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 10.9%. This drawdown was worse than the S&P 500’s 5.7% decline.
While some businesses have durable competitive advantages that enable them to grow consistently, the odds aren’t great for the ones we’re analyzing today. Taking that into account, here are three healthcare stocks we’re passing on.
Myriad Genetics (MYGN)
Market Cap: $679.3 million
Founded in 1991 as one of the pioneers in translating genetic discoveries into clinical applications, Myriad Genetics (NASDAQ: MYGN) develops genetic tests that assess disease risk, guide treatment decisions, and provide insights across oncology, women's health, and mental health.
Why Should You Sell MYGN?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share fell by 34.9% annually while its revenue was flat
- Push for growth has led to negative returns on capital, signaling value destruction
Myriad Genetics’s stock price of $7.37 implies a valuation ratio of 140.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than MYGN.
IQVIA (IQV)
Market Cap: $26.57 billion
Created from the 2016 merger of Quintiles (a clinical research organization) and IMS Health (a healthcare data specialist), IQVIA (NYSE: IQV) provides clinical research services, data analytics, and technology solutions to help pharmaceutical companies develop and market medications more effectively.
Why Does IQV Worry Us?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Estimated sales growth of 3% for the next 12 months is soft and implies weaker demand
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $149.60 per share, IQVIA trades at 13x forward price-to-earnings. Read our free research report to see why you should think twice about including IQV in your portfolio.
Repligen (RGEN)
Market Cap: $8.16 billion
With over 13 strategic acquisitions since 2012 to build its comprehensive bioprocessing portfolio, Repligen (NASDAQ: RGEN) develops and manufactures specialized technologies that improve the efficiency and flexibility of biological drug manufacturing processes.
Why Do We Think RGEN Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 11% annually over the last two years
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Adjusted operating profits fell over the last two years as its sales dropped and it struggled to adjust its fixed costs
Repligen is trading at $144.71 per share, or 84.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why RGEN doesn’t pass our bar.
Stocks We Like More
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