Biomerica Inc (NASDAQ:BMRA), a USD$31.90M small-cap, is a healthcare company operating in an 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 14.82% in the upcoming year , and a whopping growth of 42.79% 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 Biomerica is a laggard or leader relative to its healthcare sector peers. Check out our latest analysis for Biomerica
What’s the catalyst for Biomerica’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 10.79%. Biomerica lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Biomerica may be trading cheaper than its peers.
Is Biomerica and the sector relatively cheap?
Healthcare companies are typically trading at a PE of 36x, higher than the rest of the US stock market PE of 20x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 13.25% compared to the market’s 10.46%, which may be indicative of past tailwinds. Since Biomerica’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Biomerica’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Biomerica 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 Biomerica as part of your portfolio. However, if you’re relatively concentrated in healthcare equipment, you may want to value Biomerica based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Biomerica 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 healthcare equipment industry. Before you make a decision on the stock, take a look at Biomerica’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Biomerica’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.