AMERICAN HOME ISA "STRONG BUY"

Diversified US health care group American Home should see its profit/earnings multiple continue to rise; it is a "strong buy," according to analysts Barbara Ryan and Catherine Knickerbocker of Alex Brown & Sons, who expect the stock to trade at 16 times their preliminary 1991 earnings per share forecast of $5.65, or at 90-95.

They say that investors should come to recognize the acceleration in earnings growth and the improved quality of EPS. The quality of earnings has also improved substantially; and fuelling earnings now is sales growth from new drugs rather than a declining sharebase and tax rate, as in previous years, they observe.

The emphasis of the company's management is now on health care and improving profitability, the analysts say, noting that a total of 91% of AHP's earnings currently emanate from health care, compared with 74.5% in 1986. Commensurate with this shift, net margins have expanded to an estimated 19% this year from 15%, and the analysts say that they expect this to rise to 21% in 1993.