Bioblast Pharma Ltd (NASDAQ:ORPN), a USD$7.59M small-cap, operates in the healthcare industry, which continues to be affected by the sustained economic uncertainty and structural trends, such as an aging population, impacting the sector globally. Healthcare analysts are forecasting for the entire industry, a fairly unexciting growth rate 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 ORPN is lagging or leading in the industry. View our latest analysis for Bioblast Pharma
What’s the catalyst for ORPN’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 past year, the industry delivered negative growth of -60.80%, underperforming the US market growth of 4.49%. ORPN leads the pack with its impressive earnings growth of 34.61% over the past year. This proven growth may make ORPN a more expensive stock relative to its peers.
Is ORPN 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 illustrates a somewhat overpriced sector compared to the rest of the 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 ORPN’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge ORPN’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? ORPN 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 ORPN as part of your portfolio. However, if you’re relatively concentrated in biotech, you may want to value ORPN based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If ORPN 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 ORPN’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Bioblast Pharma’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.