From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. Those leading the charge have not only realized strong financial performance but also propelled the broader industry’s returns as healthcare stocks have gained 18.7% over the past six months while the S&P 500 was up 11.1%.
Nevertheless, investors should tread carefully as the sector is heavily regulated, and businesses can be negatively impacted if the rules change. On that note, here is one healthcare stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Healthcare Stocks to Sell:
Penumbra (PEN)
Market Cap: $12.51 billion
Founded in 2004 to address challenging medical conditions with significant unmet needs, Penumbra (NYSE: PEN) develops and manufactures innovative medical devices for treating vascular diseases and providing immersive healthcare rehabilitation solutions.
Why Does PEN Fall Short?
- Subscale operations are evident in its revenue base of $1.33 billion, meaning it has fewer distribution channels than its larger rivals
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.8% for the last five years
- Underwhelming 2.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
Penumbra’s stock price of $319.62 implies a valuation ratio of 68.7x forward P/E. Check out our free in-depth research report to learn more about why PEN doesn’t pass our bar.
Addus HomeCare (ADUS)
Market Cap: $2.03 billion
Serving approximately 66,000 clients across 22 states with a focus on "dual eligible" Medicare and Medicaid beneficiaries, Addus HomeCare (NASDAQ: ADUS) provides in-home personal care, hospice, and home health services to elderly, chronically ill, and disabled individuals.
Why Is ADUS Not Exciting?
- Subscale operations are evident in its revenue base of $1.35 billion, meaning it has fewer distribution channels than its larger rivals
Addus HomeCare is trading at $111.41 per share, or 16.4x forward P/E. To fully understand why you should be careful with ADUS, check out our full research report (it’s free).
One Healthcare Stock to Watch:
Amgen (AMGN)
Market Cap: $175.3 billion
Founded in 1980 during the early days of the biotechnology revolution, Amgen (NASDAQ: AMGN) is a biotechnology company that discovers, develops, and manufactures innovative medicines to treat serious illnesses like cancer, osteoporosis, and autoimmune diseases.
Why Does AMGN Stand Out?
- 15.8% annual revenue growth over the last two years surpassed the sector average as its offerings resonated with customers
- Revenue base of $35.97 billion gives it economies of scale and some negotiating power
- AMGN is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
At $324.77 per share, Amgen trades at 15.4x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
