Evoke Pharma Inc (NASDAQ:EVOK), a USD$43.09M small-cap, is a healthcare company operating in an industry, which continues to endure a more demanding healthcare agenda, and the global need for innovative, cost-effective medicines continues to rise. Healthcare analysts are forecasting for the entire industry, a positive double-digit growth of 24.76% in the upcoming year , and an enormous growth of 91.52% 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 EVOK is lagging or leading in the industry. See our latest analysis for EVOK
What’s the catalyst for EVOK’s sector growth?
Companies operating in the pharmaceutical sector are confronted with ways to improve R&D productivity, increase the efficiency of its operations, rationalise spending on sales and marketing and enhance financial performance. Over the past year, the industry saw growth of 7.76%, though still underperforming the wider US stock market. EVOK leads the pack with its impressive earnings growth of 47.48% over the past year. However, analysts are expecting its future earnings growth to be more in-line with the industry average, hovering at 23.57% over the next couple of years.
Is EVOK and the sector relatively cheap?
Pharmaceutical companies are typically trading at a PE of 23x, relatively similar to the rest of the US stock market PE of 22x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 16.15% compared to the market’s 10.06%, potentially illustrative of past tailwinds. Since EVOK’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge EVOK’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? EVOK’s future growth prospect shows that it is able to keep up with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto EVOK as part of your portfolio. However, if you’re relatively concentrated in healthcare, you may want to value EVOK based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If EVOK 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 healthcare industry. Before you make a decision on the stock, take a look at EVOK’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Evoke 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.