Bioanalytical Systems Inc (BASI): Is Healthcare An Attractive Sector Play?
Bioanalytical Systems Inc (NASDAQ:BASI), a USD$14.17M small-cap, is a healthcare company operating in an industry, which continues to be affected by the sustained economic uncertainty and structural trends, such as an aging population, impacting the sector globally. Life sciences companies, in particular, are operating in a difficult environment prompted by a more challenging healthcare agenda. This is illustrated by the growing pressure for innovative, cost-effective treatments, along with higher requirements for transparency from regulators and healthcare providers. Healthcare analysts are forecasting for the entire industry, an extremely robust growth of 53 percent in the upcoming year, and Is the life sciences industry an attractive sector-play right now? In this article, I’ll take you through the sector growth expectations, as well as evaluate whether BASI is lagging or leading its competitors in the industry. See our latest analysis for BASI
What’s the catalyst for BASI's sector growth?
Companies operating in the life sciences 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. In the past year, the industry delivered negative growth of -26 percent, underperforming the Australian market growth of 6 percent. BASI leads the pack with its impressive earnings growth of 28 percent over the past year. This proven growth may make BASI a more expensive stock relative to its peers.
Is BASI and the sector relatively cheap?
The life sciences sector's PE is currently hovering around 27 times, in-line with the Australian stock market PE of 22 times. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 7 percent compared to the market’s 16 percent, potentially indicative of past headwinds. Since BASI’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge BASI’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? BASI recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto BASI as part of your portfolio. However, if you’re relatively concentrated in life sciences, you may want to value BASI based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If BASI has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the life sciences industry. However, before you make a decision on the stock, I suggest you look at BASI’s future cash flows in order to assess whether the stock is trading at a reasonable price, as well as other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Bioanalytical Systems'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.
