Are You Backing The Right Horse With Obalon Therapeutics Inc (OBLN)?
Obalon Therapeutics Inc (NASDAQ:OBLN), a USD$140.06M small-cap, operates in the healthcare industry, which faces key trends such as rising demand fuelled by an aging population and the growing prevalence of chronic diseases. Healthcare analysts are forecasting for the entire industry, a strong double-digit growth of 21.23% in the upcoming year , and a whopping growth of 68.64% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether OBLN is a laggard or leader relative to its healthcare sector peers. See our latest analysis for OBLN
What’s the catalyst for OBLN’s sector growth?
Personalized and data-driven equipment underpins the future advancement and structural shift in the healthcare equipment industry. Over the past year, the industry saw growth in the teens, beating the US market growth of 10.30%. OBLN leads the pack with its impressive earnings growth of 92.49% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 10.96% compared to the wider healthcare equipment sector growth hovering in the twenties next year.
Is OBLN and the sector relatively cheap?
The healthcare sector’s PE is currently hovering around 42x, above the broader US stock market PE of 22x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 11.31% on equities compared to the market’s 10.06%. Since OBLN’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge OBLN’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? OBLN is a healthcare equipment industry laggard in terms of its future growth outlook. If your initial investment thesis is around the growth prospects of OBLN, there are other healthcare equipment companies that are expected to deliver higher growth in the future, and perhaps trading at a discount to the industry average. Consider how OBLN fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If OBLN has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth is expected to be lower than its healthcare equipment peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at OBLN’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Obalon Therapeutics’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other healthcare stocks instead? Use our free playform to see my list of over 1000 other healthcare companies trading on the market.
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.
