From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. 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 13.3%. This performance was worse than the S&P 500’s 5.8% fall.

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

Two Healthcare Stocks to Sell:

Haemonetics (HAE)

Market Cap: $3.42 billion

With roots dating back to 1971 and a mission to improve blood-related healthcare, Haemonetics (NYSE: HAE) provides specialized medical devices and software for blood collection, processing, and management across plasma centers, blood banks, and hospitals.

Why Does HAE Give Us Pause?

1. Muted 6.6% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers
2. Modest revenue base of $1.36 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
3. Forecasted revenue decline of 4.6% for the upcoming 12 months implies demand will fall off a cliff

At $68.01 per share, Haemonetics trades at 13.8x forward P/E. Check out our free in-depth research report to learn more about why HAE doesn’t pass our bar.

Mettler-Toledo (MTD)

Market Cap: $22.89 billion

With roots dating back to the precision balance innovations of Swiss engineer Erhard Mettler, Mettler-Toledo (NYSE: MTD) manufactures precision weighing instruments, analytical equipment, and product inspection systems used in laboratories, industrial settings, and food retail.

Why Does MTD Worry Us?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Projected sales growth of 3.3% for the next 12 months suggests sluggish demand
3. Adjusted operating margin failed to increase over the last two years, indicating the company couldn’t optimize its expenses

Mettler-Toledo’s stock price of $1,102 implies a valuation ratio of 25.3x forward P/E. Dive into our free research report to see why there are better opportunities than MTD.

One Healthcare Stock to Watch:

Merck (MRK)

Market Cap: $195 billion

With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.

Why Do We Like MRK?

1. Massive revenue base of $63.92 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
2. Free cash flow margin grew by 11.2 percentage points over the last five years, giving the company more chips to play with
3. ROIC punches in at 15.6%, illustrating management’s expertise in identifying profitable investments

Merck is trading at $77.78 per share, or 8.6x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.