Imprimis Pharmaceuticals Inc (NASDAQ:IMMY), a USD$37.99M 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 positive double-digit growth of 11.11% in the upcoming year , and an enormous growth of 36.24% 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’ll take you through the sector growth expectations, as well as evaluate whether Imprimis Pharmaceuticals is lagging or leading in the industry. View our latest analysis for Imprimis Pharmaceuticals
What’s the catalyst for Imprimis Pharmaceuticals’s sector growth?
Pharma companies are seeking ways to improve R&D productivity, increase the efficiency of its operations, rationalise spending on sales and marketing and enhance financial performance. In the past year, the industry delivered growth of 6.66%, though still underperforming the wider US stock market. Imprimis Pharmaceuticals lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Imprimis Pharmaceuticals may be trading cheaper than its peers.
Is Imprimis Pharmaceuticals and the sector relatively cheap?
The pharmaceutical industry is trading at a PE ratio of 24x, relatively similar to the rest of the US stock market PE of 20x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.69% on equities compared to the market’s 10.46%. Since Imprimis Pharmaceuticals’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Imprimis Pharmaceuticals’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Imprimis Pharmaceuticals 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 Imprimis Pharmaceuticals as part of your portfolio. However, if you’re relatively concentrated in pharmaceutical, you may want to value Imprimis Pharmaceuticals based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Imprimis Pharmaceuticals 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 pharmaceutical industry. Before you make a decision on the stock, take a look at Imprimis Pharmaceuticals’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Imprimis Pharmaceuticals’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.