From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. But speed bumps such as inventory destocking have persisted in the wake of COVID-19, limiting growth. This has capped returns as the industry’s six-month gain of 7.7% has lagged the S&P 500’s 9.3% climb.
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. With that said, here is one resilient healthcare stock at the top of our wish list and two best left ignored.
Two Healthcare Stocks to Sell:
Sotera Health Company (SHC)
Market Cap: $4.67 billion
With a critical role in ensuring the safety of millions of patients worldwide, Sotera Health (NASDAQGS:SHC) provides sterilization services, lab testing, and advisory services to ensure medical devices, pharmaceuticals, and food products are safe for use.
Why Do We Think Twice About SHC?
- 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
- Modest revenue base of $1.19 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.4 percentage points
At $16.23 per share, Sotera Health Company trades at 16.3x forward P/E. Check out our free in-depth research report to learn more about why SHC doesn’t pass our bar.
Avantor (AVTR)
Market Cap: $6.60 billion
With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE: AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.
Why Do We Avoid AVTR?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Sales are projected to be flat over the next 12 months and imply weak demand
- Sales over the last five years were less profitable as its earnings per share fell by 4.5% annually while its revenue was flat
Avantor is trading at $9.71 per share, or 11.5x forward P/E. Read our free research report to see why you should think twice about including AVTR in your portfolio.
One Healthcare Stock to Buy:
Natera (NTRA)
Market Cap: $31.4 billion
Founded in 2003 as Gene Security Network before rebranding in 2012, Natera (NASDAQ: NTRA) develops and commercializes genetic tests for prenatal screening, cancer detection, and organ transplant monitoring using its proprietary cell-free DNA technology.
Why Will NTRA Outperform?
- Products are seeing elevated demand as its tests processed averaged 19.4% growth over the past two years
- Adjusted operating profits and efficiency rose over the last two years as it benefited from some fixed cost leverage
- Free cash flow turned positive over the last five years, indicating the company has achieved financial self-sustainability
Natera’s stock price of $216.65 implies a valuation ratio of 10.4x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
