ImmunoPrecise Antibodies Ltd (TSXV:IPA), a CADCA$38.66M small-cap, is a healthcare company operating in an industry, which has experienced tailwinds from issues such as higher demand driven by an aging population and the increasing prevalence of diseases and comorbidities. The environment facing life sciences companies, particularly, remains challenging, driven by a more demanding healthcare agenda. The global need for innovative, cost-effective medicines continues to rise, whilst regulators and healthcare providers require more transparency and proven effectiveness. Healthcare analysts are forecasting for the entire industry, a strong double-digit growth of 25.78% in the upcoming year , and a massive growth of 78.74% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the Canadian stock market as a whole. Should your portfolio be overweight in the life sciences sector at the moment? Below, I will examine the sector growth prospects, as well as evaluate whether IPA is lagging or leading its competitors in the industry. See our latest analysis for IPA
What’s the catalyst for IPA’s sector growth?
Companies operating in the life sciences 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. In the past year, the industry delivered negative growth of -21.57%, underperforming the Canadian market growth of -19.21%. IPA 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 life sciences peers. As the company trails the rest of the industry in terms of growth, IPA may also be a cheaper stock relative to its peers.
Is IPA and the sector relatively cheap?
The life sciences sector’s PE is currently hovering around 41x, higher than the rest of the Canadian stock market PE of 17x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 9.50% on equities compared to the market’s 9.49%. Since IPA’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge IPA’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? IPA has been a life sciences industry laggard in the past year. If your initial investment thesis is around the growth prospects of IPA, there are other life sciences companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how IPA fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If IPA has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its life sciences peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at IPA’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into ImmunoPrecise Antibodies’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.