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 7.5%. This drop was disheartening since the S&P 500 held its ground.

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 we’re swiping left on.

Teleflex (TFX)

Market Cap: $5.61 billion

With a portfolio spanning from vascular access catheters to minimally invasive surgical tools, Teleflex (NYSE: TFX) designs, manufactures, and supplies single-use medical devices used in critical care and surgical procedures across hospitals worldwide.

Why Is TFX Not Exciting?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share
2. Earnings growth underperformed the sector average over the last five years as its EPS grew by just 3.3% annually
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $126.86 per share, Teleflex trades at 8.7x forward P/E. Read our free research report to see why you should think twice about including TFX in your portfolio.

Brookdale (BKD)

Market Cap: $1.58 billion

With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE: BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.

Why Are We Hesitant About BKD?

1. Annual sales declines of 4.8% for the past five years show its products and services struggled to connect with the market during this cycle
2. Underwhelming -0.8% return on capital reflects management’s difficulties in finding profitable growth opportunities
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Brookdale’s stock price of $6.73 implies a valuation ratio of 3.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BKD doesn’t pass our bar.

Progyny (PGNY)

Market Cap: $1.87 billion

Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny (NASDAQ: PGNY) provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.

Why Are We Cautious About PGNY?

1. Revenue base of $1.21 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
2. Estimated sales growth of 2.7% for the next 12 months implies demand will slow from its two-year trend
3. Push for growth has led to negative returns on capital, signaling value destruction

Progyny is trading at $21.50 per share, or 13.3x forward P/E. If you’re considering PGNY for your portfolio, see our FREE research report to learn more.

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