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, limiting growth. This has capped returns as the industry’s six-month gain of 9.8% has lagged the S&P 500’s 17.2% 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 is one healthcare stock poised to generate sustainable market-beating returns and two that may face trouble.
Two Healthcare Stocks to Sell:
Privia Health (PRVA)
Market Cap: $2.99 billion
Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ:PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.
Why Are We Wary of PRVA?
- Modest revenue base of $2.04 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Negative returns on capital show that some of its growth strategies have backfired
Privia Health is trading at $24.29 per share, or 25.6x forward P/E. Read our free research report to see why you should think twice about including PRVA in your portfolio.
Elanco (ELAN)
Market Cap: $11.36 billion
Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE:ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.
Why Does ELAN Fall Short?
- Sales trends were unexciting over the last two years as its 2.5% annual growth was below the typical healthcare company
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Push for growth has led to negative returns on capital, signaling value destruction
Elanco’s stock price of $22.86 implies a valuation ratio of 24x forward P/E. To fully understand why you should be careful with ELAN, check out our full research report (it’s free for active Edge members).
One Healthcare Stock to Buy:
Insulet (PODD)
Market Cap: $22.95 billion
Revolutionizing diabetes care with its tubeless "Pod" technology, Insulet (NASDAQ:PODD) develops and manufactures innovative insulin delivery systems for people with diabetes, primarily through its Omnipod product line.
Why Are We Backing PODD?
- Constant currency growth averaged 26.8% over the past two years, showing it can expand globally regardless of the macroeconomic environment
- Free cash flow margin jumped by 32.6 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Rising returns on capital show management is finding more attractive investment opportunities
At $327.55 per share, Insulet trades at 57.5x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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
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