Synthetic Biologics Inc (NYSEMKT:SYN), a US$15.98m small-cap, is a healthcare company operating in an 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 strong double-digit growth of 12.04% in the upcoming year , and an enormous growth of 42.00% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Synthetic Biologics is lagging or leading in the industry.
What’s the catalyst for Synthetic Biologics’s sector growth?
Data analytics is creating opportunities for innovations, however, stakeholders are challenged with the pressure of reducing costs. In the previous year, the industry saw growth in the thirties, beating the US market growth of 14.24%. Synthetic Biologics lags the pack with its negative growth rate of -12.51% over the past year, which indicates the company has been growing at a slower pace than its biotech peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 60.44% in the upcoming year. This future growth may make Synthetic Biologics a more expensive stock relative to its peers.
Is Synthetic Biologics and the sector relatively cheap?
Biotech companies are typically trading at a PE of 26.56x, higher than the rest of the US stock market PE of 18.44x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 17.73% compared to the market’s 11.38%, which may be indicative of past tailwinds. Since Synthetic Biologics’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Synthetic Biologics’s value is to assume the stock should be relatively in-line with its industry.
Synthetic Biologics’s industry-beating future is a positive for investors. If Synthetic Biologics 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 biotech industry. However, before you make a decision on the stock, I suggest you look at Synthetic Biologics’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has SYN’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Synthetic Biologics? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.