ASX 200 healthcare shares are in the green on Tuesday with the S&P/ASX 200 Health Care Index (ASX: XHJ) lifting 0.17%.
An undeniable darling of the sector is Pro Medicus Ltd (ASX: PME) shares.
Pro Medicus provides unique medical imaging software and services to hospitals and healthcare organisations worldwide.
Pro Medicus is now the third-largest ASX 200 healthcare share after staggering price growth over the past three years.
It has overtaken the hearing aid blue-chip stock Cochlear Ltd (ASX: COH), which is now the fifth-largest healthcare stock.
Jed Richards from Shaw and Partners has a sell rating on both healthcare shares.
He explains why on The Bull this week.
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ASX 200 healthcare shares to sell now: expert
Strong start for Pro Medicus shares in FY26… but broker says sell
Pro Medicus was one of the 5 strongest healthcare stocks in FY25, lifting 99%.
Since 1 July, the stock has lifted a further 6.73%.
And this is why Richards says investors should sell it.
Richards said:
Pro Medicus trades at extremely high valuation multiples and has no dividend yield.
While its medical imaging software is innovative, the stock price reflects aggressive growth assumptions.
Richards said any slowdown in earnings or margin pressure could trigger a sharp correction in the share's valuation.
Compared to peers, PME appears overvalued and lacks income support. Investors may want to consider locking in gains and re-allocating funds to more reasonably priced healthcare or technology names with better risk-reward profiles.
Pro Medicus shares are currently trading at $304.12, down 0.21% for the day so far.
Pro Medicus will reveal its latest results this Thursday, 14 August.
Cochlear faces market competition
Richards has a sell rating on this ASX 200 healthcare share because he's concerned about market competition.
The analyst said:
Cochlear faces increasing global competition as hearing technology rapidly evolves.
While it remains a leader in implantable devices, rivals are closing the innovation gap, and its dominance may erode.
Richards notes that Cochlear shares have risen from $249.78 on 9 April to $309.65 today (down 0.61% for the day).
The stock's high price/earnings ratio suggests growth is already priced in, leaving limited upside.
Any slowdown in sales or margin compression could impact the company's valuation.
Investors may want to consider trimming exposure before investing in more attractively valued healthcare or technology opportunities.
The Cochlear share price is down 8.8% over the past year.
Cochlear will release its next round of half-year results this Friday, 15 August.
