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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. If you’re considering REGN for your portfolio, see our FREE research report to learn more.

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