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 has tumbled by 8.4%. This drop was disappointing since the S&P 500 stood firm.
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 is one resilient healthcare stock at the top of our wish list and two that may face trouble.
Two Healthcare Stocks to Sell:
Guardant Health (GH)
Market Cap: $5.71 billion
Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ: GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.
Why Is GH Not Exciting?
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 19% annually
- Negative free cash flow raises questions about the return timeline for its investments
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Guardant Health’s stock price of $46.23 implies a valuation ratio of 6.7x forward price-to-sales. If you’re considering GH for your portfolio, see our FREE research report to learn more.
Evolent Health (EVH)
Market Cap: $1.16 billion
Founded in 2011 to transform how healthcare is delivered to patients with complex needs, Evolent Health (NYSE: EVH) provides specialty care management services and technology solutions that help health plans and providers deliver better care for patients with complex conditions.
Why Does EVH Worry Us?
- Sales are projected to tank by 18.9% over the next 12 months as demand evaporates
- Poor free cash flow margin of 0.3% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Negative returns on capital show that some of its growth strategies have backfired
At $10.08 per share, Evolent Health trades at 15.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why EVH doesn’t pass our bar.
One Healthcare Stock to Watch:
Exact Sciences (EXAS)
Market Cap: $8.49 billion
With a mission to detect cancer earlier when it's more treatable, Exact Sciences (NASDAQ: EXAS) develops and markets cancer screening and diagnostic tests, including its flagship Cologuard stool-based colorectal cancer screening test.
Why Is EXAS Interesting?
- Average constant currency growth of 15.3% over the past two years demonstrates its ability to grow internationally despite currency fluctuations
- Adjusted operating margin expanded by 21.5 percentage points over the last two years as it scaled and became more efficient
- Earnings per share grew by 12.6% annually over the last five years, comfortably beating the peer group average
Exact Sciences is trading at $45.75 per share, or 230.3x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
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