The healthcare industry has achieved immense growth over the past few years owing to the COVID-19 pandemic, surging chronic disease cases, and an aging population. Healthcare stocks remained relatively stable during the market correction earlier this year, thanks to the inelastic demand for medical products and services.
However, certain risks are associated with the healthcare sector, including rules and regulations to control drug prices or corporate taxes, growing competition, and economic uncertainty, that potentially weigh on healthcare companies’ profits. Also, extended-care facilities have seen a downward trend over the past two years due to the emergence of COVID-19 variants. This has impacted the financials of certain healthcare companies. So, investors are advised to avoid healthcare stocks that are relatively overvalued versus their peers because their current price levels cannot be justified. Furthermore, such stocks have weak financials in addition to bleak growth potential.
