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’s 4.1% return has trailed the S&P 500 by 6.2 percentage points.
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 are two healthcare stocks boasting durable advantages and one that may face trouble.
One Healthcare Stock to Sell:
CooperCompanies (COO)
Market Cap: $11.91 billion
With a history dating back to 1958 and a portfolio spanning two distinct healthcare segments, Cooper Companies (NASDAQ: COO) develops and manufactures medical devices focused on vision care through contact lenses and women's health including fertility products and services.
Why Are We Hesitant About COO?
- Sales trends were unexciting over the last two years as its 6.4% annual growth was below the typical healthcare company
- Free cash flow margin dropped by 6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
CooperCompanies is trading at $61.02 per share, or 13x forward P/E. Check out our free in-depth research report to learn more about why COO doesn’t pass our bar.
Two Healthcare Stocks to Watch:
Vertex Pharmaceuticals (VRTX)
Market Cap: $113.7 billion
Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ: VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.
Why Are We Positive on VRTX?
- Solid 13.8% annual revenue growth over the last five years indicates its offerings solve complex business issues
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
- Industry-leading 49.4% return on capital demonstrates management’s skill in finding high-return investments
Vertex Pharmaceuticals’s stock price of $447.05 implies a valuation ratio of 22.3x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Clover Health (CLOV)
Market Cap: $2.20 billion
Founded in 2014 to improve healthcare for America's seniors through technology, Clover Health (NASDAQ: CLOV) provides Medicare Advantage plans for seniors with a focus on affordable care and uses its proprietary Clover Assistant software to help physicians manage patient care.
Why Should You Buy CLOV?
- Impressive 31.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Adjusted operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Free cash flow flipped to positive over the last five years, showing the company is at an important crossroads
At $4.14 per share, Clover Health trades at 39.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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