Personal health and wellness is one of the many secular tailwinds for healthcare companies. But financial performance has lagged recently as players offloaded surplus COVID inventories in 2023 and 2024, a headwind for overall demand. The result? Over the past six months, the industry has tumbled by 11.1%. This drop was worse than the S&P 500’s 1.7% loss.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here are two healthcare stocks boasting durable advantages and one we’re steering clear of.

One Healthcare Stock to Sell:

CVS Health (CVS)

Market Cap: $85.34 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 Cautious About CVS?

1. Annual sales growth of 7% over the last two years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.9% annually
3. Free cash flow margin shrank by 3.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

CVS Health is trading at $67.59 per share, or 10.9x forward P/E. To fully understand why you should be careful with CVS, check out our full research report (it’s free).

Two Healthcare Stocks to Watch:

McKesson (MCK)

Market Cap: $88.78 billion

With roots dating back to 1833, making it one of America's oldest continuously operating businesses, McKesson (NYSE:MCK) is a healthcare services company that distributes pharmaceuticals, medical supplies, and provides technology solutions to pharmacies, hospitals, and healthcare providers.

Why Should You Buy MCK?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 12.2% annual sales growth over the last two years
2. Massive revenue base of $344.6 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
3. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue

McKesson’s stock price of $707.70 implies a valuation ratio of 19.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Option Care Health (OPCH)

Market Cap: $5.40 billion

With a nationwide network of 177 locations serving 43 states and a team of over 4,500 clinicians, Option Care Health (NASDAQ:OPCH) is the largest independent provider of home and alternate site infusion services, delivering medications and clinical support to patients across the United States.

Why Are We Fans of OPCH?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 15.3% annual sales growth over the last five years
2. Share buybacks catapulted its annual earnings per share growth to 66.4%, which outperformed its revenue gains over the last five years
3. Free cash flow margin expanded by 3.3 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

At $32.95 per share, Option Care Health trades at 19.9x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.