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What Is The Future Prospect For Healthcare And Allena Pharmaceuticals Inc (ALNA)?

Armando Maloney

Allena Pharmaceuticals Inc (NASDAQ:ALNA), a USD$261.28M small-cap, is a healthcare company operating in an 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, 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, as well as evaluate whether ALNA is lagging or leading in the industry. See our latest analysis for ALNA

What’s the catalyst for ALNA’s sector growth?

NasdaqGS:ALNA Past Future Earnings Nov 25th 17
NasdaqGS:ALNA Past Future Earnings Nov 25th 17

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 of 8.45%, though still underperforming the wider US stock market. ALNA 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 ALNA may be trading cheaper than its peers.

Is ALNA and the sector relatively cheap?

NasdaqGS:ALNA PE PEG Gauge Nov 25th 17
NasdaqGS:ALNA PE PEG Gauge Nov 25th 17

Biotech companies are typically trading at a PE of 27x, 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 did return a higher 16.08% compared to the market’s 10.06%, which may be indicative of past tailwinds. Since ALNA’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge ALNA’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? ALNA has been a biotech industry laggard in the past year. If your initial investment thesis is around the growth prospects of ALNA, there are other biotech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how ALNA fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If ALNA 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 ALNA’s future cash flows in order to assess whether the stock is trading at a reasonable price.

For a deeper dive into Allena Pharmaceuticals’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.