AzurRx BioPharma Inc (NASDAQ:AZRX), a USD$40.21M 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 fairly unexciting growth rate of 6.42% in the upcoming year, and a whopping growth of 43.65% 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 AZRX is a laggard or leader relative to its healthcare sector peers. Check out our latest analysis for AzurRx BioPharma
What’s the catalyst for AZRX'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. In the previous year, the industry endured negative growth of -60.80%, underperforming the US market growth of 4.49%. AZRX leads the pack with its impressive earnings growth of 11.00% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with AZRX poised to deliver a 57.90% growth over the next couple of years.
Is AZRX and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 31x, 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 did return a higher 15.86% compared to the market’s 9.99%, which may be indicative of past tailwinds. Since AZRX’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge AZRX’s value is to assume the stock should be relatively in-line with its industry. In terms of returns, AZRX generated 623.56% in the past year, which is 607.71% over the biotech sector.
What this means for you:
Are you a shareholder? AZRX’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 AZRX as part of your portfolio. However, if you’re relatively concentrated in biotech, you may want to value AZRX based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If AZRX 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 AZRX’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into AzurRx BioPharma'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.