Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. 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 7.8%. This drop is a far cry from the S&P 500’s 7.1% ascent.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one healthcare stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two HealthcareStocks to Sell:
Exact Sciences (EXAS)
Market Cap: $9.79 billion
With a mission to detect cancer earlier when it's more treatable, Exact Sciences (NASDAQ:EXAS) develops and markets cancer screening and diagnostic tests, including its flagship Cologuard stool-based colorectal cancer screening test.
Why Does EXAS Worry Us?
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Negative returns on capital show that some of its growth strategies have backfired
- 11× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Exact Sciences’s stock price of $51.95 implies a valuation ratio of 78.8x forward P/E. Dive into our free research report to see why there are better opportunities than EXAS.
GoodRx (GDRX)
Market Cap: $1.8 billion
Started in 2011 to tackle the problem of high prescription drug costs in America, GoodRx (NASDAQ:GDRX) operates a digital platform that helps consumers find lower prices on prescription medications through price comparison tools and discount codes.
Why Should You Dump GDRX?
- Muted 3.3% annual revenue growth over the last two years shows its demand lagged behind its healthcare peers
- Revenue base of $797.4 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Push for growth has led to negative returns on capital, signaling value destruction
GoodRx is trading at $4.78 per share, or 11.1x forward P/E. Check out our free in-depth research report to learn more about why GDRX doesn’t pass our bar.
One Healthcare Stock to Watch:
Tenet Healthcare (THC)
Market Cap: $16.32 billion
With a network spanning nine states and serving primarily urban and suburban communities, Tenet Healthcare (NYSE:THC) operates a nationwide network of hospitals, ambulatory surgery centers, and outpatient facilities providing acute care and specialty healthcare services.
Why Do We Like THC?
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Industry-leading 21% return on capital demonstrates management’s skill in finding high-return investments, and its returns are growing as it capitalizes on even better market opportunities
- Returns on capital are climbing as management makes more lucrative bets
At $175.75 per share, Tenet Healthcare trades at 14.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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-small-cap company Exlservice (+354% 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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