Top 20 Defensive Stocks Ranked by Marvin Business Quality
Marvin's rules picked 20 profitable defensive stocks across Healthcare, Utilities and Consumer Defensive. They are ranked by Business Quality, with each company scored against others in its own industry.
Defensive stocks come from areas people keep spending on in good times and bad, such as healthcare, electricity and water, and everyday household and food products. Their businesses tend to be steadier than those of companies that depend on the economy's ups and downs. Steadier does not mean risk-free.
This list has 20 profitable companies from Healthcare, Utilities and Consumer Defensive. Each one passed Marvin's rules for size, profitability and overall score. Healthcare makes up most of the list, with a few utilities and consumer staples among them.
When you read the picks, look at the figures together. Strong margins suggest a company keeps more of each sale as profit, and a low debt-to-equity ratio suggests it leans less on borrowing. Some figures are missing for some companies, and each blurb notes where that matters.
The list
How Marvin ranked these stocks
Marvin started with companies above a minimum size and kept only profitable ones in Consumer Defensive, Utilities and Healthcare with a solid Overall score. It then ranked them by Business Quality, highest first, and its rules limit how many picks come from each sector. All scores run on a scale from zero to one hundred and compare a company only with others in its own industry, so a high score means strong against industry peers today, not a forecast or a recommendation.
Companies above about $300 million in size, ranked by Marvin scores (0-100, relative to each company's own industry). Profitable companies in Consumer Defensive, Utilities and Healthcare with an Overall score of at least 60, highest Business Quality first; at most 3 per sector.
The stocks, one by one
Edwards Lifesciences Corporation EW
Edwards Lifesciences, a medical device maker, has an operating margin of 22.3% and a gross margin of 77.8%, which suggests strong profitability. Revenue grew 11.5% last year. Caution: return on equity is a modest 9.5%, and the Opportunity score of 22 trails its Quality score.
Krystal Biotech, Inc. KRYS
Krystal Biotech grew revenue 33.9% last year and turned much of it into profit, with an operating margin of 44.9% and a free cash flow margin of 58.5%. Caution: gross margin and debt figures are not available, so the picture of its finances is incomplete.
ANI Pharmaceuticals, Inc. ANIP
ANI Pharmaceuticals posted fast revenue growth of 43.8% and a return on equity of 18.1%, a healthy sign. Caution: its operating margin of 15.4% is lower than many companies on this list, and no debt or gross margin figures are available.
Globus Medical, Inc. GMED
Globus Medical, a medical device company, shows a free cash flow margin of 24.0% and an operating margin of 20.3%, both signs of solid cash generation. Revenue grew 16.7%. Caution: return on equity is a modest 11.2%, and no debt figure is available.
American Electric Power Company, Inc. AEP
American Electric Power, a regulated electric utility, grew revenue 10.9% and has an operating margin of 24.0%. Caution: its debt-to-equity ratio is 1.65, which means a fair amount of borrowing, and its free cash flow margin of 11.6% is thinner than its operating margin.
American States Water Company AWR
American States Water, a regulated water utility, has a high operating margin of 31.8% and a moderate debt-to-equity ratio of 0.65. Revenue grew 10.5%. Caution: its free cash flow margin is very thin at 3.0%, so little cash is left after investment.
The Procter & Gamble Company PG
Procter & Gamble, a household products maker, has an operating margin of 22.7% and a free cash flow margin of 17.4%, pointing to steady profits. Caution: revenue growth was just 3.3%, and return on equity and debt figures are not available.
Addus HomeCare Corporation ADUS
Addus HomeCare, a care provider, grew revenue 23.2% and carries very little debt, with a debt-to-equity ratio of 0.09. Caution: its operating margin of 10.0% and return on equity of 9.2% are modest compared with others on this list.
Darling Ingredients Inc. DAR
Darling Ingredients, a packaged foods company, has an operating margin of 14.5% and a return on equity of 11.4%, with revenue growth of 7.4%. Caution: its gross margin of 26.3% is on the low side, and free cash flow and debt figures are not available.
