Healthcare has long been regarded as a prime sector for long-term investors. After all, everyone inevitably requires healthcare products and services. With aging populations on the rise in the U.S. and other major countries, the demand is set to soar over the next decade and beyond. However, not all healthcare stocks are created equal. In this article, we'll explore two healthcare stocks that are worth buying hand over fist and one that should be avoided.

Navigating the Healthcare Stock Landscape

Buy BioNTech

In 2021's third quarter, BioNTech (BNTX -3.29%) achieved a remarkable revenue of over 6 billion euros, approximately $6.9 billion at the time. Fast forward to 2024's third quarter, and while revenue dipped to 1.24 billion euros ($1.3 billion), it's important to note that the company's COVID-19 revenue has made a significant comeback. In fact, it jumped 39% year over year during this period. The real game-changer, though, lies in BioNTech's promising pipeline. The company plans to launch its first cancer therapy in 2026 and aims to secure regulatory approvals for 10 cancer indications by 2030. It's making solid strides towards these goals, with two cancer programs in late-stage testing and 12 in phase 2 clinical trials. Despite the sinking revenue and profits, BioNTech remains a stock that investors should seriously consider. Its enterprise value of around $11.8 billion is only 4.5 times the expected 2024 sales. In contrast, the average biotech stock trades at more than 7.7 times sales. Even if BioNTech doesn't achieve all its pipeline successes (which is highly unlikely), the stock is a steal at its current price.

Buy TransMedics Group

By early August, TransMedics Group's (TMDX -1.22%) share price had more than doubled year to date. But since then, the stock has given back all its gains and then some due to missing Q3 revenue and earnings estimates. To truly understand TransMedics' growth potential, we need to examine the dynamics of the organ transplantation market. The current standard for transporting donor organs is cold storage, but this method has a major drawback - far too few organs reach their intended recipients. Enter TransMedics' Organ Care System (OCS). This innovative technology keeps donor organs alive until transplantation, and it's the only warm perfusion technology approved by the U.S. Food and Drug Administration for multiple organs like hearts, lungs, and livers. TransMedics is also addressing historical logistical challenges in organ transplants by operating its own aviation fleet. Additionally, the company is working hard to obtain regulatory approvals for OCS in key European countries. In our view, this stock presents a great buying opportunity during the pullback.

Avoid Walgreens Boots Alliance

The stock chart for Walgreens Boots Alliance (WBA 17.74%) is truly dismal. The pharmacy services company's shares have plummeted this year and are down around 90% from their 2015 peak. After this massive sell-off, Walgreens may seem like a bargain with its shares trading at only 5.5 times forward earnings. However, this stock could be a classic value trap. One of Walgreens' major issues persists - competition in the retail pharmacy market remains fierce, especially with the likes of Amazon and Walmart flexing their muscles. The company also has to contend with a significant debt load of over $33.8 billion. There's talk of a potential acquisition with private equity firm Sycamore Partners, but we should be cautious. Rumored deals often don't materialize. Even without an immediate acquisition, we think Walgreens Boots Alliance can turn things around. But for now, investors might be better off staying on the sidelines with this beaten-down stock.