The Canadian healthcare space is a good, defensive place to turn in times of economic uncertainty. These days, tariffs, inflation, and general economic worries are leading many investors to look for healthcare stocks for shelter. While there aren’t many choices, I’ll discuss two of them in this article: Bausch Health Companies Inc. (TSX:BHC) and Canopy Growth Corp. (TSX:WEED).
Which one is the best stock to buy right now? Let’s take a look.
Bausch Health
Bausch Health is a fully integrated specialty pharmaceutical and branded generics business. It focuses on areas such as consumer and eye care, gastroenterology, and dermatology. Its business is a global one that’s diversified across geographies and products.
The company has a checkered past, filled with price-gauging and the reckless pursuit of growth at the expense of its financial health. This left it with mind-boggling debt levels of more than $20 billion and a very skeptical investor community. Bausch has been on a mission to redeem itself ever since.
In its most recent quarter, the company reported continued momentum, both operationally and with regard to its balance sheet. For example, the quarter represented its eighth quarter of revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) growth. In fact, revenue increased 7% to $2.26 billion and adjusted EBITDA increased 14%.
Furthermore, Bausch has been successful in reducing its debt and effectively improving the health of its balance sheet. As of the end of 2024, total long-term debt was $18.9 billion, compared to $23.9 billion in 2020. Also, the company refinanced $7.9 billion of debt, effectively pushing maturities out to 2028 and beyond. While it’s still a big problem, the debt situation is seeing some improvements at least.
The next few years are expected to post strong earnings growth off the company’s continued momentum in revenue and earnings. While investors still likely see too much risk in this stock, the valuation is quite cheap. Management is seeking options to unlock shareholder value, including share buybacks.
Canopy Growth
Canopy Growth is Canada’s most well-known cannabis company. But that hasn’t stopped the company from bleeding losses and the stock from a freefall that never ends. Simply put, the company and the industry is pretty much in shambles. The only hope is a restructuring and refocusing.
Thankfully, this is what we are seeing. Canopy Growth’s CEO is embarking on an ambitious plan to take advantage of areas of growth, streamline the company, and grab its position as the leading cannabis company globally.
One of the pockets of strength that the company is focusing on is the medical marijuana market. In Canada, the medical business is quite strong, with Canopy posting a 13% increase in the company’s latest quarter. Plans include unifying the medical cannabis business into a single structure to improve speed, scalability, and market responsiveness. It is one global business to serve the medical needs of patients.
Canopy Growth’s commitment to global medical cannabis will be backed by improved product availability, enhancements to the healthcare provider and patient experiences and growth in key European markets.
Along with all of that, Canopy has performed a review of costs, with the goal of taking costs out of the system. They are targeting at least $20 million of savings over the next 12 to 18 months. Finally, debt has been reduced, which is reducing interest expense by $13 million.
The hope is that Canopy Growth can stop the bleeding and the losses. While I think that the medical marijuana business is promising, the stock is clearly a very high risk one. I bought a small position in the stock due to the global potential I see in medical marijuana. But it’s money that I risked knowing I could lose it all. Canopy is just one of a basket of high-risk stocks I invested in for exposure to potentially significant, outsized gains.
The bottom line
In conclusion, neither of these stocks are the defensive healthcare stocks that we would hope for. With this being said, of the two, I think that the best stock to buy right now is Bausch Health.