HealthEquity, Inc. HQY
HealthEquity has a free cash flow margin of 35.8% and an operating margin of 25.8%, along with low debt at a debt-to-equity ratio of 0.49. Caution: revenue growth of 9.5% is moderate, and return on equity is 11.9%.
IDEXX Laboratories, Inc. IDXX
IDEXX Laboratories has a high return on equity of 70.7% and an operating margin of 32.0%, signs of a very profitable business. Caution: its Opportunity score is only 7, which holds its Overall score to 79, and no debt figure is available.
Costco Wholesale Corporation COST
Costco, a discount retailer, has a return on equity of 25.8% and revenue growth of 10.1%. Caution: margins are thin, with an operating margin of 3.9% and a gross margin of 12.8%, and its Opportunity score is a low 29.
Perdoceo Education Corporation PRDO
Perdoceo Education grew revenue 24.2% and has an operating margin of 24.6% and a free cash flow margin of 25.4%, showing strong profits and cash. Caution: gross margin and debt figures are not available, so its financial strength is only partly visible.
DexCom, Inc. DXCM
DexCom, a medical device company, grew revenue 15.6% and converts sales to cash well, with a free cash flow margin of 28.3%. Return on equity is 38.1%. Caution: no debt figure is available, so its borrowing level cannot be judged here.
Innoviva, Inc. INVA
Innoviva has a high operating margin of 36.9% and a free cash flow margin of 43.1%, with return on equity at 29.0%. Revenue grew 14.7%. Caution: no debt figure is available, and its Opportunity score of 63 is middling.
Nutex Health, Inc. NUTX
Nutex Health grew revenue 82.4% and has an operating margin of 40.6% and return on equity of 45.6%, all very strong. Caution: one year of rapid growth does not show it is consistent, and no debt figure is available.
Eli Lilly and Company LLY
Eli Lilly grew revenue 44.7% last year, has a gross margin of 83.4% and a return on equity of 78.8%, all very strong. Caution: operating margin, free cash flow margin and debt figures are not available, so profitability can only be partly checked.
Philip Morris International Inc. PM
Philip Morris International, a tobacco company, has an operating margin of 37.7% and a free cash flow margin of 29.9%, suggesting strong profits and cash. Caution: revenue growth was a modest 7.3%, and return on equity and debt figures are not available.
Royalty Pharma plc RPRX
Royalty Pharma has a very high operating margin of 59.6%, meaning it keeps a large share of each sale as profit. Revenue grew 5.1%. Caution: free cash flow, gross margin, return on equity and debt figures are all missing, so this view is limited.
STERIS plc STE
STERIS has an operating margin of 18.9% and a free cash flow margin of 15.3%, with low debt at a debt-to-equity ratio of 0.27. Caution: revenue growth of 8.7% is modest, and its Opportunity score of 56 is lower than its Quality score.
Common questions
What makes a stock defensive?
A defensive stock belongs to a business people keep paying for in any economy, such as healthcare, power and water, or household staples. Its sales tend to be steadier than those of companies selling things people can delay buying. That steadiness is a tendency, not a guarantee, and defensive stocks can still fall.
Why are so many of these stocks in Healthcare?
Marvin's rules look at three sectors: Consumer Defensive, Utilities and Healthcare. They then rank companies by Business Quality, so the order reflects how strong each company's finances look against its industry peers. A lot of healthcare companies scored well on that measure, which is why the sector makes up most of the list.
What do Marvin's scores mean?
Overall, Quality and Opportunity scores run on a scale from zero to one hundred and compare a company only with others in its own industry. A high score means the company looks strong relative to its peers today. The scores are not predictions or advice, and a company's score can change as new financial results arrive.
Keep reading
- Top 15 Healthcare Companies With the Strongest Businesses
- Top 20 Medical Stocks Ranked by Marvin Scores
- Top 15 Healthcare Stocks Right Now, Ranked by Marvin Scores
- Top 25 Good Companies That Could Be About to Break Out
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Marvin's scores (0-100) compare each company with others in its industry today. Growth and margin figures come from SEC filings. This is general information, not personal investment advice or a recommendation to buy or sell anything. Do your own research.