This is part of The Motley Fool's annual "Stocks for Mom" special.

IMS Health
Trading at $15.97 as of May 2, 2003

Happy Mother's Day, Mom! You remembered to take your pills today, right?

I thought of medications because the company I'd like to introduce you to is in the drug biz. Meet IMS Health(NYSE: RX). Not many people have heard of it (although it was a stock pick in our Motley Fool Select last year), but maybe they should have. In the company's own words:

Operating in more than 100 countries, IMS is the world's leading provider of information solutions to the pharmaceutical and healthcare industries. With $1.4 billion in 2002 revenue and nearly 50 years of industry experience, IMS offers leading-edge business intelligence products and services that are integral to clients' day-to-day operations, including marketing effectiveness solutions for prescription and over-the-counter pharmaceutical products; sales optimization solutions to increase pharmaceutical sales force productivity; and consulting and customized services that turn information into actionable insights.

Hmm... that paragraph started out OK, but then lapsed into a lot of buzzwords. (Hey, did you know that you offer "leading-edge child welfare services that are integral to your clients' day-to-day functioning, as well as recipe optimization solutions to increase your family's health and productivity; and consulting and customized services that maximize the household budget"? You've also given me many "actionable insights" over the years -- thanks, mom!)

Basically, IMS Health serves the pharmaceutical and health-care industries, offering market research, consulting and sales management services. Its business is likely to grow as long as the drug business keeps growing, and who could imagine an end to that? Who, specifically, are IMS Health's customers? In its own words: "Essentially every major pharmaceutical manufacturer and biotechnology firm is an IMS customer, along with professional service firms, financial analysts, government and regulatory agencies, researchers and educators."

IMS Health is also sporting a lower valuation than most major pharmaceutical companies, so it's a less expensive way to invest in the sector. Another benefit is that IMS's business is spread out over the whole industry. If you invest in just one drug company, your fortunes are tied to a handful of drugs in the company's pipeline, along with whatever blockbuster drugs the firm currently sells. (Blockbusters also eventually lose their proprietary edge, too, when their patents expire.)

In case you doubt the growth of the pharmaceutical industry, know that U.S. prescription drug sales grew 11.8% to $192.2 billion in 2002. Impressive, eh? By the way, that data comes from none other than IMS Health! In other news, IMS Health recently announced a three-year agreement to provide Pfizer(NYSE: PFE) with data, analytics, and advisory services.

Here are a few quick stats on the firm, culled from MSN and Morningstar:

    IMS Health  Industry  S&P 500
Gross margin              60.4%   52.2%    47.5%

Net profit margin 18.6% -0.4% 3.7%
5-yr avg. gross margin 60.1% 52.1% 47.5%
5-yr avg. net margin 15.8% -1.1% 5.5%
Sales growth rate 7.1% 5.1% -2.8%
Price/sales ratio 2.53 2.13 1.32 Price/cash flow ratio 11.00 25.80 15.60
Return on capital 48.6% -0.4% 3.6% 5-yr avg. ret. on capital 40.6% -0.9% 5.8%

Most of those numbers look pretty good. All isn't 100% rosy, though. Sales have been sluggish in the past year or two, partly due to relatively fewer drugs coming onto the market. The whole pharmaceutical industry hasn't quite been firing on all cylinders lately, and IMS Health's progress is inextricably tied to that.

Still, while Merck(NYSE: MRK) recently traded at a price-to-earnings (P/E) ratio of 18, and Pfizer's was 23, Eli Lilly's(NYSE: LLY) was 24, Johnson & Johnson's(NYSE: JNJ) was 27, Bristol-Myers Squibb (NYSE: BMY) was 22, and Abbott Labs(NYSE: ABT) was 20, IMS Health's P/E ratio was a more attractive 16. Making matters better, IMS Health's five-year high  and low P/Es are 70 and 13.9, respectively, meaning that the current price is very much on the low end for the company, historically. One more green flag for the firm is that it's a key holding in the very well-regarded Oakmark Select I mutual fund (ticker: OAKLX), run by Bill Nygren. (Fool contributor Whitney Tilson wrote positively about the company, too, several years ago, and it was featured as a stock recommendation in a past issue of The Motley Fool Select.)

So... should you rush out and snap up shares of IMS Health? No, of course not -- at least not just on the basis of these few words about it. Take some time and learn more about the company, if it interests you. Spend a while poking through its website and presentations. Read what Fools are saying about it on our IMS Health discussion board (where you can take advantage of a free trial of our vibrant discussion board community). Scrutinize its financial statements and crunch some numbers. Consider its upside and downside, its risks and possible rewards. Maybe you'll like what you see.

For more stock ideas delivered right to your mailbox -- from your postman, that is -- check out David and Tom Gardner's Motley Fool Stock Advisor .

Selena Maranjian is smarter than a speeding bullet and faster than a tall building. For more about her, view her bio and her profile. You might also be interested in books she has written or co-written:The Motley Fool Money GuideandThe Motley Fool Investment Guide for Teens.The Motley Fool is Fools writing for Fools.

A Stock for Mom represents the opinion of one Fool and should in no way be taken as the opinion of either The Motley Fool, Inc. or the company in question, or as representative of anyone or anything other than that specific Fool's thoughts.