From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. 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 13.3%. This drawdown was worse than the S&P 500’s 5.8% fall.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one healthcare stock poised to generate sustainable market-beating returns and two we’re steering clear of.

Two Healthcare Stocks to Sell:

Labcorp (LH)

Market Cap: $20.82 billion

With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE: LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.

Why Are We Cautious About LH?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 13.3 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Labcorp is trading at $248.76 per share, or 15.1x forward P/E. Check out our free in-depth research report to learn more about why LH doesn’t pass our bar.

Premier (PINC)

Market Cap: $1.92 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 Do We Think PINC Will Underperform?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9.3% annually over the last two years
2. Projected sales decline of 9.6% over the next 12 months indicates demand will continue deteriorating
3. Overall productivity fell over the last two years as its plummeting sales were accompanied by a decline in its adjusted operating margin

At $22.91 per share, Premier trades at 17.3x forward P/E. To fully understand why you should be careful with PINC, check out our full research report (it’s free).

One Healthcare Stock to Watch:

BioMarin Pharmaceutical (BMRN)

Market Cap: $11.47 billion

Pioneering treatments for conditions that often had no previous therapeutic options, BioMarin Pharmaceutical (NASDAQ: BMRN) develops and commercializes therapies that address the root causes of rare genetic disorders, particularly those affecting children.

Why Are We Fans of BMRN?

1. Annual revenue growth of 16.5% over the past two years was outstanding, reflecting market share gains this cycle
2. Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 22.8% outpaced its revenue gains
3. Free cash flow margin expanded by 14.9 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

BioMarin Pharmaceutical’s stock price of $61 implies a valuation ratio of 13.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.