From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. 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 13.9% gain for healthcare stocks has fallen short of the S&P 500’s 32.7% 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. On that note, here is one healthcare stock poised to generate sustainable market-beating returns and two we’re passing on.

Two Healthcare Stocks to Sell:

Select Medical (SEM)

Market Cap: $1.60 billion

With a nationwide network spanning 46 states and over 2,700 healthcare facilities, Select Medical (NYSE: SEM) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States.

Why Should You Dump SEM?

1. Declining admissions over the past two years imply it may need to invest in improvements to get back on track
2. Forecasted revenue decline of 4.5% for the upcoming 12 months implies demand will fall even further
3. Earnings per share fell by 3.4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

At $13.13 per share, Select Medical trades at 11x forward P/E. Read our free research report to see why you should think twice about including SEM in your portfolio.

GoodRx (GDRX)

Market Cap: $1.57 billion

Started in 2011 to tackle the problem of high prescription drug costs in America, GoodRx (NASDAQ: GDRX) operates a digital platform that helps consumers find lower prices on prescription medications through price comparison tools and discount codes.

Why Are We Out on GDRX?

1. Weak customer trends over the past two years suggest it may need to improve its products, pricing, or go-to-market strategy
2. Revenue base of $799.9 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Push for growth has led to negative returns on capital, signaling value destruction

GoodRx is trading at $4.58 per share, or 10.8x forward P/E. If you’re considering GDRX for your portfolio, see our FREE research report to learn more.

One Healthcare Stock to Buy:

McKesson (MCK)

Market Cap: $91.8 billion

With roots dating back to 1833, making it one of America's oldest continuously operating businesses, McKesson (NYSE: MCK) is a healthcare services company that distributes pharmaceuticals, medical supplies, and provides technology solutions to pharmacies, hospitals, and healthcare providers.

Why Should You Buy MCK?

1. Annual revenue growth of 15.3% over the last two years beat the sector average and underscores the unique value of its offerings
2. Enormous revenue base of $377.6 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
3. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 18.3% exceeded its revenue gains over the last five years

McKesson’s stock price of $738 implies a valuation ratio of 19.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. 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).

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