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 16.6% over the past six months while the S&P 500 was up 7.1%.
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 is one resilient healthcare stock at the top of our wish list and two that may face trouble.
Two Healthcare Stocks to Sell:
Lantheus (LNTH)
Market Cap: $6.51 billion
Pioneering the "Find, Fight and Follow" approach to disease management, Lantheus Holdings (NASDAQGM:LNTH) develops and commercializes radiopharmaceuticals and other imaging agents that help healthcare professionals detect, diagnose, and treat diseases.
Why Do We Think Twice About LNTH?
- 6.4% annual revenue growth over the last two years was slower than its healthcare peers
- Forecasted revenue decline of 5% for the upcoming 12 months implies demand will fall off a cliff
- Efficiency has decreased over the last two years as its adjusted operating margin fell by 9.8 percentage points
Lantheus’s stock price of $101.46 implies a valuation ratio of 19.1x forward P/E. If you’re considering LNTH for your portfolio, see our FREE research report to learn more.
Bio-Techne (TECH)
Market Cap: $11.22 billion
With a catalog of hundreds of thousands of specialized biological products used in laboratories worldwide, Bio-Techne (NASDAQ: TECH) develops and manufactures specialized reagents, instruments, and services that help researchers study biological processes and enable diagnostic testing and cell therapy development.
Why Are We Out on TECH?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Modest revenue base of $1.21 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Bio-Techne is trading at $72.14 per share, or 36x forward P/E. Read our free research report to see why you should think twice about including TECH in your portfolio.
One Healthcare Stock to Watch:
ANI Pharmaceuticals (ANIP)
Market Cap: $1.73 billion
With a diverse portfolio of 116 pharmaceutical products and a growing rare disease platform, ANI Pharmaceuticals (NASDAQ: ANIP) develops, manufactures, and markets branded and generic prescription pharmaceuticals, with a focus on rare disease treatments.
Why Does ANIP Stand Out?
- Annual revenue growth of 33.6% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow margin increased by 38.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Rising returns on capital show the company is starting to reap the benefits of its past investments
At $81.69 per share, ANI Pharmaceuticals trades at 8.7x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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