NEW YORK (TheStreet) -- The red-hot health care sector was a great place to put your money in the first half of the year. With nearly a 9% return, it handily beat the market, which was up a meager 0.2% over the same period.

Yet, not all stocks in the sector participated in the growth. Here are the 10 worst-performing stocks in the sector. 

Because good deals can often be found in the stock bargain bin, TheStreet paired the 10 worst performing health care sector stocks with TheStreet Ratings to determine whether they really are good investments going forward.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which stocks were among the worst performers in the S&P 500 to date. And when you're done with that be sure to find out which company had the best performance in the S&P 500 for the first quarter.

 

MRK ChartMRK data by YCharts
10. Merck & Co., Inc. (MRK - Get Report)

Rating: Buy, B+
Market Cap: $161 billion
Year-to-date return: 0.25%

Merck & Co., Inc. provides health care solutions worldwide.

"We rate MERCK & CO (MRK) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for MERCK & CO is currently very high, coming in at 94.01%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MRK's net profit margin of 10.11% significantly trails the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market on the basis of return on equity, MERCK & CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • MRK, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 8.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

 

ALXN ChartALXN data by YCharts
9. Alexion Pharmaceuticals, Inc. (ALXN - Get Report)
Rating: Buy, B
Market Cap: $40.5 billion
Year-to-date return: -2.3%

Alexion Pharmaceuticals, Inc., a biopharmaceutical company, develops and commercializes life-transforming therapeutic products.

"We rate ALEXION PHARMACEUTICALS INC (ALXN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ALXN's revenue growth trails the industry average of 22.1%. Since the same quarter one year prior, revenues slightly increased by 6.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • ALXN's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.14, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 174.17% to $23.03 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 157.15%.
  • ALEXION PHARMACEUTICALS INC's earnings per share declined by 43.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALEXION PHARMACEUTICALS INC increased its bottom line by earning $3.26 versus $1.26 in the prior year. This year, the market expects an improvement in earnings ($4.95 versus $3.26).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Biotechnology industry and the overall market on the basis of return on equity, ALEXION PHARMACEUTICALS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

VAR ChartVAR data by YCharts
8. Varian Medical Systems, Inc. (VAR - Get Report)
Rating: Buy, A-
Market Cap: $8.4 billion
Year-to-date return: -2.5%

Varian Medical Systems, Inc. designs, manufactures, sells, and services medical devices and software products for treating cancer and other medical conditions in the United States. The company operates in two segments, Oncology Systems and Imaging Components.

"We rate VARIAN MEDICAL SYSTEMS INC (VAR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Equipment & Supplies industry average. The net income increased by 14.2% when compared to the same quarter one year prior, going from $92.79 million to $105.97 million.
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.29, which illustrates the ability to avoid short-term cash problems.
  • 44.62% is the gross profit margin for VARIAN MEDICAL SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.95% is above that of the industry average.
  • VARIAN MEDICAL SYSTEMS INC has improved earnings per share by 19.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VARIAN MEDICAL SYSTEMS INC reported lower earnings of $3.83 versus $3.99 in the prior year. This year, the market expects an improvement in earnings ($4.27 versus $3.83).

XRAY ChartXRAY data by YCharts
7. DENTSPLY International Inc. (XRAY - Get Report)
Rating: Buy, A-
Market Cap: $7.2 billion
Year-to-date return: -3.2%

DENTSPLY International Inc. designs, develops, manufactures, and markets various consumable dental products for the professional dental market in the United States and internationally.

"We rate DENTSPLY INTERNATL INC (XRAY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins, good cash flow from operations, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for DENTSPLY INTERNATL INC is rather high; currently it is at 61.49%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.74% trails the industry average.
  • Net operating cash flow has slightly increased to $65.63 million or 1.65% when compared to the same quarter last year. Despite an increase in cash flow, DENTSPLY INTERNATL INC's average is still marginally south of the industry average growth rate of 5.07%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • DENTSPLY INTERNATL INC's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DENTSPLY INTERNATL INC increased its bottom line by earning $2.23 versus $2.15 in the prior year. This year, the market expects an improvement in earnings ($2.55 versus $2.23).

 

AMGN ChartAMGN data by YCharts
6. Amgen Inc. (AMGN - Get Report)

Rating: Buy, A+
Market Cap: $116.7 billion
Year-to-date return: -3.6%

Amgen Inc., a biotechnology company, discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses for the treatment of illness in the areas of oncology, hematology, inflammation, bone health, nephrology, cardiovascular, and general medicine.

