From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. 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 6.3%. This drawdown is a far cry from the S&P 500’s 6.2% ascent.

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. Taking that into account, here is one healthcare stock poised to generate sustainable market-beating returns and two we’re passing on.

Two HealthcareStocks to Sell:

Surgery Partners (SGRY)

Market Cap: $2.82 billion

With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.

Why Are We Hesitant About SGRY?

1. Underwhelming unit sales over the past two years suggest it might have to lower prices to accelerate growth
2. 6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $22.15 per share, Surgery Partners trades at 20.3x forward P/E. Dive into our free research report to see why there are better opportunities than SGRY.

PacBio (PACB)

Market Cap: $480.1 million

Pioneering what scientists call "HiFi long-read sequencing," recognized as Nature Methods' method of the year for 2022, Pacific Biosciences (NASDAQ: PACB) develops advanced DNA sequencing systems that enable scientists and researchers to analyze genomes with unprecedented accuracy and completeness.

Why Should You Dump PACB?

1. Sales trends were unexciting over the last two years as its 6.6% annual growth was below the typical healthcare company
2. Free cash flow margin shrank by 29.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

PacBio’s stock price of $1.60 implies a valuation ratio of 3x forward price-to-sales. Check out our free in-depth research report to learn more about why PACB doesn’t pass our bar.

One Healthcare Stock to Watch:

Centene (CNC)

Market Cap: $16.58 billion

Serving nearly 1 in 15 Americans through its government healthcare programs, Centene (NYSE: CNC) is a healthcare company that manages government-sponsored health insurance programs like Medicaid and Medicare for low-income and complex-needs populations.

Why Are We Fans of CNC?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 15.5% annual sales growth over the last five years
2. Enormous revenue base of $169.3 billion gives it leverage over plan holders and advantageous reimbursement terms with healthcare providers
3. Earnings per share have massively outperformed its peers over the last five years, increasing by 14.8% annually

Centene is trading at $33.31 per share, or 4.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our 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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