Laser Focus World is an industry bedrock—first published in 1965 and still going strong. We publish original articles about cutting-edge advances in lasers, optics, photonics, sensors, and quantum technologies, as well as test and measurement, and the shift currently underway to usher in the photonic integrated circuits, optical interconnects, and copackaged electronics and photonics to deliver the speed and efficiency essential for data centers of the future.

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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

3 Healthcare Stocks Walking a Fine Line

BLCO Cover Image

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 1.2%. This drawdown is a noticeable divergence from the S&P 500’s 11.3% return.

Investors should tread carefully as the influx of venture capital has also ushered in a new wave of competition. With that said, here are three healthcare stocks we’re steering clear of.

Bausch + Lomb (BLCO)

Market Cap: $5.16 billion

With a nearly 170-year history dedicated to vision care and eye health innovation, Bausch + Lomb (NYSE: BLCO) develops and manufactures a comprehensive range of eye health products including contact lenses, pharmaceuticals, surgical devices, and consumer eye care solutions.

Why Is BLCO Not Exciting?

  1. Muted 7.2% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers
  2. Free cash flow margin dropped by 23.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
  3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Bausch + Lomb is trading at $14.61 per share, or 17.3x forward P/E. To fully understand why you should be careful with BLCO, check out our full research report (it’s free).

Mettler-Toledo (MTD)

Market Cap: $26.53 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. Estimated sales growth of 4.5% for the next 12 months is soft and implies weaker demand
  3. Inability to adjust its cost structure while its revenue declined over the last two years led to a 1.1 percentage point drop in the company’s adjusted operating margin

At $1,288 per share, Mettler-Toledo trades at 29.2x forward P/E. Read our free research report to see why you should think twice about including MTD in your portfolio.

PacBio (PACB)

Market Cap: $372.5 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 Do We Steer Clear of PACB?

  1. Sales trends were unexciting over the last two years as its 3.4% annual growth was below the typical healthcare company
  2. Free cash flow margin shrank by 28.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
  3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

PacBio’s stock price of $1.25 implies a valuation ratio of 2.2x forward price-to-sales. To fully understand why you should be careful with PACB, check out our full research report (it’s free).

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