Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Despite the rosy long-term prospects, short-term headwinds such as COVID inventory destocking have caused the industry to lag recently - over the past six months, the collective 9.8% gain for healthcare stocks has fallen short of the S&P 500’s 22.6% rise.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here is one healthcare stock boasting a durable advantage and two we’re passing on.
Two Healthcare Stocks to Sell:
Premier (PINC)
Market Cap: $2.33 billion
Operating one of the largest healthcare group purchasing organizations in the United States with over 4,350 hospital members, Premier (NASDAQ: PINC) is a technology-driven healthcare improvement company that helps hospitals, health systems, and other providers reduce costs and improve clinical outcomes.
Why Are We Out on PINC?
- Sales tumbled by 12.9% annually over the last two years, showing market trends are working against its favor during this cycle
- Overall productivity fell over the last two years as its plummeting sales were accompanied by a decline in its adjusted operating margin
- Issuance of new shares over the last five years caused its earnings per share to fall by 11.8% annually, even worse than its revenue declines
Premier’s stock price of $28.14 implies a valuation ratio of 20.8x forward P/E. Dive into our free research report to see why there are better opportunities than PINC.
Avantor (AVTR)
Market Cap: $7.53 billion
With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE: AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.
Why Are We Wary of AVTR?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Forecasted revenue decline of 1% for the upcoming 12 months implies demand will fall even further
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Avantor is trading at $11.05 per share, or 12.2x forward P/E. To fully understand why you should be careful with AVTR, check out our full research report (it’s free for active Edge members).
One Healthcare Stock to Buy:
Eli Lilly (LLY)
Market Cap: $758.1 billion
Founded in 1876 by a Civil War veteran and pharmacist frustrated with the poor quality of medicines, Eli Lilly (NYSE: LLY) discovers, develops, and manufactures pharmaceutical products for conditions including diabetes, obesity, cancer, immunological disorders, and neurological diseases.
Why Should You Buy LLY?
- Market share has increased this cycle as its 36.1% annual revenue growth over the last two years was exceptional
- Operating margin expanded by 20.4 percentage points over the last two years as it scaled and became more efficient
- Share buybacks catapulted its annual earnings per share growth to 29.5%, which outperformed its revenue gains over the last five years
At $840.48 per share, Eli Lilly trades at 29x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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