From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. Players catalyzing medical advancements have benefited from elevated demand, which has supported the industry’s returns lately - over the past six months, healthcare stocks have gained 7.6%, nearly mirroring the S&P 500.
Although these businesses have produced results, only a handful will thrive over the long term as the influx of venture capital has ushered in a new wave of competition. On that note, here are two healthcare stocks we think can generate sustainable market-beating returns and one we’re swiping left on.
One Healthcare Stock to Sell:
GoodRx (GDRX)
Market Cap: $890.7 million
Started in 2011 to tackle the problem of high prescription drug costs in America, GoodRx (NASDAQ: GDRX) operates a digital platform that helps consumers find lower prices on prescription medications through price comparison tools and discount codes.
Why Do We Pass on GDRX?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Revenue base of $787.9 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Negative returns on capital show management lost money while trying to expand the business
GoodRx is trading at $2.76 per share, or 8.2x forward P/E. Check out our free in-depth research report to learn more about why GDRX doesn’t pass our bar.
Two Healthcare Stocks to Watch:
Amgen (AMGN)
Market Cap: $191.1 billion
Founded in 1980 during the early days of the biotechnology revolution, Amgen (NASDAQ: AMGN) is a biotechnology company that discovers, develops, and manufactures innovative medicines to treat serious illnesses like cancer, osteoporosis, and autoimmune diseases.
Why Are We Fans of AMGN?
- Solid 12.3% annual revenue growth over the last two years indicates its offerings solve complex business issues
- Revenue base of $37.22 billion gives it economies of scale and some negotiating power
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Amgen’s stock price of $346.68 implies a valuation ratio of 15.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Medpace (MEDP)
Market Cap: $13.57 billion
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ: MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Why Should MEDP Be on Your Watchlist?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 16.9% over the past two years
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin grew by 8.3 percentage points over the last five years, giving the company more chips to play with
At $513.06 per share, Medpace trades at 27.1x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
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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 Kadant (+351% five-year return). Find your next big winner with StockStory today.
