Vertex and UNH Outshine PNTG as Healthcare Sector Continues to Soar
The healthcare sector has been a top performer lately, with stocks returning 46.9% over the past six months and outpacing the S&P 500 by 25.5 percentage points.
However, investors should be cautious due to heavy regulation in the industry, which can negatively impact businesses if rules change.
Among healthcare stocks, The Pennant Group (PNTG) stands out as a stock to avoid. With a smaller revenue base of $1.09 billion and a poor free cash flow margin of 2.4% over the last five years, PNTG has limited its ability to invest in growth initiatives or pay dividends.
On the other hand, Vertex Pharmaceuticals (VRTX) and UnitedHealth (UNH) are two healthcare stocks worth watching. VRTX has achieved annual revenue growth of 13.5% over the last five years, beating the sector average, while UNH has seen 10.6% annual revenue growth over the same period.