Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Shareholders who bet on the industry have seen decent returns lately as healthcare stocks were up 3.8% over the past six months, almost identical to the S&P 500.
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. On that note, here are two healthcare stocks we think can generate sustainable market-beating returns and one we’re steering clear of.
One Healthcare Stock to Sell:
Haemonetics (HAE)
Market Cap: $2.76 billion
With roots dating back to 1971 and a mission to improve blood-related healthcare, Haemonetics (NYSE: HAE) provides specialized medical devices and software for blood collection, processing, and management across plasma centers, blood banks, and hospitals.
Why Is HAE Not Exciting?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Modest revenue base of $1.32 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Haemonetics is trading at $59.50 per share, or 11.7x forward P/E. If you’re considering HAE for your portfolio, see our FREE research report to learn more.
Two Healthcare Stocks to Watch:
Elevance Health (ELV)
Market Cap: $63.54 billion
Formerly known as Anthem until its 2022 rebranding, Elevance Health (NYSE: ELV) is one of America's largest health insurers, serving approximately 47 million medical members through its network-based managed care plans.
Why Could ELV Be a Winner?
- 10.3% annual revenue growth over the last five years was better than the sector average, highlighting the value of its products and services
- Massive revenue base of $197.6 billion gives it meaningful leverage when negotiating reimbursement rates
- Industry-leading 27.3% return on capital demonstrates management’s skill in finding high-return investments
Elevance Health’s stock price of $287.16 implies a valuation ratio of 11.2x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Zoetis (ZTS)
Market Cap: $48.74 billion
Originally spun off from Pfizer in 2013 as the world's largest pure-play animal health company, Zoetis (NYSE: ZTS) discovers, develops, and sells medicines, vaccines, diagnostic products, and services for pets and livestock animals worldwide.
Why Does ZTS Stand Out?
- Steady constant currency growth over the past two years shows the company can pursue its global ambitions, even in uncertain economic times
- Strong free cash flow margin of 21.5% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
At $116.26 per share, Zoetis trades at 17x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
