What Is The Future Prospect For Healthcare And Mesoblast Limited (ASX:MSB)?
Mesoblast Limited (ASX:MSB), a A$629.45M 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, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Mesoblast is lagging or leading in the industry. Check out our latest analysis for Mesoblast
What’s the catalyst for Mesoblast’s sector growth?
New R&D methods and big data analytics 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 9.22%, beating the Australian market growth of 6.93%. Mesoblast 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 6.60% in the upcoming year.
Is Mesoblast and the sector relatively cheap?
The biotech sector’s PE is currently hovering around 29.5x, higher than the rest of the Australian stock market PE of 17.8x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 16.12% compared to the market’s 11.87%, which may be indicative of past tailwinds. Since Mesoblast’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Mesoblast’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Mesoblast’s industry-beating future is a positive for investors. If Mesoblast 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. However, before you make a decision on the stock, I suggest you look at Mesoblast’s fundamentals in order to build a holistic investment thesis.
1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has MSB’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Mesoblast? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.