Personal health and wellness is one of the many secular tailwinds for healthcare companies. 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 11.1%. This drop was worse than the S&P 500’s 1.7% loss.

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. Taking that into account, here are two healthcare stocks boasting durable advantages and one we’re steering clear of.

One Healthcare Stock to Sell:

CVS Health (CVS)

Market Cap: $85.34 billion

With over 9,000 retail pharmacy locations serving as neighborhood health destinations across America, CVS Health (NYSE:CVS) operates retail pharmacies, provides pharmacy benefit management services, and offers health insurance through its Aetna subsidiary.

Why Are We Cautious About CVS?

1. Annual sales growth of 7% over the last two years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand

2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.9% annually

3. Free cash flow margin shrank by 3.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

CVS Health is trading at $67.59 per share, or 10.9x forward P/E. To fully understand why you should be careful with CVS, check out our full research report (it’s free) .

Two Healthcare Stocks to Watch:

McKesson (MCK)

Market Cap: $88.78 billion

With roots dating back to 1833, making it one of America's oldest continuously operating businesses, McKesson (NYSE:MCK) is a healthcare services company that distributes pharmaceuticals, medical supplies, and provides technology solutions to pharmacies, hospitals, and healthcare providers.

Why Should You Buy MCK?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 12.2% annual sales growth over the last two years

2. Massive revenue base of $344.6 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power

3. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue

McKesson’s stock price of $707.70 implies a valuation ratio of 19.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free .