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Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Despite the rosy long-term prospects, short-term headwinds such as COVID inventory destocking have harmed the industry’s returns - over the past six months, healthcare stocks have collectively shed 9.5%. This drop was worse than the S&P 500’s 2.3% loss.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here is one healthcare stock boasting a durable advantage and two best left ignored.

Two Healthcare Stocks to Sell:

CONMED (CNMD)

Market Cap: $1.84 billion

With over five decades of experience in surgical innovation since its founding in 1970, CONMED (NYSE:CNMD) develops and manufactures medical devices and equipment for surgical procedures, specializing in orthopedic and general surgery products.

Why Is CNMD Not Exciting?

1. 6.5% annual revenue growth over the last five years was slower than its healthcare peers

2. Revenue base of $1.31 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale

3. Underwhelming 5.3% return on capital reflects management’s difficulties in finding profitable growth opportunities

CONMED is trading at $58.01 per share, or 12.6x forward price-to-earnings. Read our free research report to see why you should think twice about including CNMD in your portfolio, it’s free.

Phreesia (PHR)

Market Cap: $1.50 billion

Founded in 2005 to streamline the traditionally paper-heavy patient check-in process, Phreesia (NYSE:PHR) provides software solutions that automate patient intake, registration, and payment processes for healthcare organizations while improving patient engagement in their care.

Why Does PHR Give Us Pause?

1. Modest revenue base of $419.8 million gives it less fixed cost leverage and fewer distribution channels than larger companies

2. Negative free cash flow raises questions about the return timeline for its investments

3. Negative returns on capital show management lost money while trying to expand the business

At $25.53 per share, Phreesia trades at 30x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than PHR.

One Healthcare Stock to Watch:

Intuitive Surgical (ISRG)

Market Cap: $177.8 billion

Pioneering minimally invasive surgery since its first da Vinci system was FDA-cleared in 2000, Intuitive Surgical (NASDAQ:ISRG) develops and manufactures robotic-assisted surgical systems that enable minimally invasive procedures across various medical specialties.