From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, limiting growth. This has capped the upside for healthcare stocks lately as the industry’s flat return over the past six months has trailed the S&P 500’s 18.6% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one healthcare stock boasting a durable advantage and two we’re swiping left on.
Two Healthcare Stocks to Sell:
CONMED (CNMD)
Market Cap: $1.41 billion
With over five decades of experience in surgical innovation since its founding in 1970, CONMED (NYSE: CNMD) develops and manufactures medical devices and equipment for surgical procedures, specializing in orthopedic and general surgery products.
Why Is CNMD Not Exciting?
- Smaller revenue base of $1.33 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Low returns on capital reflect management’s struggle to allocate funds effectively
CONMED’s stock price of $45.67 implies a valuation ratio of 10.1x forward P/E. Check out our free in-depth research report to learn more about why CNMD doesn’t pass our bar.
Progyny (PGNY)
Market Cap: $1.84 billion
Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny (NASDAQ: PGNY) provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.
Why Does PGNY Worry Us?
- Smaller revenue base of $1.24 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Estimated sales growth of 4.8% for the next 12 months implies demand will slow from its two-year trend
- ROIC of 0.6% reflects management’s challenges in identifying attractive investment opportunities
At $21.42 per share, Progyny trades at 12.8x forward P/E. Read our free research report to see why you should think twice about including PGNY in your portfolio.
One Healthcare Stock to Watch:
Humana (HUM)
Market Cap: $30.7 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?
- Products and services resonate with customers, evidenced by its respectable 11.8% annualized sales growth over the last five years
- Dominant market position is represented by its $123.1 billion in revenue, which gives it negotiating power over membership pricing and reimbursement rates
- Industry-leading 49% return on capital demonstrates management’s skill in finding high-return investments
Humana is trading at $257.25 per share, or 17.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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