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Healthcare companies are pushing the status quo by innovating in areas like drug development and digital health. Despite the rosy long-term prospects, short-term headwinds such as COVID inventory destocking have harmed the industry’s returns - over the past six months, healthcare stocks have collectively shed 6.3%. This drop is a stark contrast from the S&P 500’s 5.1% gain.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one healthcare stock poised to generate sustainable market-beating returns and two best left ignored.

Two Healthcare Stocks to Sell:

Moderna (MRNA)

Market Cap: $12 billion

Founded in 2010 and widely known for its COVID-19 vaccine, Moderna (NASDAQ:MRNA) is a biotechnology company focused on developing messenger RNA (mRNA) therapeutics and vaccines.

Why Is MRNA Risky?

1. Sales tumbled by 59% annually over the last two years, showing market trends are working against its favor during this cycle

2. Free cash flow margin dropped by 369.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Moderna’s stock price of $31.14 implies a valuation ratio of 5.6x forward price-to-sales. If you’re considering MRNA for your portfolio, see our FREE research report to learn more .

AMN Healthcare Services (AMN)

Market Cap: $1.01 billion

Founded in 1985, AMN Healthcare Services (NYSE:AMN) provides workforce and staffing services for the healthcare industry, specializing in placing nurses, physicians, and other health in various care settings.

Why Should You Dump AMN?

1. Declining travelers on assignment over the past two years indicate demand is soft and that the company may need to revise its strategy

2. Projected sales decline of 11.3% over the next 12 months indicates demand will continue deteriorating

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

AMN Healthcare Services is trading at $27.44 per share, or 17.4x forward price-to-earnings. Read our free research report to see why you should think twice about including AMN in your portfolio, it’s free .

One Healthcare Stock to Buy:

Elevance Health (ELV)

Market Cap: $89.32 billion

Known for its Blue Cross and Blue Shield brand, Elevance Health (NYSE:EVH) is a health insurance company formerly known as Anthem.

Why Are We Backing ELV?

1. Enormous revenue base of $177 billion gives it leverage over plan holders and advantageous reimbursement terms with healthcare providers

2. Earnings growth has comfortably beaten the peer group average over the last five years as its EPS has compounded at 11.2% annually

3. Industry-leading 22.5% return on capital demonstrates management’s skill in finding high-return investments