1 Healthcare Stock with Promising Prospects and 2 Facing Challenges

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, and their momentum is only rising as the industry has posted a 17.3% gain over the past six months, beating the S&P 500 by 8.1 percentage points.

Nevertheless, investors should tread carefully as the sector is heavily regulated, and businesses can be negatively impacted if the rules change. With that said, here is one resilient healthcare stock at the top of our wish list and two we’re passing on.

Two Healthcare Stocks to Sell:

GoodRx (GDRX)

Market Cap: $790.9 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 Should You Sell GDRX?

1. Underwhelming customer growth over the past two years shows the company faced challenges in winning new contracts
2. Subscale operations are evident in its revenue base of $800.7 million, meaning it has fewer distribution channels than its larger rivals
3. Negative returns on capital show that some of its growth strategies have backfired

At $2.32 per share, GoodRx trades at 5.5x forward P/E. To fully understand why you should be careful with GDRX, check out our full research report (it’s free).

Azenta (AZTA)

Market Cap: $1.38 billion

Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ:AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.

Why Are We Out on AZTA?

1. Sales tumbled by 2.7% annually over the last two years, showing market trends are working against its favor during this cycle
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. Long-term business health is up for debate as its cash burn has increased over the last five years

Azenta’s stock price of $29.85 implies a valuation ratio of 32.8x forward P/E. Dive into our free research report to see why there are better opportunities than AZTA.

One Healthcare Stock to Watch:

agilon health (AGL)

Market Cap: $186.9 million

Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE:AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.

Why Does AGL Stand Out?

1. Impressive 37.2% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Average customer growth of 8.8% over the past two years demonstrates success in acquiring new clients that could increase their spending in the future
3. Cash-burning tendencies have improved over the last five years, showing it could become financially independent one day

agilon health is trading at $0.46 per share, or 0x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

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