Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Those leading the charge have not only realized strong financial performance but also propelled the broader industry’s returns as healthcare stocks have gained 14.3% over the past six months while the S&P 500 was up 6.3%.
Nevertheless, investors should tread carefully as the sector is heavily regulated, and businesses can be negatively impacted if the rules change. On that note, here is one healthcare stock poised to generate sustainable market-beating returns and two we would avoid.
Two Healthcare Stocks to Sell:
Moderna (MRNA)
Market Cap: $22.07 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 Should You Sell MRNA?
- Annual sales declines of 34.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Free cash flow margin dropped by 129.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Moderna’s stock price of $55.89 implies a valuation ratio of 11.1x forward price-to-sales. Check out our free in-depth research report to learn more about why MRNA doesn’t pass our bar.
10x Genomics (TXG)
Market Cap: $5.83 billion
Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ: TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.
Why Do We Steer Clear of TXG?
- Annual revenue growth of 1.1% over the last two years was below our standards for the healthcare sector
- Revenue base of $638.8 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Push for growth has led to negative returns on capital, signaling value destruction
At $46.31 per share, 10x Genomics trades at 9.5x forward price-to-sales. Read our free research report to see why you should think twice about including TXG in your portfolio.
One Healthcare Stock to Watch:
Cardinal Health (CAH)
Market Cap: $53.72 billion
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE: CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Are We Fans of CAH?
- Enormous revenue base of $250.7 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Forecasted revenue growth of 8.1% for the next 12 months suggests stronger momentum versus most peers
- Share repurchases have increased shareholder returns as its annual earnings per share growth of 12.4% exceeded its revenue gains over the last five years
Cardinal Health is trading at $229.84 per share, or 19.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
