Personal health and wellness is one of the many secular tailwinds for healthcare companies. But near-term speed bumps have persisted in the wake of COVID-19 as players destocked inventories in 2023 and 2024. This has capped returns as the industry’s six-month gain of 1.2% has lagged the S&P 500’s 12.8% climb.
While some businesses have durable competitive advantages that enable them to grow consistently, the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three healthcare stocks best left ignored.
Repligen (RGEN)
Market Cap: $8.38 billion
Founded in 1981, Repligen Corporation (NASDAQ:RGEN) develops and manufactures advanced products used in the production of drugs, with a focus on filtration, chromatography, and process analytics.
Why Should You Sell RGEN?
- Annual sales declines of 11.1% for the past two years show its products and services struggled to connect with the market during this cycle
- Absence of organic revenue growth suggests it may have to lean into acquisitions to drive its expansion
- Adjusted operating profits fell over the last two years as its sales dropped and it struggled to adjust its fixed costs
At $146.25 per share, Repligen trades at 81.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than RGEN.
Thermo Fisher (TMO)
Market Cap: $208.6 billion
Known for their involvement in the Human Genome Project, Thermo Fisher (NYSE:TMO) supplies instruments, laboratory equipment, and reagents for scientific research and healthcare.
Why Does TMO Fall Short?
- Core business is underperforming as its organic revenue has disappointed, suggesting it might need acquisitions to stimulate growth
- Expenses have increased as a percentage of revenue over the last five years and its adjusted operating margin fell by 7 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
Thermo Fisher is trading at $539.23 per share, or 23.7x forward price-to-earnings. To fully understand why you should be careful with TMO, check out our full research report (it’s free).
Danaher (DHR)
Market Cap: $145 billion
Started as a real estate investment trust, Danaher (NYSE:DHR) designs and manufactures professional, medical, industrial, and commercial products and services.
Why Does DHR Worry Us?
- Organic revenue growth falls short of our benchmarks and implies it may need to improve its products, pricing, or go-to-market strategy
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Overall productivity fell over the last two years as its plummeting sales were accompanied by a decline in its adjusted operating margin
Danaher’s stock price of $199.95 implies a valuation ratio of 25x forward price-to-earnings. If you’re considering DHR for your portfolio, see our FREE research report to learn more.
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