Personal health and wellness is one of the many secular tailwinds for healthcare companies. Despite the rosy long-term prospects, short-term headwinds such as COVID inventory destocking have harmed the industry’s returns - over the past six months, healthcare stocks have collectively shed 8.4%. This drawdown was discouraging since the S&P 500 held its ground.
A cautious approach is imperative when dabbling in these businesses as regulation is another unpredictable element that can affect their earnings potential. Keeping that in mind, here are three healthcare stocks we’re swiping left on.
Moderna (MRNA)
Market Cap: $10.58 billion
Rising to global prominence during the COVID-19 pandemic with one of the first effective vaccines, Moderna (NASDAQ: MRNA) develops messenger RNA (mRNA) medicines that direct the body's cells to produce proteins with therapeutic or preventive benefits for various diseases.
Why Should You Dump MRNA?
- Annual sales declines of 54.1% for the past two years show its products and services struggled to connect with the market during this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 309.9 percentage points
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $27.30 per share, Moderna trades at 5.1x forward price-to-sales. To fully understand why you should be careful with MRNA, check out our full research report (it’s free).
Viatris (VTRS)
Market Cap: $10.67 billion
Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ: VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.
Why Should You Sell VTRS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.8% annually over the last two years
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 11.1% annually
- Negative returns on capital show that some of its growth strategies have backfired, and its shrinking returns suggest its past profit sources are losing steam
Viatris’s stock price of $9.08 implies a valuation ratio of 4x forward P/E. Dive into our free research report to see why there are better opportunities than VTRS.
Elanco (ELAN)
Market Cap: $7.04 billion
Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE: ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.
Why Does ELAN Give Us Pause?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share were flat while its revenue grew
- Negative returns on capital show management lost money while trying to expand the business
Elanco is trading at $14.17 per share, or 17.6x forward P/E. If you’re considering ELAN for your portfolio, see our FREE research report to learn more.
Stocks We Like 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 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 Tecnoglass (+1,754% 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.
