1 Healthcare Stock Worth Your Attention and 2 to Turn Down

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 11.7%. This performance was worse than the S&P 500’s 5.1% 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. With that said, here is one healthcare stock poised to generate sustainable market-beating returns and two that may face trouble.

Two Healthcare Stocks to Sell:

Acadia Healthcare (ACHC)

Market Cap: $2.04 billion

With a network of over 250 facilities serving patients in 38 states and Puerto Rico, Acadia Healthcare (NASDAQ:ACHC) operates facilities providing mental health and substance use disorder treatment services across the United States.

Why Are We Cautious About ACHC?

1. Flat sales over the last five years suggest it must find different ways to grow during this cycle
2. Disappointing admissions over the past two years imply it may need to invest in improvements to get back on track
3. Free cash flow margin shrank by 38.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $22.38 per share, Acadia Healthcare trades at 6.6x forward price-to-earnings. To fully understand why you should be careful with ACHC, check out our full research report (it’s free).

AdaptHealth (AHCO)

Market Cap: $1.13 billion

With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ:AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.

Why Are We Hesitant About AHCO?

1. Sales trends were unexciting over the last two years as its 4.8% annual growth was below the typical healthcare company
2. ROIC of 2.4% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

AdaptHealth’s stock price of $8.47 implies a valuation ratio of 8.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why AHCO doesn’t pass our bar.

One Healthcare Stock to Buy:

Insulet (PODD)

Market Cap: $18.31 billion

Revolutionizing diabetes care with its tubeless "Pod" technology, Insulet (NASDAQ:PODD) develops and manufactures innovative insulin delivery systems for people with diabetes, primarily through its Omnipod product line.

Why Should You Buy PODD?

1. Constant currency growth averaged 25.7% over the past two years, showing it can expand globally regardless of the macroeconomic environment
2. Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 78% outpaced its revenue gains
3. Free cash flow margin grew by 19.7 percentage points over the last five years, giving the company more chips to play with

Insulet is trading at $264 per share, or 66.9x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.