Avadel Pharmaceuticals plc (NASDAQ:AVDL): Is Now The Time To Bet On Healthcare?
Avadel Pharmaceuticals plc (NASDAQ:AVDL), a $457.66M small-cap, is a healthcare company operating in an industry, which continues to endure a more demanding healthcare agenda, and the global need for innovative, cost-effective medicines continues to rise. Healthcare analysts are forecasting for the entire industry, a strong double-digit growth of 10.22% in the upcoming year , and an enormous growth of 36.81% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Avadel Pharmaceuticals is a laggard or leader relative to its healthcare sector peers. View our latest analysis for Avadel Pharmaceuticals
What’s the catalyst for Avadel Pharmaceuticals’s sector growth?
Companies operating in the pharmaceutical sector are confronted with ways to improve R&D productivity, increase the efficiency of its operations, rationalise spending on sales and marketing and enhance financial performance. Over the past year, the industry saw growth of 7.65%, though still underperforming the wider US stock market. Avadel Pharmaceuticals leads the pack with its impressive earnings growth of over 100% last year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -111.83% compared to the wider pharmaceutical sector growth hovering in the teens next year.
Is Avadel Pharmaceuticals and the sector relatively cheap?
The pharmaceutical sector’s PE is currently hovering around 24.2x, in-line with the US stock market PE of 20.1x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.58% on equities compared to the market’s 10.45%. On the stock-level, Avadel Pharmaceuticals is trading at a lower PE ratio of 6x, making it cheaper than the average pharmaceutical stock. In terms of returns, Avadel Pharmaceuticals generated 121.91% in the past year, which is 110.33% over the pharmaceutical sector.
Next Steps:
Avadel Pharmaceuticals is a pharmaceutical industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Avadel Pharmaceuticals is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Avadel Pharmaceuticals’s fundamentals in order to build a holistic investment thesis.
1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has AVDL’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Avadel Pharmaceuticals? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
