These Have Been 3 of the Best-Performing Healthcare Stocks Since 2020

The COVID-19 public health emergency is slated to end in the U.S. on May 11. While many companies that benefited from an uptick in demand during the early stages of the pandemic saw their share prices boom and bust over the past few years, there are some that are still at far higher values than where they were before the pandemic started.

Three of the best-performing healthcare stocks since then include Moderna (MRNA -0.58%), McKesson (MCK 1.16%), and Eli Lilly (LLY -2.63%). Here's a look at why these three stocks have done so well since 2020 and whether they're still good buys today.

1. Moderna

Moderna gained plenty of attention these past few years for its COVID-19 vaccine Spikevax. Prior to its development, the healthcare company was far less known. Some doubts about the continuing high-level demand for COVID-19 vaccines have been raised, but investors overall remain bullish on the company. It has multiple products in its approval pipeline, including a vaccine for the respiratory syncytial virus that has been highly effective in late-stage trials. There's also the possibility that there will be a need for annual booster shots for COVID-19.

The stock gave back many of the gains generated in 2021, but it's still up an incredible 575% since 2020. That makes it one of the best investments you could have held during that time frame. The S&P 500, by comparison, rose just 27%.

I wouldn't rush out to buy the stock right now as there are plenty of risks and some uncertainty around its business today. Sales from its vaccine are forecast to generate just $5 billion this year (down from more than $18 billion in 2022). That's a lot of lost revenue to replace. Management said it believes Moderna can get its revenue back up to $15 billion by 2027, but it looks like a long shot to me. And with the stock still trading around the levels it was at two years ago, I wouldn't be surprised if it falls further in value this year.

2. McKesson

Another company that benefited from heightened demand during the pandemic was pharmaceutical distributor McKesson. It helped the U.S. government distribute COVID-19 vaccines. In its fiscal year ending March 31, 2022, the company estimates that COVID-19 tests and the distribution of ancillary supplies related to COVID-19 vaccines added $1.8 billion in revenue to its medical-surgical solutions segment. That's a relatively modest contribution given the fact that the company generated just under $264 billion in total revenue that year.

While distributing COVID-19 vaccines didn't transform its business, McKesson has made for a dependable healthcare investment, as its revenue continues to grow along with the industry's needs. Another reason investors are bullish on the stock is that last year McKesson and other distributors reached a settlement related to opioids, addressing a big risk facing the company. While it will cost McKesson $7.4 billion for its role in the crisis, the company will be able to make payments over a period of 18 years.

The one downside is that its margins are low. Last fiscal year it reported a profit of just $1.1 billion, for a net margin of less than 0.5%. But with hundreds of billions in revenue, it doesn't need a huge margin to make a significant profit. 

Since the start of 2020, the stock price is up 159%. It's trading at 17 times earnings, which is far below the healthcare average of 24. For investors who want a dependable investment, potentially a recession-proof one as well, McKesson could make for a good buy right now.

3. Eli Lilly

Eli Lilly has been a consistently strong stock to own over the years, and it's up around 210% since the start of 2020. The company's strong growth prospects have led to a higher valuation and made the stock a hot buy.

The company has a mega-blockbuster drug in the works in Mounjaro. Analysts are incredibly bullish on its prospects, especially if it can obtain approval from the Food and Drug Administration this year to treat weight gain. Regulators have approved it for diabetes, but given that it has helped people lose up to 22.5% of their body weight in clinical trials, there's a huge opportunity for those who want to lose weight as well. At its peak, it could generate $25 billion in revenue, and one estimate has it hitting $100 billion. That will ultimately depend on how many indications it ends up being approved for, as there are many weight-loss-related diseases Mounjaro could potentially help with.

There are four other potential product launches for Eli Lilly this year that investors can be excited about, including Alzheimer's treatment donanemab, which has been shown to be effective in reducing amyloid plaque -- often associated with the disease's progression.

Eli Lilly is a stock I could easily see soaring much higher in the future, potentially hitting a $1 trillion market cap in the future. With some solid assets and growth prospects to build around, this could make for a fantastic long-term buy.