Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Despite the rosy long-term prospects, short-term headwinds such as COVID inventory destocking have caused the industry to lag recently - over the past six months, the collective 1.9% gain for healthcare stocks has fallen short of the S&P 500’s 6.1% rise.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here is one resilient healthcare stock at the top of our wish list and two best left ignored.
Two Healthcare Stocks to Sell:
Lantheus (LNTH)
Market Cap: $5.3 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 Does LNTH Give Us Pause?
- Modest revenue base of $1.54 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Projected sales decline of 6.3% for the next 12 months points to a tough demand environment ahead
- Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 10.1 percentage points
Lantheus is trading at $81.60 per share, or 16.1x forward P/E. Check out our free in-depth research report to learn more about why LNTH doesn’t pass our bar.
Azenta (AZTA)
Market Cap: $1.21 billion
Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ: AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.
Why Do We Pass on AZTA?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.7% annually over the last two years
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 18.6% annually, worse than its revenue
- Increased cash burn over the last five years raises questions about the return timeline for its investments
At $26.30 per share, Azenta trades at 28.3x forward P/E. To fully understand why you should be careful with AZTA, check out our full research report (it’s free).
One Healthcare Stock to Watch:
Astrana Health (ASTH)
Market Cap: $1.61 billion
Formerly known as Apollo Medical Holdings until early 2024, Astrana Health (NASDAQ: ASTH) operates a technology-powered healthcare platform that enables physicians to deliver coordinated care while successfully participating in value-based payment models.
Why Could ASTH Be a Winner?
- Annual revenue growth of 51.5% over the past two years was outstanding, reflecting market share gains this cycle
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 15.9% annually
Astrana Health’s stock price of $32.70 implies a valuation ratio of 11.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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