From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. Shareholders who bet on the industry have been rewarded lately as healthcare stocks have returned 24.9% over the past six months, topping the S&P 500 by 13.3 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. Keeping that in mind, here are three healthcare stocks we’re passing on.
Bausch + Lomb (BLCO)
Market Cap: $6.16 billion
With a nearly 170-year history dedicated to vision care and eye health innovation, Bausch + Lomb (NYSE: BLCO) develops and manufactures a comprehensive range of eye health products including contact lenses, pharmaceuticals, surgical devices, and consumer eye care solutions.
Why Do We Think Twice About BLCO?
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- 7.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- ROIC of 1.5% reflects management’s challenges in identifying attractive investment opportunities
Bausch + Lomb is trading at $16.98 per share, or 16.9x forward P/E. Read our free research report to see why you should think twice about including BLCO in your portfolio.
Envista (NVST)
Market Cap: $4.41 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 Do We Think NVST Will Underperform?
- Sales trends were unexciting over the last five years as its 3.4% annual growth was below the typical healthcare company
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7% annually
- Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
At $27.78 per share, Envista trades at 17.5x forward P/E. Check out our free in-depth research report to learn more about why NVST doesn’t pass our bar.
Progyny (PGNY)
Market Cap: $1.98 billion
Pioneering a data-driven approach to family building that has achieved an industry-leading patient satisfaction score of +80, Progyny (NASDAQ: PGNY) provides comprehensive fertility and family building benefits solutions to employers, helping employees access quality fertility treatments and support services.
Why Does PGNY Give Us Pause?
- Underwhelming unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Smaller revenue base of $1.31 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Low returns on capital reflect management’s struggle to allocate funds effectively
Progyny’s stock price of $26.50 implies a valuation ratio of 11.8x forward P/E. If you’re considering PGNY for your portfolio, see our FREE research report to learn more.
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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.
