Hemispherx Biopharma Inc (AMEX:HEB), a USD$10.43M small-cap, operates in the healthcare 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, a relatively muted growth of 6.42% in the upcoming year, and an enormous 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. Below, I will examine the sector growth prospects, as well as evaluate whether HEB is lagging or leading in the industry. Check out our latest analysis for Hemispherx Biopharma
What’s the catalyst for HEB'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 negative growth of -60.80%, underperforming the US market growth of 4.49%. HEB leads the pack with its impressive earnings growth of 27.25% over the past year. This proven growth may make HEB a more expensive stock relative to its peers.
Is HEB and the sector relatively cheap?
The biotech sector's PE is currently hovering around 31x, 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 15.86% compared to the market’s 9.99%, which may be indicative of past tailwinds. Since HEB’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge HEB’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? HEB recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto HEB as part of your portfolio. However, if you’re relatively concentrated in biotech, you may want to value HEB based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If HEB has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the biotech industry. Before you make a decision on the stock, take a look at HEB’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Hemispherx 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.