Aethlon Medical Inc (NASDAQ:AEMD), a USD$14.64M small-cap, operates in the healthcare industry, which has experienced tailwinds from issues such as higher demand driven by an aging population and the increasing prevalence of diseases and comorbidities. Healthcare analysts are forecasting for the entire industry, a positive double-digit growth of 23.05% in the upcoming year, and an enormous growth of 52.15% 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’ll take you through the sector growth expectations, as well as evaluate whether AEMD is lagging or leading in the industry. Check out our latest analysis for Aethlon Medical
What’s the catalyst for AEMD'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 of 5.19%, beating the US market growth of 4.49%. AEMD lags the pack with its negative growth rate of -13.56% over the past year, which indicates the company will be growing at a slower pace than its healthcare equipment peers. Although AEMD is poised to deliver a 16.11% growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 23.05%.
Is AEMD and the sector relatively cheap?
The healthcare sector's PE is currently hovering around 43x, higher than the rest of the 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 10.98% on equities compared to the market’s 9.99%. Since AEMD’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge AEMD’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? AEMD is a healthcare equipment industry laggard in terms of its future growth outlook. If your initial investment thesis is around the growth prospects of AEMD, 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 AEMD fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If AEMD 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 AEMD’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Aethlon Medical'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.