Healthcare stocks have rebounded to a degree since the start of 2023, but a wide swath of these equities are still trading well below their all-time highs following the 2022 bear market. A small handful of healthcare stocks, however, have managed to defy this downward trend. 

For example, GE Healthcare Technologies (GEHC -0.63%) and Reata Pharmaceuticals (RETA) have actually been thriving in this harsh climate for healthcare equities. Specifically, GE Healthcare stock has risen by a stately 31.3% through the first two months of 2023, while Reata's shares have gapped up by an eye-catching 133% over this same period.

Are these two shining stars in the out-of-favor healthcare sector still worth buying? Let's dig deeper to find out. 

A happy investor pointing upward.

Image source: Getty Images.

1. GE Healthcare Technologies

GE Healthcare, a former subdivision of General Electric, became a stand-alone company on Jan. 4, 2023. The precision medical company books revenue via four operating segments: imaging, ultrasound, patient care solutions, and pharmaceutical diagnostics.

Among these segments, GE Healthcare's imaging and ultrasound units have been its main growth drivers of late. That being said, pharmaceutical diagnostics sales should emerge as a key part of its growth story in the months ahead as China reopens and U.S. customer inventory levels normalize. 

At current levels, GE Healthcare's stock trades at approximately 15 times 2028 estimated earnings (assuming zero share repurchases over the intervening period). That's a dirt cheap valuation for a medical device company in the broad sense, but it's a fairly typical valuation when excluding diabetes device specialists (who generally sport enormous premiums) like DexCom from the comparison. In turn, GE Healthcare's stock is arguably fairly valued following this recent surge in its share price.

On the bright side, GE Healthcare's ample free cash flows open up the possibility of a shareholder rewards program (share buybacks and/or a dividend) or business development opportunities in the near term. Management could pull either one of these levers to create additional upside in the stock. 

Overall, GE Healthcare stock ought to appeal to defensive-oriented investors, thanks to the company's economically insensitive business model, favorable tailwinds such as an aging global population, and its entrenched competitive position in high-value market segments like imaging/ultrasound.    

2. Reata Pharmaceuticals

Reata Pharmaceuticals stock has been on fire of late following the Food and Drug Administration's (FDA) approval of its Friedreich's ataxia (FA) drug, Skyclarys (omaveloxolone), for patients 16 and older. FA is an ultra-rare, inherited neurodegenerative disorder that afflicts approximately 6,000 individuals in the United States. Skyclarys is the first drug approved by the FDA for this condition. 

Inside the U.S., FA represents a commercial opportunity north of $1.6 billion per year (based on the drug's list price and total addressable market). Wall Street analysts think Skyclarys will capture approximately 25% of its total addressable U.S. market by 2030.

In other words, the drug is expected to generate about $400 million in U.S. sales by the end of the decade. This initial sales estimate may be on the conservative side, however. FA patients are highly motivated to seek treatment, creating an opportunity for a far higher adoption rate than 25% by 2030. 

Reata Pharmaceuticals stock probably won't be a big winner as the company gears up for Skyclarys' commercial launch and initial sales data begin to drip in over the next few quarters. After all, new drug launches by relatively small companies like Reata rarely get off to a blistering start, although orphan indications can be the exception to this general rule of thumb. 

In the long run, though, Reata Pharmaceuticals stock ought to deliver healthy gains for shareholders. The company sports a virtual monopoly in FA with this landmark approval, and it has other high-value assets under development. However, this biotech stock may require patience on the part of shareholders due to the logistical and financial hurdles inherent in launching a new drug.