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 14.1%. This performance was worse than the S&P 500’s 9.3% decline.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is 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:

Addus HomeCare (ADUS)

Market Cap: $1.82 billion

Serving approximately 66,000 clients across 22 states with a focus on "dual eligible" Medicare and Medicaid beneficiaries, Addus HomeCare (NASDAQ:ADUS) provides in-home personal care, hospice, and home health services to elderly, chronically ill, and disabled individuals.

Why Do We Think Twice About ADUS?

1. Weak average billable patients over the past two years suggest it might have to lower prices to accelerate growth

2. Subscale operations are evident in its revenue base of $1.15 billion, meaning it has fewer distribution channels than its larger rivals

3. 3.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Addus HomeCare’s stock price of $102.27 implies a valuation ratio of 16.8x forward price-to-earnings. If you’re considering ADUS for your portfolio, see our FREE research report to learn more .

Illumina (ILMN)

Market Cap: $11.28 billion

Pioneering the ability to read the human genome at unprecedented speed and affordability, Illumina (NASDAQ:ILMN) develops and sells advanced DNA sequencing and microarray technologies that allow researchers and clinicians to analyze genetic variations and functions.

Why Are We Out on ILMN?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth

2. Earnings per share fell by 8.8% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11.4 percentage points

Illumina is trading at $72.24 per share, or 16x forward price-to-earnings. Check out our free in-depth research report to learn more about why ILMN doesn’t pass our bar .