Cleveland BioLabs Inc (NASDAQ:CBLI), a USD$30.57M 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, negative growth in the upcoming year , and a massive growth of 44.94% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether CBLI is a laggard or leader relative to its healthcare sector peers. See our latest analysis for CBLI
What’s the catalyst for CBLI’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. Over the past year, the industry saw growth of 8.45%, though still underperforming the wider US stock market. CBLI 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 CBLI may be trading cheaper than its peers.
Is CBLI and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 27x, above the broader US stock market PE of 22x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 16.08% compared to the market’s 10.06%, which may be indicative of past tailwinds. Since CBLI’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CBLI’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? CBLI has been a biotech industry laggard in the past year. If your initial investment thesis is around the growth prospects of CBLI, there are other biotech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how CBLI fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If CBLI has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its biotech 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 CBLI’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Cleveland BioLabs’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.