Personal health and wellness is one of the many secular tailwinds for healthcare companies. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, limiting growth. This has capped the upside for healthcare stocks lately as the industry’s flat return over the past six months has trailed the S&P 500’s 18.3% gain.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one healthcare stock boasting a durable advantage and two we’re swiping left on.

Two Healthcare Stocks to Sell:

Regeneron (REGN)

Market Cap: $58.47 billion

Founded by scientists who wanted to build a company where science could thrive, Regeneron Pharmaceuticals (NASDAQ: REGN) develops and commercializes medicines for serious diseases, with key products treating eye conditions, allergic diseases, cancer, and other disorders.

Why Are We Hesitant About REGN?

1. Annual sales growth of 5.9% over the last two years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
2. Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 21.4 percentage points
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Regeneron’s stock price of $564.50 implies a valuation ratio of 15.5x forward P/E. To fully understand why you should be careful with REGN, check out our full research report (it’s free).

Revvity (RVTY)

Market Cap: $9.76 billion

Formerly known as PerkinElmer until its rebranding in 2023, Revvity (NYSE: RVTY) provides health science technologies and services that support the complete workflow from discovery to development and diagnosis to cure.

Why Are We Out on RVTY?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Overall productivity fell over the last five years as its plummeting sales were accompanied by a decline in its adjusted operating margin
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

Revvity is trading at $83.88 per share, or 15.9x forward P/E. If you’re considering RVTY for your portfolio, see our FREE research report to learn more.

One Healthcare Stock to Watch:

Medpace (MEDP)

Market Cap: $13.96 billion

Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ: MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.

Why Is MEDP on Our Radar?

1. Core business is healthy and doesn’t need acquisitions to boost sales as its organic revenue growth averaged 15.7% over the past two years
2. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. Industry-leading 44.1% return on capital demonstrates management’s skill in finding high-return investments

At $495.29 per share, Medpace trades at 40.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

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