Personal health and wellness is one of the many secular tailwinds for healthcare companies. But financial performance has lagged recently as players offloaded surplus COVID inventories in 2023 and 2024, a headwind for overall demand. The result? Over the past six months, the industry has tumbled by 6.3%. This performance is a stark contrast from the S&P 500’s 6.2% gain.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one resilient healthcare stock at the top of our wish list and two we’re steering clear of.
Two HealthcareStocks to Sell:
Thermo Fisher (TMO)
Market Cap: $162.1 billion
With over 14,000 sales personnel and a portfolio spanning more than 2,500 technology manufacturers, Thermo Fisher Scientific (NYSE: TMO) provides scientific equipment, reagents, consumables, software, and laboratory services to pharmaceutical, biotech, academic, and healthcare customers worldwide.
Why Does TMO Worry Us?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 10 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
At $429.33 per share, Thermo Fisher trades at 18.1x forward P/E. Dive into our free research report to see why there are better opportunities than TMO.
Bruker (BRKR)
Market Cap: $6.43 billion
With roots dating back to the pioneering days of nuclear magnetic resonance technology, Bruker (NASDAQ: BRKR) develops and manufactures high-performance scientific instruments that enable researchers and industrial analysts to explore materials at microscopic, molecular, and cellular levels.
Why Is BRKR Not Exciting?
- Expenses have increased as a percentage of revenue over the last two years as its adjusted operating margin fell by 5.1 percentage points
- Free cash flow margin shrank by 9.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Bruker is trading at $42.13 per share, or 15.3x forward P/E. Read our free research report to see why you should think twice about including BRKR in your portfolio.
One Healthcare Stock to Watch:
Humana (HUM)
Market Cap: $28.93 billion
With over 80% of its revenue derived from federal government contracts, Humana (NYSE: HUM) provides health insurance plans and healthcare services to approximately 17 million members, with a strong focus on Medicare Advantage plans for seniors.
Why Do We Like HUM?
- 12.2% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers
- Dominant market position is represented by its $120.2 billion in revenue, which gives it negotiating power over membership pricing and reimbursement rates
- Estimated revenue growth of 6.2% for the next 12 months implies its momentum over the last two years will continue
Humana’s stock price of $239.68 implies a valuation ratio of 16x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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