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 returns as the industry’s six-month gain of 4.3% has lagged the S&P 500’s 7.1% climb.
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. Keeping that in mind, here are two resilient healthcare stocks at the top of our wish list and one that may face trouble.
One Healthcare Stock to Sell:
Thermo Fisher (TMO)
Market Cap: $173.5 billion
With over 14,000 sales personnel and a portfolio spanning more than 2,500 technology manufacturers, Thermo Fisher Scientific (NYSE:TMO) provides scientific equipment, reagents, consumables, software, and laboratory services to pharmaceutical, biotech, academic, and healthcare customers worldwide.
Why Does TMO Fall Short?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 6.7 percentage points
- Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
Thermo Fisher is trading at $463.02 per share, or 18.2x forward P/E. If you’re considering TMO for your portfolio, see our FREE research report to learn more.
Two Healthcare Stocks to Watch:
Amgen (AMGN)
Market Cap: $177.9 billion
Founded in 1980 during the early days of the biotechnology revolution, Amgen (NASDAQ:AMGN) is a biotechnology company that discovers, develops, and manufactures innovative medicines to treat serious illnesses like cancer, osteoporosis, and autoimmune diseases.
Why Are We Positive On AMGN?
- Annual revenue growth of 12.3% over the last two years beat the sector average and underscores the unique value of its offerings
- $37.22 billion in revenue gives its scale, which leads to bargaining power with customers because there are few trusted alternatives
- Strong free cash flow margin of 27.7% enables it to reinvest or return capital consistently
At $329.50 per share, Amgen trades at 4.6x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Cardinal Health (CAH)
Market Cap: $46.14 billion
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE:CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Are We Fans of CAH?
- Unparalleled scale of $250.7 billion in revenue gives it negotiating leverage and staying power in an industry with high barriers to entry
- Projected revenue growth of 9% for the next 12 months indicates demand will rise above its two-year trend
- Performance over the past five years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
Cardinal Health’s stock price of $197 implies a valuation ratio of 17.1x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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