Personal health and wellness is one of the many secular tailwinds for healthcare companies. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, limiting growth. This has capped returns as the industry’s six-month gain of 7.8% has lagged the S&P 500’s 13.2% climb.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here are two healthcare stocks boasting durable advantages and one best left ignored.
One Healthcare Stock to Sell:
Moderna (MRNA)
Market Cap: $18.14 billion
Rising to global prominence during the COVID-19 pandemic with one of the first effective vaccines, Moderna (NASDAQ: MRNA) develops messenger RNA (mRNA) medicines that direct the body's cells to produce proteins with therapeutic or preventive benefits for various diseases.
Why Do We Think MRNA Will Underperform?
- Sales tumbled by 34.3% annually over the last two years, showing market trends are working against its favor during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 46.5% annually, worse than its revenue declines
- 129.7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Moderna is trading at $45.38 per share, or 9.9x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MRNA.
Two Healthcare Stocks to Watch:
Intuitive Surgical (ISRG)
Market Cap: $156.4 billion
Pioneering minimally invasive surgery since its first da Vinci system was FDA-cleared in 2000, Intuitive Surgical (NASDAQ: ISRG) develops and manufactures robotic-assisted surgical systems that enable minimally invasive procedures across various medical specialties.
Why Do We Watch ISRG?
- Impressive 20.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share buybacks catapulted its annual earnings per share growth to 21.3%, which outperformed its revenue gains over the last five years
- Robust free cash flow margin of 19.6% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute
At $442.32 per share, Intuitive Surgical trades at 41.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
BrightSpring Health Services (BTSG)
Market Cap: $11.66 billion
Founded in 1974, BrightSpring Health Services (NASDAQ: BTSG) offers home health care, hospice, neuro-rehabilitation, and pharmacy services.
Why Is BTSG on Our Radar?
- Market share has increased this cycle as its 22.6% annual revenue growth over the last two years was exceptional
- Revenue base of $13.65 billion gives it economies of scale and some negotiating power
- Estimated revenue growth of 14.2% for the next 12 months implies its momentum over the last two years will continue
BrightSpring Health Services’s stock price of $56.75 implies a valuation ratio of 31.9x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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