Novelion Therapeutics Inc (NASDAQ:NVLN), a USD$63.60M small-cap, operates in the healthcare industry, which has experienced tailwinds from issues such as higher demand driven by an aging population and the increasing prevalence of diseases and comorbidities. Healthcare analysts are forecasting for the entire industry, a fairly unexciting growth rate of 9.04% in the upcoming year , and a massive growth of 49.33% 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 Novelion Therapeutics is a laggard or leader relative to its healthcare sector peers. View our latest analysis for Novelion Therapeutics
What’s the catalyst for Novelion Therapeutics’s sector growth?
Data analytics and other technology-enabled approaches 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 growth in the teens, beating the US market growth of 10.88%. Novelion Therapeutics lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its biotech peers. However, in the upcoming year, Novelion Therapeutics is expected to deliver growth in-line with its industry peers, at a growth rate of 7.87%.
Is Novelion Therapeutics and the sector relatively cheap?
Biotech companies are typically trading at a PE of 29x, higher than the rest of the US stock market PE of 19x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 16.06% compared to the market’s 10.46%, which may be indicative of past tailwinds. Since Novelion Therapeutics’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Novelion Therapeutics’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Novelion Therapeutics’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 Novelion Therapeutics as part of your portfolio. However, if you’re relatively concentrated in healthcare, you may want to value Novelion Therapeutics based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Novelion Therapeutics 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 Novelion Therapeutics’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Novelion Therapeutics’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.