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 31.5% over the past six months while the S&P 500 was up 6.8%.
Although these businesses have produced results, only a handful will thrive over the long term as the influx of venture capital has ushered in a new wave of competition. Keeping that in mind, here is one healthcare stock poised to generate sustainable market-beating returns and two that may face trouble.
Two healthcare stocks to sell:
Bruker (BRKR)
Market Cap: $8.77 billion
With roots dating back to the pioneering days of nuclear magnetic resonance technology, Bruker (NASDAQ: BRKR) develops and manufactures high-performance scientific instruments that enable researchers and industrial analysts to explore materials at microscopic, molecular, and cellular levels.
Why Does BRKR Fall Short?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
- Diminishing returns on capital suggest its earlier profit pools are drying up
Bruker’s stock price of $57.59 implies a valuation ratio of 25.6x forward P/E. To fully understand why you should be careful with BRKR, check out our full research report (it’s free).
Bio-Techne (TECH)
Market Cap: $11.38 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 Should You Sell 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 $1.22 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 $72.64 per share, or 35.3x forward P/E. Dive into our free research report to see why there are better opportunities than TECH.
One healthcare stock to watch:
Waters Corporation (WAT)
Market Cap: $44.57 billion
Founded in 1958 and pioneering innovations in laboratory analysis for over six decades, Waters (NYSE: WAT) develops and manufactures analytical instruments, software, and consumables for liquid chromatography, mass spectrometry, and thermal analysis used in scientific research and quality testing.
Why Are We Positive on WAT?
- Projected revenue growth of 48.5% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Has the option to reinvest or return capital to investors as its 14.9% free cash flow margin is well above its peers
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
At $454.91 per share, Waters Corporation trades at 29.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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