Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, and over the past six months, the industry has pulled back by 6.9%. This performance is a noticeable divergence from the S&P 500’s 5.8% return.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here are two resilient healthcare stocks at the top of our wish list and one we’re swiping left on.
One Healthcare Stock to Sell:
Sotera Health Company (SHC)
Market Cap: $4.47 billion
With a critical role in ensuring the safety of millions of patients worldwide, Sotera Health (NASDAQGS:SHC) provides sterilization services, lab testing, and advisory services to ensure medical devices, pharmaceuticals, and food products are safe for use.
Why Does SHC Fall Short?
- Muted 7.3% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers
- Revenue base of $1.12 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Low free cash flow margin of 1.1% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Sotera Health Company is trading at $15.23 per share, or 19.9x forward P/E. Check out our free in-depth research report to learn more about why SHC doesn’t pass our bar.
Two Healthcare Stocks to Watch:
Stryker (SYK)
Market Cap: $144.9 billion
With over 150 million patients impacted annually through its innovative healthcare technologies, Stryker (NYSE: SYK) develops and manufactures advanced medical devices and equipment across orthopedics, surgical tools, neurotechnology, and patient care solutions.
Why Is SYK Interesting?
- Core business can prosper without any help from acquisitions as its organic revenue growth averaged 10.2% over the past two years
- Economies of scale give it more fixed cost leverage than its smaller competitors
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 13.3% annually
Stryker’s stock price of $378.95 implies a valuation ratio of 27.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Globus Medical (GMED)
Market Cap: $8.48 billion
With operations spanning 64 countries and a portfolio of over 10 new products launched in 2023 alone, Globus Medical (NYSE: GMED) develops and sells implantable devices, surgical instruments, and technology solutions for spine, orthopedic, and neurosurgical procedures.
Why Could GMED Be a Winner?
- Average constant currency growth of 62.3% over the past two years demonstrates its ability to grow internationally despite currency fluctuations
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 20.2% annually
At $62.79 per share, Globus Medical trades at 18.4x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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