Personal health and wellness is one of the many secular tailwinds for healthcare companies. But financial performance has lagged recently as players offloaded surplus COVID inventories in 2023 and 2024, a headwind for overall demand. The result? Over the past six months, the industry has tumbled by 10.2%. This drop was particularly disheartening since the S&P 500 held its ground.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one resilient healthcare stock at the top of our wish list and two we’re passing on.

Two Healthcare Stocks to Sell:

Teleflex (TFX)

Market Cap: $6.39 billion

With a portfolio spanning from vascular access catheters to minimally invasive surgical tools, Teleflex (NYSE:TFX) designs, manufactures, and supplies single-use medical devices used in critical care and surgical procedures across hospitals worldwide.

Why Are We Wary of TFX?

1. Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
2. Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Teleflex is trading at $138.14 per share, or 9.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than TFX.

Owens & Minor (OMI)

Market Cap: $725.4 million

With roots dating back to 1882 and operations spanning approximately 80 countries, Owens & Minor (NYSE:OMI) is a healthcare solutions company that manufactures medical supplies, distributes products to healthcare providers, and delivers medical equipment directly to patients.

Why Are We Hesitant About OMI?

1. Sizable revenue base leads to growth challenges as its 3% annual revenue increases over the last five years fell short of other healthcare companies
2. Low returns on capital reflect management’s struggle to allocate funds effectively, and its shrinking returns suggest its past profit sources are losing steam
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $9.69 per share, Owens & Minor trades at 5.3x forward price-to-earnings. To fully understand why you should be careful with OMI, check out our full research report (it’s free).

One Healthcare Stock to Buy:

HCA Healthcare (HCA)

Market Cap: $79.32 billion

With roots dating back to 1968 and a network spanning 20 states, HCA Healthcare (NYSE:HCA) operates a network of 190 hospitals and 150+ outpatient facilities providing a full range of medical services across the US and England.

Why Are We Bullish on HCA?

1. Massive revenue base of $70.6 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
2. Share buybacks catapulted its annual earnings per share growth to 15.9%, which outperformed its revenue gains over the last five years
3. ROIC punches in at 29.3%, illustrating management’s expertise in identifying profitable investments

HCA Healthcare’s stock price of $317.20 implies a valuation ratio of 13x forward price-to-earnings. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

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