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Personal health and wellness is one of the many secular tailwinds for healthcare companies. 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 6.8%. This performance was disappointing since the S&P 500 climbed 1%.

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. 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:

Viatris (VTRS)

Market Cap: $11.34 billion

Formed in 2020 through the merger of Mylan and Upjohn, Viatris (NASDAQ:VTRS) provides a portfolio of branded, generic, and over-the-counter medications as well as biosimilars aimed at addressing a wide range of therapeutic areas.

Why Do We Steer Clear of VTRS?

1. Annual sales declines of 4.8% for the past two years show its products and services struggled to connect with the market during this cycle

2. Projected sales decline of 6.5% over the next 12 months indicates demand will continue deteriorating

3. Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 9.6% annually

Viatris’s stock price of $9.58 implies a valuation ratio of 3.7x forward price-to-earnings. Check out our free in-depth research report to learn more about why VTRS doesn’t pass our bar.

PacBio (PACB)

Market Cap: $409.1 million

Founded in 2000 by Dr. Stephen Turner, a scientist from Cornell University, along with investments from Mohr Davidow Ventures, Pacific Biosciences of California (NASDAQ:PACB) develops and sells advanced sequencing technologies for genetic analysis.

Why Do We Think PACB Will Underperform?

1. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 5.3% annually

2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 141.1 percentage points

3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

At $1.43 per share, PacBio trades at 2.7x forward price-to-sales. To fully understand why you should be careful with PACB, check out our full research report (it’s free).

One Healthcare Stock to Watch:

BioMarin Pharmaceutical (BMRN)

Market Cap: $13.74 billion

Founded in 1997, BioMarin Pharmaceutical (NASDAQ:BMRN) is a biopharmaceutical company specializing in developing and commercializing innovative therapies for rare genetic disorders, with key products addressing disorders where the body can’t break down certain sugars (Morquio A syndrome) and certain proteins (phenylketonuria).