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 1.7% over the last six months. This drawdown is a stark contrast from the S&P 500’s 9% gain.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here are two resilient healthcare stocks at the top of our wish list and one that may face trouble.

One Healthcare Stock to Sell:

Regeneron (REGN)

Market Cap: $74.49 billion

Founded in 1988 as a small research firm, Regeneron (NASDAQ:REGN) is a biopharmaceutical company that develops and manufactures innovative medicines, with a focus on eye diseases, cancer, and rare genetic disorders.

Why Is REGN Not Exciting?

1. Estimated sales growth of 2.1% for the next 12 months implies demand will slow from its two-year trend
2. Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 10.5 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Regeneron’s stock price of $691 implies a valuation ratio of 15.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why REGN doesn’t pass our bar.

Two Healthcare Stocks to Watch:

Zoetis (ZTS)

Market Cap: $70.49 billion

Originally a subsidiary of Pfizer, Zoetis (NYSE:ZTS) is an animal health company that develops and distributes medicines, vaccines, and diagnostic products for livestock and pets.

Why Are We Fans of ZTS?

1. Average constant currency growth of 9% over the past two years demonstrates its ability to grow internationally despite currency fluctuations
2. Strong free cash flow margin of 21.5% enables it to reinvest or return capital consistently
3. ROIC punches in at 28.7%, illustrating management’s expertise in identifying profitable investments

At $157.42 per share, Zoetis trades at 25.3x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.

Merck (MRK)

Market Cap: $221.8 billion

Founded in 1891, Merck (NYSE:MRK) is a global pharmaceutical company that develops prescription medicines, vaccines, biologic therapies, and animal health products.

Why Does MRK Stand Out?

1. Massive revenue base of $64.17 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
2. Adjusted operating margin expanded by 11.4 percentage points over the last five years as it scaled and became more efficient
3. Free cash flow margin jumped by 21.1 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

Merck is trading at $87.88 per share, or 9.8x forward price-to-earnings. Is now a good time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out 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.