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1 Healthcare Stock with Competitive Advantages and 2 We Question
Personal health and wellness is one of the many secular tailwinds for healthcare companies. Those leading the charge have not only realized strong financial performance but also propelled the broader industry’s returns as healthcare stocks have gained 11.9% over the past six months while the S&P 500 was up 8.7%.
Nevertheless, investors should tread carefully as the sector is heavily regulated, and businesses can be negatively impacted if the rules change. Taking that into account, here is one resilient healthcare stock at the top of our wish list and two best left ignored.
Two Healthcare Stocks to Sell:
AdaptHealth (AHCO)
Market Cap: $1.41 billion
With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ:AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.
Why Are We Hesitant About AHCO?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Earnings per share fell by 12.4% annually over the last five years while its revenue grew, partly because it diluted shareholders
- Underwhelming 0.3% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
AdaptHealth is trading at $10.72 per share, or 11x forward P/E. To fully understand why you should be careful with AHCO, check out our full research report (it’s free).
Collegium Pharmaceutical (COLL)
Market Cap: $1.19 billion
Pioneering abuse-deterrent technology in a field plagued by addiction concerns, Collegium Pharmaceutical (NASDAQ:COLL) develops and markets specialty medications for treating moderate to severe pain, including abuse-deterrent opioid formulations.
Why Does COLL Worry Us?
- Subscale operations are evident in its revenue base of $796.3 million, meaning it has fewer distribution channels than its larger rivals
- Costs have risen faster than its revenue over the last two years, causing its adjusted operating margin to decline by 6.4 percentage points
- Stagnant returns on capital show management has failed to improve the company’s business quality
Collegium Pharmaceutical’s stock price of $36.71 implies a valuation ratio of 4.5x forward P/E. Check out our free in-depth research report to learn more about why COLL doesn’t pass our bar.
One Healthcare Stock to Watch:
iRhythm (IRTC)
Market Cap: $3.72 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 on Our Radar?
- Impressive 23.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 27.5% over the last five years outstripped its revenue performance
- Free cash flow profile has moved into positive territory over the last five years, showing the company has crossed a key inflection point
At $113.26 per share, iRhythm trades at 351.1x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.