Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Shareholders who bet on the industry have been rewarded lately as healthcare stocks have returned 14.6% over the past six months, topping the S&P 500 by 1.5 percentage points.
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. With that said, here is one healthcare stock boasting a durable advantage and two we’re passing on.
Two Healthcare Stocks to Sell:
Masimo (MASI)
Market Cap: $7.38 billion
Founded in 1989 to solve the "unsolvable problem" of accurate pulse oximetry during patient movement, Masimo (NASDAQ: MASI) develops and manufactures noninvasive patient monitoring technologies, including its breakthrough pulse oximetry systems that accurately measure blood oxygen levels even during patient movement.
Why Are We Cautious About MASI?
- Sales tumbled by 16.3% annually over the last two years, showing market trends are working against its favor during this cycle
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Masimo’s stock price of $137.37 implies a valuation ratio of 24.2x forward P/E. If you’re considering MASI for your portfolio, see our FREE research report to learn more.
CVS Health (CVS)
Market Cap: $101.2 billion
With over 9,000 retail pharmacy locations serving as neighborhood health destinations across America, CVS Health (NYSE: CVS) operates retail pharmacies, provides pharmacy benefit management services, and offers health insurance through its Aetna subsidiary.
Why Are We Hesitant About CVS?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6.4% over the last two years was below our standards for the healthcare sector
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 2.9% annually while its revenue grew
- Underwhelming 5.3% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
CVS Health is trading at $79.79 per share, or 11.6x forward P/E. To fully understand why you should be careful with CVS, check out our full research report (it’s free for active Edge members).
One Healthcare Stock to Watch:
Molina Healthcare (MOH)
Market Cap: $8.56 billion
Founded in 1980 as a provider for underserved communities in Southern California, Molina Healthcare (NYSE: MOH) provides managed healthcare services primarily to low-income individuals through Medicaid, Medicare, and Marketplace insurance programs across 21 states.
Why Do We Like MOH?
- Market share has increased this cycle as its 19.3% annual revenue growth over the last five years was exceptional
- Large revenue base of $44.55 billion gives it power over healthcare providers and plan holders
- Earnings per share grew by 5.8% annually over the last five years and slightly topped the peer group average
At $168.08 per share, Molina Healthcare trades at 14.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
