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 harmed the industry’s returns - over the past six months, healthcare stocks have collectively shed 9.5%. This drop was worse than the S&P 500’s 2.3% loss.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here is one healthcare stock boasting a durable advantage and two best left ignored.

Two Healthcare Stocks to Sell:

CONMED (CNMD)

Market Cap: $1.84 billion

With over five decades of experience in surgical innovation since its founding in 1970, CONMED (NYSE:CNMD) develops and manufactures medical devices and equipment for surgical procedures, specializing in orthopedic and general surgery products.

Why Is CNMD Not Exciting?

1. 6.5% annual revenue growth over the last five years was slower than its healthcare peers
2. Revenue base of $1.31 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
3. Underwhelming 5.3% return on capital reflects management’s difficulties in finding profitable growth opportunities

CONMED is trading at $58.01 per share, or 12.6x forward price-to-earnings. Read our free research report to see why you should think twice about including CNMD in your portfolio, it’s free.

Phreesia (PHR)

Market Cap: $1.50 billion

Founded in 2005 to streamline the traditionally paper-heavy patient check-in process, Phreesia (NYSE:PHR) provides software solutions that automate patient intake, registration, and payment processes for healthcare organizations while improving patient engagement in their care.

Why Does PHR Give Us Pause?

1. Modest revenue base of $419.8 million gives it less fixed cost leverage and fewer distribution channels than larger companies
2. Negative free cash flow raises questions about the return timeline for its investments
3. Negative returns on capital show management lost money while trying to expand the business

At $25.53 per share, Phreesia trades at 30x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than PHR.

One Healthcare Stock to Watch:

Intuitive Surgical (ISRG)

Market Cap: $177.8 billion

Pioneering minimally invasive surgery since its first da Vinci system was FDA-cleared in 2000, Intuitive Surgical (NASDAQ:ISRG) develops and manufactures robotic-assisted surgical systems that enable minimally invasive procedures across various medical specialties.

Why Do We Watch ISRG?

1. Average unit sales growth of 9.7% over the past two years reflects steady demand for its products
2. Forecasted revenue growth of 14.8% for the next 12 months indicates its momentum over the last two years is sustainable
3. Earnings growth has easily exceeded the peer group average over the last five years as its EPS has compounded at 11.5% annually

Intuitive Surgical’s stock price of $490 implies a valuation ratio of 63x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.