1 Healthcare Stock for Long-Term Investors and 2 to Keep Off Your Radar

Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. 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 14.1%. This performance was worse than the S&P 500’s 9.3% decline.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one healthcare stock poised to generate sustainable market-beating returns and two we’re swiping left on.

Two Healthcare Stocks to Sell:

Addus HomeCare (ADUS)

Market Cap: $1.82 billion

Serving approximately 66,000 clients across 22 states with a focus on "dual eligible" Medicare and Medicaid beneficiaries, Addus HomeCare (NASDAQ:ADUS) provides in-home personal care, hospice, and home health services to elderly, chronically ill, and disabled individuals.

Why Do We Think Twice About ADUS?

1. Weak average billable patients over the past two years suggest it might have to lower prices to accelerate growth
2. Subscale operations are evident in its revenue base of $1.15 billion, meaning it has fewer distribution channels than its larger rivals
3. 3.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Addus HomeCare’s stock price of $102.27 implies a valuation ratio of 16.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why ADUS doesn’t pass our bar.

Illumina (ILMN)

Market Cap: $11.28 billion

Pioneering the ability to read the human genome at unprecedented speed and affordability, Illumina (NASDAQ:ILMN) develops and sells advanced DNA sequencing and microarray technologies that allow researchers and clinicians to analyze genetic variations and functions.

Why Are We Out on ILMN?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Earnings per share fell by 8.8% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.4 percentage points

Illumina is trading at $72.24 per share, or 16x forward price-to-earnings. If you’re considering ILMN for your portfolio, see our FREE research report to learn more.

One Healthcare Stock to Watch:

Alignment Healthcare (ALHC)

Market Cap: $3.79 billion

Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ:ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.

Why Are We Positive On ALHC?

1. Customer trends over the past two years show it’s maintaining a steady flow of new contracts that can potentially increase in value over time
2. Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
3. Adjusted operating margin expanded by 2.1 percentage points over the last two years as it scaled and became more efficient

At $20 per share, Alignment Healthcare trades at 90.1x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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.