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.

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing

    What Investors Need to Know About Returns in 2016

    Last year wasn’t a great one for investors seeking solid returns, so here are three things we believe all investors need to know about returns in 2016.
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Stock Analysis

    The Top 5 Micro Cap Biotechnology Stocks for 2016 (BSTC, OSIR)

    Discover some of the most promising micro-cap biotechnology stocks that investors can consider for their 2016 investment portfolio.
  7. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  8. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  9. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center