From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, limiting growth. This has capped the upside for healthcare stocks lately as the industry’s flat return over the past six months has trailed the S&P 500’s 17.4% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one resilient healthcare stock at the top of our wish list and two that may face trouble.
Two Healthcare Stocks to Sell:
Thermo Fisher (TMO)
Market Cap: $179.9 billion
With over 14,000 sales personnel and a portfolio spanning more than 2,500 technology manufacturers, Thermo Fisher Scientific (NYSE: TMO) provides scientific equipment, reagents, consumables, software, and laboratory services to pharmaceutical, biotech, academic, and healthcare customers worldwide.
Why Does TMO Give Us Pause?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 10.2 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
At $482 per share, Thermo Fisher trades at 20.4x forward P/E. Dive into our free research report to see why there are better opportunities than TMO.
Waters Corporation (WAT)
Market Cap: $17.44 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 Does WAT Worry Us?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Waning returns on capital imply its previous profit engines are losing steam
Waters Corporation’s stock price of $293.03 implies a valuation ratio of 21.6x forward P/E. If you’re considering WAT for your portfolio, see our FREE research report to learn more.
One Healthcare Stock to Watch:
The Ensign Group (ENSG)
Market Cap: $9.52 billion
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ: ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Why Are We Positive On ENSG?
- Unit sales averaged 12.2% growth over the past two years and imply healthy demand for its products
- Projected revenue growth of 15.2% for the next 12 months suggests its momentum from the last two years will persist
- Earnings per share grew by 17.3% annually over the last five years and trumped its peers
The Ensign Group is trading at $166.77 per share, or 25.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