"We rate AMGEN INC (AMGN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, revenue growth, reasonable valuation levels and expanding profit margins. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 50.71% and other important driving factors, this stock has surged by 32.94% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AMGN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • AMGEN INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AMGEN INC increased its bottom line by earning $6.70 versus $6.65 in the prior year. This year, the market expects an improvement in earnings ($9.60 versus $6.70).
  • AMGN's revenue growth trails the industry average of 22.1%. Since the same quarter one year prior, revenues rose by 11.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for AMGEN INC is currently very high, coming in at 90.16%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 32.24% trails the industry average.

 


ZBH ChartZBH data by YCharts
5. Zimmer Holdings, Inc. (ZMH)

Rating: Buy, A-
Market Cap: N/A
Year-to-date return: -3.7%

Zimmer Holdings, Inc., together with its subsidiaries, designs, develops, manufactures, and markets orthopaedic reconstructive devices, spinal and trauma devices, biologics, dental implants, and related surgical products in the Americas, Europe, and the Asia Pacific.

"We rate ZIMMER HOLDINGS INC (ZBH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for ZIMMER HOLDINGS INC is currently very high, coming in at 81.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.61% is above that of the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • ZIMMER HOLDINGS INC's earnings per share declined by 20.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ZIMMER HOLDINGS INC reported lower earnings of $4.19 versus $4.43 in the prior year. This year, the market expects an improvement in earnings ($6.35 versus $4.19).
  • ZMH, with its decline in revenue, underperformed when compared the industry average of 21.4%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

BAX ChartBAX data by YCharts
4. Baxter International Inc. (BAX - Get Report)

Rating: Buy, B
Market Cap: $38 billion
Year-to-date return: -4.6%

Baxter International Inc., develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions.

"We rate BAXTER INTERNATIONAL INC (BAX) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, BAXTER INTERNATIONAL INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for BAXTER INTERNATIONAL INC is rather high; currently it is at 54.25%. Regardless of BAX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BAX's net profit margin of 11.42% compares favorably to the industry average.
  • BAXTER INTERNATIONAL INC's earnings per share declined by 17.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BAXTER INTERNATIONAL INC reported lower earnings of $3.46 versus $3.65 in the prior year. This year, the market expects an improvement in earnings ($3.96 versus $3.46).
  • BAX, with its decline in revenue, underperformed when compared the industry average of 21.4%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

 

A ChartA data by YCharts
3. Agilent Technologies, Inc. (A - Get Report)

Rating: Buy, B
Market Cap: $12.9 billion
Year-to-date return: -5.8%

Agilent Technologies, Inc. provides bio-analytical solutions and services to the life sciences, diagnostics and genomics, chemical analysis, communications, and electronics industries worldwide.

"We rate AGILENT TECHNOLOGIES INC (A) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, growth in earnings per share and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.98, which clearly demonstrates the ability to cover short-term cash needs.
  • AGILENT TECHNOLOGIES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AGILENT TECHNOLOGIES INC reported lower earnings of $0.98 versus $2.11 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $0.98).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for AGILENT TECHNOLOGIES INC is rather high; currently it is at 57.74%. Regardless of A's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.61% trails the industry average.

 

JNJ ChartJNJ data by YCharts
2. Johnson & Johnson (JNJ - Get Report)

Rating: Buy, A-
Market Cap: $270.3 billion
Year-to-date return: -6.8%

Johnson & Johnson, together with its subsidiaries, researches and develops, manufactures, and sells various products in the health care field worldwide. It operates in three segments: Consumer, Pharmaceutical, and Medical Devices.

"We rate JOHNSON & JOHNSON (JNJ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JNJ's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, JNJ has a quick ratio of 1.80, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Pharmaceuticals industry and the overall market on the basis of return on equity, JOHNSON & JOHNSON has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • JOHNSON & JOHNSON's earnings per share declined by 6.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, JOHNSON & JOHNSON increased its bottom line by earning $5.70 versus $4.82 in the prior year. This year, the market expects an improvement in earnings ($6.14 versus $5.70).
  • JNJ, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

 

ISRG ChartISRG data by YCharts
1. Intuitive Surgical, Inc. (ISRG - Get Report)

Rating: Hold, C+
Market Cap: $17.9 billion
Year-to-date return: -8.4%

Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories in the United States, Europe, and Asia.

"We rate INTUITIVE SURGICAL INC (ISRG) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income increased by 119.0% when compared to the same quarter one year prior, rising from $44.30 million to $97.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 21.4%. Since the same quarter one year prior, revenues rose by 14.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • Net operating cash flow has decreased to $123.70 million or 25.61% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, INTUITIVE SURGICAL INC's return on equity is below that of both the industry average and the S&P 500.