ETFOptimize | High-performance ETF-based Investment Strategies

Quantitative strategies, Wall Street-caliber research, and insightful market analysis since 1998.


ETFOptimize | HOME
Close Window

3 Healthcare Stocks That Fall Short

COO Cover Image

Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. 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 1.4%. This performance is a stark contrast from the S&P 500’s 15.7% gain.

Investors should tread carefully as the influx of venture capital has also ushered in a new wave of competition. Keeping that in mind, here are three healthcare stocks best left ignored.

CooperCompanies (COO)

Market Cap: $13.3 billion

With a history dating back to 1958 and a portfolio spanning two distinct healthcare segments, Cooper Companies (NASDAQ: COO) develops and manufactures medical devices focused on vision care through contact lenses and women's health including fertility products and services.

Why Does COO Worry Us?

  1. Sales trends were unexciting over the last two years as its 7.3% annual growth was below the typical healthcare company
  2. 8.3 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. ROIC of 5.1% reflects management’s challenges in identifying attractive investment opportunities

CooperCompanies is trading at $66.99 per share, or 15.4x forward P/E. Dive into our free research report to see why there are better opportunities than COO.

U.S. Physical Therapy (USPH)

Market Cap: $1.25 billion

With a nationwide footprint spanning 671 clinics across 42 states, U.S. Physical Therapy (NYSE: USPH) operates a network of outpatient physical therapy clinics and provides industrial injury prevention services to employers across the United States.

Why Do We Think Twice About USPH?

  1. Subscale operations are evident in its revenue base of $729.6 million, meaning it has fewer distribution channels than its larger rivals
  2. Free cash flow margin dropped by 9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
  3. Waning returns on capital imply its previous profit engines are losing steam

U.S. Physical Therapy’s stock price of $82.52 implies a valuation ratio of 31.8x forward P/E. Read our free research report to see why you should think twice about including USPH in your portfolio.

Illumina (ILMN)

Market Cap: $14.18 billion

Pioneering the ability to read the human genome at unprecedented speed and affordability, Illumina (NASDAQ: ILMN) develops and sells advanced DNA sequencing and microarray technologies that allow researchers and clinicians to analyze genetic variations and functions.

Why Do We Pass on ILMN?

  1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
  2. Earnings per share fell by 6.3% annually over the last five years while its revenue grew, partly because it diluted shareholders
  3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $92.16 per share, Illumina trades at 20.7x forward P/E. To fully understand why you should be careful with ILMN, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound 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 Kadant (+351% 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

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

Stock Quote API & Stock News API supplied by www.cloudquote.io
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms Of Service.


 

IntelligentValue Home
Close Window

DISCLAIMER

All content herein is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor should it be interpreted as a recommendation to buy, hold or sell (short or otherwise) any security.  All opinions, analyses, and information included herein are based on sources believed to be reliable, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. We undertake no obligation to update such opinions, analysis or information. You should independently verify all information contained on this website. Some information is based on analysis of past performance or hypothetical performance results, which have inherent limitations. We make no representation that any particular equity or strategy will or is likely to achieve profits or losses similar to those shown. Shareholders, employees, writers, contractors, and affiliates associated with ETFOptimize.com may have ownership positions in the securities that are mentioned. If you are not sure if ETFs, algorithmic investing, or a particular investment is right for you, you are urged to consult with a Registered Investment Advisor (RIA). Neither this website nor anyone associated with producing its content are Registered Investment Advisors, and no attempt is made herein to substitute for personalized, professional investment advice. Neither ETFOptimize.com, Global Alpha Investments, Inc., nor its employees, service providers, associates, or affiliates are responsible for any investment losses you may incur as a result of using the information provided herein. Remember that past investment returns may not be indicative of future returns.

Copyright © 1998-2017 ETFOptimize.com, a publication of Optimized Investments, Inc. All rights reserved.