From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. Those leading the charge have not only realized strong financial performance but also propelled the broader industry’s returns as healthcare stocks have gained 17.1% over the past six months while the S&P 500 was up 9.5%.
Nevertheless, investors should tread carefully as the sector is heavily regulated, and businesses can be negatively impacted if the rules change. Keeping that in mind, here is one healthcare stock boasting a durable advantage and two we’re swiping left on.
Two Healthcare Stocks to Sell:
Omnicell (OMCL)
Market Cap: $2.20 billion
Driven by the vision of an "Autonomous Pharmacy" with zero medication errors, Omnicell (NASDAQ: OMCL) provides medication management automation and adherence tools that help healthcare systems and pharmacies reduce errors and improve efficiency.
Why Should You Dump OMCL?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 9.5 percentage points
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 5.4% annually while its revenue grew
Omnicell’s stock price of $49.31 implies a valuation ratio of 28.1x forward P/E. If you’re considering OMCL for your portfolio, see our FREE research report to learn more.
Supernus Pharmaceuticals (SUPN)
Market Cap: $2.81 billion
With a diverse portfolio of eight FDA-approved medications targeting neurological conditions, Supernus Pharmaceuticals (NASDAQ: SUPN) develops and markets treatments for central nervous system disorders including epilepsy, ADHD, Parkinson's disease, and migraine.
Why Are We Out on SUPN?
- Muted 5.9% annual revenue growth over the last five years shows its demand lagged behind its healthcare peers
- Subscale operations are evident in its revenue base of $681.5 million, meaning it has fewer distribution channels than its larger rivals
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $48.95 per share, Supernus Pharmaceuticals trades at 19.5x forward P/E. Dive into our free research report to see why there are better opportunities than SUPN.
One Healthcare Stock to Watch:
Vertex Pharmaceuticals (VRTX)
Market Cap: $121.3 billion
Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ: VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.
Why Are We Fans of VRTX?
- Solid 14.4% annual revenue growth over the last five years indicates its offering’s solve complex business issues
- Strong free cash flow margin of 25.4% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Vertex Pharmaceuticals is trading at $476.63 per share, or 23.8x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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