Check-Cap Ltd (NASDAQ:CHEK), a USD$20.22M small-cap, operates in the healthcare industry, which faces more complex and interdependent challenges, requiring multi-pronged, collaborative, and technology-enabled business models. Healthcare analysts are forecasting for the entire industry, a positive 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 will analyse the industry outlook, as well as evaluate whether CHEK is lagging or leading in the industry. Check out our latest analysis for Check-Cap
What’s the catalyst for CHEK’s sector growth?
Personalized and data-driven equipment underpins the future advancement and structural shift in the healthcare equipment industry. In the previous year, the industry saw growth in the teens, beating the US market growth of 10.30%. CHEK is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 14.26% in the prior year. However, analysts are not expecting this trend to continue, with future growth expected to be 3.63% compared to the wider catpial goods sector growth hovering in the twenties next year.
Is CHEK 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 means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 11.31% on equities compared to the market’s 10.06%. Since CHEK’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CHEK’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? CHEK is a healthcare equipment industry laggard in terms of its future growth outlook. If your initial investment thesis is around the growth prospects of CHEK, 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 CHEK fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If CHEK 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 CHEK’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Check-Cap’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.