Xenetic Biosciences Inc (NASDAQ:XBIO), a USD$21.71M 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 fairly unexciting growth rate of 1.58% in the upcoming year , and a whopping growth of 39.93% 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, as well as evaluate whether Xenetic Biosciences is lagging or leading in the industry. View our latest analysis for Xenetic Biosciences
What’s the catalyst for Xenetic Biosciences’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 growth in the teens, beating the US market growth of 10.76%. Xenetic Biosciences 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 Xenetic Biosciences may be trading cheaper than its peers.
Is Xenetic Biosciences and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 27x, above the broader US stock market PE of 20x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 16.12% compared to the market’s 10.46%, which may be indicative of past tailwinds. Since Xenetic Biosciences’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Xenetic Biosciences’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Xenetic Biosciences 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 Xenetic Biosciences as part of your portfolio. However, if you’re relatively concentrated in biotech, you may want to value Xenetic Biosciences based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Xenetic Biosciences 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 Xenetic Biosciences’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Xenetic Biosciences’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.