Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Those leading the charge have realized strong financial performance, and over the past six months, the industry’s 15.5% return has closely followed the S&P 500.
Nevertheless, investors should tread carefully as the sector is heavily regulated, and businesses can be negatively impacted if the rules change. Keeping that in mind, here is one healthcare stock boasting a durable advantage and two we’re passing on.
Two Healthcare Stocks to Sell:
Myriad Genetics (MYGN)
Market Cap: $654.4 million
Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ: MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.
Why Should You Sell MYGN?
- Annual revenue growth of 6% over the last two years was below our standards for the healthcare sector
- Push for growth has led to negative returns on capital, signaling value destruction, and its falling returns suggest its earlier profit pools are drying up
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $6.79 per share, Myriad Genetics trades at 225x forward P/E. If you’re considering MYGN for your portfolio, see our FREE research report to learn more.
West Pharmaceutical Services (WST)
Market Cap: $19.64 billion
Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE: WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.
Why Are We Wary of WST?
- Annual revenue growth of 1.5% over the last two years was below our standards for the healthcare sector
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 5.5 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
West Pharmaceutical Services’s stock price of $273.09 implies a valuation ratio of 36.7x forward P/E. Dive into our free research report to see why there are better opportunities than WST.
One Healthcare Stock to Watch:
Intuitive Surgical (ISRG)
Market Cap: $201.3 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 Is ISRG on Our Radar?
- Average unit sales growth of 12.7% over the past two years reflects steady demand for its products
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Earnings per share grew by 20.9% annually over the last five years, massively outpacing its peers
Intuitive Surgical is trading at $567.84 per share, or 61.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
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