise value at $186.28B (implies a LFCF/EV ratio at 11.22%).

2. AstraZeneca PLC (NYSE:AZN): Develops, and commercializes prescription medicines for cardiovascular, gastrointestinal, infection, neuroscience, oncology and respiratory and inflammation diseases worldwide. Market cap is at $55.34B, and the most recent closing price is at $43.86. Levered free cash flow is at $6.72B versus enterprise value at $53.79B (implies a LFCF/EV ratio at 12.49%).

3. WellPoint Inc. (NYSE:WLP): Operates as a health benefits company in the United States. Market cap is at $22.7B, and the most recent closing price is at $68.36. Levered free cash flow is at $3.17B versus enterprise value at $13.73B (implies a LFCF/EV ratio at 23.09%).

4. Cigna Corp. (NYSE:CI): Operates as a health service organization. Market cap is at $13.47B, and the most recent closing price is at $46.38. Levered free cash flow is at $1.60B versus enterprise value at $13.61B (implies a LFCF/EV ratio at 11.76%).

5. Warner Chilcott plc (Nasdaq:WCRX): Focuses on the development, manufacture and promotion of branded pharmaceutical products in women's healthcare, gastroenterology, dermatology and urology segments in North America and western Europe markets. Market cap is at $5.44B, and the most recent closing price is at $21.81. Levered free cash flow is at $1.22B versus enterprise value at $7.93B (implies a LFCF/EV ratio at 15.38%).

6. Hill-Rom Holdings, Inc. (NYSE:HRC): Provides medical technologies and related services for the health care industry in the United States and internationally. Market cap is at $2.03B, and the most recent closing price is at $32.53. Levered free cash flow is at $196.80M versus enterprise value at $1.92B (implies a LFCF/EV ratio at 10.25%).

7. ViroPharma Inc. (Nasdaq:VPHM): Engages in the development and commercialization of products that address serious diseases with a focus on products used by physician specialists or in hospital settings in the United States and internationally. Market cap is at $1.54B, and the most recent closing price is at $22.03. Levered free cash flow is at $160.56M versus enterprise value at $1.25B (implies a LFCF/EV ratio at 12.84%).

8. Molina Healthcare Inc. (NYSE:MOH): Provides Medicaid-related solutions to meet the health care needs of low-income families and individuals, as well as assists state agencies in their administration of the Medicaid program. Market cap is at $1.23B, and the most recent closing price is at $26.51. Levered free cash flow is at $100.00M versus enterprise value at $602.09M (implies a LFCF/EV ratio at 16.61%).

9. AmSurg Corp. (Nasdaq:AMSG): Engages in the development, acquisition and operation of ambulatory surgery centers in partnership with physicians in the United States. Market cap is at $905.88M, and the most recent closing price is at $28.76. Levered free cash flow is at $136.42M versus enterprise value at $1.34B (implies a LFCF/EV ratio at 10.18%).

10. PDL BioPharma, Inc. (Nasdaq:PDLI): Engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. Market cap is at $879.81M, and the most recent closing price is at $6.26. Levered free cash flow is at $184.62M versus enterprise value at $1.07B (implies a LFCF/EV ratio at 17.25%).

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Kapitall's Danny Guttridge does not own any of the shares mentioned above. Data sourced from Finviz.

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