Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Players catalyzing medical advancements have benefited from elevated demand, and their momentum is only rising as the industry has posted a 9.7% gain over the past six months, beating the S&P 500 by 1.8 percentage points.
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. Taking that into account, here are three healthcare stocks best left ignored.
Chemed (CHE)
Market Cap: $6.65 billion
With a unique business model combining end-of-life care and household services, Chemed (NYSE: CHE) operates two distinct businesses: VITAS, which provides hospice care for terminally ill patients, and Roto-Rooter, which offers plumbing and water restoration services.
Why Are We Wary of CHE?
- Annual revenue growth of 4% over the last five years was below our standards for the healthcare sector
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.8% annually
- Diminishing returns on capital suggest its earlier profit pools are drying up
Chemed’s stock price of $502.58 implies a valuation ratio of 20.2x forward P/E. If you’re considering CHE for your portfolio, see our FREE research report to learn more.
Bristol-Myers Squibb (BMY)
Market Cap: $125.6 billion
With roots dating back to 1887 and a transformative merger in 1989 that gave the company its current name, Bristol-Myers Squibb (NYSE: BMY) discovers, develops, and markets prescription medications for serious diseases including cancer, blood disorders, immunological conditions, and cardiovascular diseases.
Why Are We Cautious About BMY?
- The company has faced growth challenges as its 2.6% annual revenue increases over the last five years fell short of other healthcare companies
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 10.4 percentage points
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.7% annually while its revenue grew
At $61.76 per share, Bristol-Myers Squibb trades at 9.9x forward P/E. To fully understand why you should be careful with BMY, check out our full research report (it’s free).
Viatris (VTRS)
Market Cap: $20.12 billion
Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ: VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.
Why Should You Sell VTRS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.6% annually over the last two years
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 9.2% annually
- Negative returns on capital show management lost money while trying to expand the business, and its falling returns suggest its earlier profit pools are drying up
Viatris is trading at $16.77 per share, or 6.9x forward P/E. Read our free research report to see why you should think twice about including VTRS in your portfolio.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
