Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Those leading the charge have realized strong financial performance, and over the past six months, the industry has held its ground with a flat return while the S&P 500 fell by 2.1%.
Although this could signal cash-like stability, investors must be mindful as the influx of venture capital has ushered in a new wave of competition. Taking that into account, here is one healthcare stock boasting a durable advantage and two that may face trouble.
Two Healthcare Stocks to Sell:
Danaher (DHR)
Market Cap: $135.2 billion
Born from a real estate investment trust that transformed into a manufacturing powerhouse, Danaher (NYSE: DHR) is a global science and technology company that provides specialized equipment, software, and services for biotechnology, life sciences, and diagnostics.
Why Is DHR Not Exciting?
- 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
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 10.4 percentage points
- Free cash flow margin shrank by 7.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Danaher is trading at $192.38 per share, or 22.9x forward P/E. If you’re considering DHR for your portfolio, see our FREE research report to learn more.
Bausch + Lomb (BLCO)
Market Cap: $5.64 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 Does BLCO Fall Short?
- Earnings per share have dipped by 100% annually over the past three years, which is concerning because stock prices follow EPS over the long term
- Free cash flow margin shrank by 19.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $15.93 per share, Bausch + Lomb trades at 21.1x forward P/E. Dive into our free research report to see why there are better opportunities than BLCO.
One Healthcare Stock to Watch:
Inspire Medical Systems (INSP)
Market Cap: $1.57 billion
Offering an alternative for the millions who struggle with traditional CPAP machines, Inspire Medical Systems (NYSE: INSP) develops and sells an implantable neurostimulation device that treats obstructive sleep apnea by stimulating nerves to keep airways open during sleep.
Why Could INSP Be a Winner?
- Market share has increased this cycle as its 51.2% annual revenue growth over the last five years was exceptional
- Earnings per share grew by 25.9% annually over the last five years, massively outpacing its peers
- Free cash flow margin grew by 19.2 percentage points over the last five years, giving the company more chips to play with
Inspire Medical Systems’s stock price of $55.51 implies a valuation ratio of 27.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
