From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. But speed bumps such as inventory destocking have persisted in the wake of COVID-19, limiting growth. This has capped returns as the industry’s six-month gain of 7.7% has lagged the S&P 500’s 9.3% 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. With that said, here is one resilient healthcare stock at the top of our wish list and two best left ignored.
Two Healthcare Stocks to Sell:
Sotera Health Company (SHC)
Market Cap: $4.67 billion
With a critical role in ensuring the safety of millions of patients worldwide, Sotera Health (NASDAQGS:SHC) provides sterilization services, lab testing, and advisory services to ensure medical devices, pharmaceuticals, and food products are safe for use.
Why Do We Think Twice About SHC?
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Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
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Modest revenue base of $1.19 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
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Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.4 percentage points
At $16.23 per share, Sotera Health Company trades at 16.3x forward P/E. If you’re considering SHC for your portfolio, see our FREE research report to learn more.
Avantor (AVTR)
Market Cap: $6.60 billion
With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE:AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.
Why Do We Avoid AVTR?
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Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
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Sales are projected to be flat over the next 12 months and imply weak demand
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Sales over the last five years were less profitable as its earnings per share fell by 4.5% annually while its revenue was flat
Avantor is trading at $9.71 per share, or 11.5x forward P/E. To fully understand why you should be careful with AVTR, check out our full research report (it’s free).
One Healthcare Stock to Buy:
Natera (NTRA)
Market Cap: $31.4 billion
Founded in 2003 as Gene Security Network before rebranding in 2012, Natera (NASDAQ:NTRA) develops and commercializes genetic tests for prenatal screening, cancer detection, and organ transplant monitoring using its proprietary cell-free DNA technology.
