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, and over the past six months, the industry has pulled back by 7.5%. This drop was discouraging since the S&P 500 held steady.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here are two healthcare stocks we think can generate sustainable market-beating returns and one we’re steering clear of.
One Healthcare Stock to Sell:
iRhythm (IRTC)
Market Cap: $4.48 billion
Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ:IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.
Why Is IRTC Not Exciting?
- Issuance of new shares over the last five years caused its earnings per share to fall by 5.6% annually while its revenue grew
- Cash-burning history makes us doubt the long-term viability of its business model
- 124× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
iRhythm’s stock price of $138.38 implies a valuation ratio of 78.4x forward EV-to-EBITDA. To fully understand why you should be careful with IRTC, check out our full research report (it’s free).
Two Healthcare Stocks to Watch:
Sarepta Therapeutics (SRPT)
Market Cap: $3.51 billion
Pioneering treatments for a devastating childhood muscle-wasting disease that primarily affects boys, Sarepta Therapeutics (NASDAQ:SRPT) develops and commercializes RNA-targeted therapies and gene therapies for rare genetic disorders, primarily Duchenne muscular dystrophy.
Why Do We Love SRPT?
- Market share has increased this cycle as its 51.3% annual revenue growth over the last two years was exceptional
- Earnings per share grew by 41% annually over the last five years, massively outpacing its peers
- Cash-burning tendencies have improved over the last five years, showing it could become financially independent one day
At $35.74 per share, Sarepta Therapeutics trades at 3.5x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Tenet Healthcare (THC)
Market Cap: $14.82 billion
With a network spanning nine states and serving primarily urban and suburban communities, Tenet Healthcare (NYSE:THC) operates a nationwide network of hospitals, ambulatory surgery centers, and outpatient facilities providing acute care and specialty healthcare services.
Why Do We Like THC?
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 30.7% exceeded its revenue gains over the last five years
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities
- Returns on capital are climbing as management makes more lucrative bets
Tenet Healthcare is trading at $159.57 per share, or 13x forward P/E. Is now the right time to buy? Find out in our full 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 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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.