From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. Players catalyzing medical advancements have benefited from elevated demand, and their momentum is only rising as the industry has posted a 15.6% gain over the past six months, beating the S&P 500 by 1.7 percentage points.
Regardless of these results, investors must exercise caution as many businesses in this space are subject to heavy regulation that can influence their earnings potential. Taking that into account, here are two healthcare stocks boasting durable advantages and one best left ignored.
One Healthcare Stock to Sell:
Surgery Partners (SGRY)
Market Cap: $1.99 billion
With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.
Why Do We Think Twice About SGRY?
- Disappointing unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Low free cash flow margin of 4.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Surgery Partners’s stock price of $15.54 implies a valuation ratio of 24.9x forward P/E. Read our free research report to see why you should think twice about including SGRY in your portfolio.
Two Healthcare Stocks to Watch:
ResMed (RMD)
Market Cap: $36.05 billion
Founded in 1989 to address the then-underdiagnosed condition of sleep apnea, ResMed (NYSE: RMD) develops cloud-connected medical devices and software solutions that treat sleep apnea, COPD, and other respiratory disorders for home and clinical use.
Why Could RMD Be a Winner?
- Average constant currency growth of 9.4% over the past two years demonstrates its ability to grow internationally despite currency fluctuations
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 14.2% outpaced its revenue gains
- Free cash flow margin jumped by 21.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
ResMed is trading at $248.27 per share, or 22.6x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Inspire Medical Systems (INSP)
Market Cap: $3.36 billion
Offering an alternative for the millions who struggle with traditional CPAP machines, Inspire Medical Systems (NYSE: INSP) develops and sells an implantable neurostimulation device that treats obstructive sleep apnea by stimulating nerves to keep airways open during sleep.
Why Is INSP on Our Radar?
- Growing number of domestic medical centers reflects a desire to reach more customers in underserved markets
- Earnings per share grew by 21.4% annually over the last five years, massively outpacing its peers
- Free cash flow margin expanded by 26 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $115.52 per share, Inspire Medical Systems trades at 74.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
