Connecture Inc (NASDAQ:CNXR), a USD$14.48M 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 20.42% in the upcoming year, and a low 3.58% growth over the next couple of years. This rate is below the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether CNXR is lagging or leading in the industry. See our latest analysis for CNXR
What’s the catalyst for CNXR's sector growth?
Data analytics and other technology-enabled approaches are creating opportunities for innovations, however, stakeholders have been challenged to keep abreast of this structural shift while under pressure to cut costs. In the previous year, the industry saw growth of 9.02%, beating the US market growth of 4.49%. CNXR lags the pack with its negative growth rate of -41.19% over the past year, which indicates the company will be growing at a slower pace than its healthcare tech peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 36.21% in the upcoming year.
Is CNXR and the sector relatively cheap?
Healthcare tech companies are typically trading at a PE of 67x, higher than the rest of the US stock market PE of 22x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 7.80% compared to the market’s 9.99%, which may be indicative of past headwinds. Since CNXR’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CNXR’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? CNXR’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto CNXR as part of your portfolio. However, if you’re relatively concentrated in healthcare tech, you may want to value CNXR based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If CNXR has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the healthcare tech industry. Before you make a decision on the stock, take a look at CNXR’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Connecture'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.