Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, limiting growth.
This has capped the upside for healthcare stocks lately as the industry’s flat return over the past six months has trailed the S&P 500’s 10.5% gain.
Value investing has created more billionaires than any other strategy, like Warren Buffett, who built his fortune by purchasing wonderful businesses at reasonable prices.
But these hidden gems are few and far between - many stocks that appear cheap often stay that way because they face structural issues.
While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns.
Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Tenet Healthcare currently trades at $161.00 and has been a dream stock for shareholders. It’s returned 510% since August 2020, blowing past the S&P 500’s 92.2% gain. The company has also beaten the index over the past six months as its stock price is up 11.3% thanks to its solid quarterly results.
Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential.
However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
Hospital operator Tenet Healthcare (NYSE:THC) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 3.3% year on year to $5.27 billion. The company’s full-year revenue guidance of $21.1 billion at the midpoint came in 0.9% above analysts’ estimates. Its non-GAAP profit of $4.02 per share was 40.1% above analysts’ consensus estimates.
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 7.8%. This drop is a far cry from the S&P 500’s 7.1% ascent.
Volatility cuts both ways - while it creates opportunities, it also increases risk, making sharp declines just as likely as big gains.
This unpredictability can shake out even the most experienced investors.
