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’s 7.6% return has trailed the S&P 500 by 2.3 percentage points.
Investors should tread carefully as the influx of venture capital has also ushered in a new wave of competition. Keeping that in mind, here are three healthcare stocks that may face trouble.
Envista (NVST)
Market Cap: $3.89 billion
Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE: NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.
Why Is NVST Risky?
- Muted 4.7% annual revenue growth over the last two years shows its demand lagged behind its healthcare peers
- 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
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $23.98 per share, Envista trades at 16.9x forward P/E. If you’re considering NVST for your portfolio, see our FREE research report to learn more.
LeMaitre (LMAT)
Market Cap: $2.24 billion
Founded in 1983 and named after a pioneering vascular surgeon, LeMaitre Vascular (NASDAQGM:LMAT) develops and manufactures specialized medical devices used by vascular surgeons to treat peripheral vascular disease and other circulatory conditions.
Why Does LMAT Give Us Pause?
- Smaller revenue base of $256.3 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
LeMaitre’s stock price of $98.11 implies a valuation ratio of 31.6x forward P/E. Check out our free in-depth research report to learn more about why LMAT doesn’t pass our bar.
Brookdale (BKD)
Market Cap: $3.07 billion
With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE: BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.
Why Does BKD Fall Short?
- Sales were flat over the last five years, indicating it’s failed to expand this cycle
- Estimated sales decline of 4.4% for the next 12 months implies a challenging demand environment
Brookdale is trading at $13.20 per share, or 15.9x forward EV-to-EBITDA. To fully understand why you should be careful with BKD, check out our full research report (it’s free).
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