InflaRx NV (NASDAQ:IFRX), a USD$550.39M small-cap, operates in the healthcare industry, which faces demand for new drug development to meet new or persistent chronic illnesses, and ongoing need for biotech drugs as Baby Boomers continue to age. Healthcare analysts are forecasting for the entire industry, a somewhat weaker growth of 9.04% in the upcoming year , and a whopping growth of 49.33% 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 InflaRx is a laggard or leader relative to its healthcare sector peers. View our latest analysis for InflaRx
What’s the catalyst for InflaRx’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 past year, the industry delivered growth in the teens, beating the US market growth of 10.81%. InflaRx lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its biotech peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 99.77% in the upcoming year.
Is InflaRx and the sector relatively cheap?
The biotech sector’s PE is currently hovering around 29x, higher than the rest of the US stock market PE of 20x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 16.06% compared to the market’s 10.46%, which may be indicative of past tailwinds. Since InflaRx’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge InflaRx’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? InflaRx’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 InflaRx as part of your portfolio. However, if you’re relatively concentrated in biotech, you may want to value InflaRx based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If InflaRx 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 biotech industry. Before you make a decision on the stock, take a look at InflaRx’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into InflaRx’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.