Invitrocue Limited (ASX:IVQ), a AU$48.55M 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. The growth in development of new drugs for unmet needs, as well as the ongoing and increasing need for biotech drugs as Baby Boomer generation continues to age, are growth drivers for the positive outlook in the biotech industry over the long term. Healthcare analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the biotech sector right now. Below, I will examine the sector growth prospects, and also determine whether Invitrocue is a laggard or leader relative to its healthcare sector peers. View our latest analysis for Invitrocue
What’s the catalyst for Invitrocue’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 Australian market growth of 6.91%. Invitrocue 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 Invitrocue may be trading cheaper than its peers.
Is Invitrocue and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 27.95x, above the broader Australian stock market PE of 17.36x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 16.87% compared to the market’s 11.38%, which may be indicative of past tailwinds. Since Invitrocue’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Invitrocue’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Invitrocue recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If the stock has been on your watchlist for a while, now may be the time to buy, if you like its ability to deliver growth and are not highly concentrated in the healthcare industry. However, before you make a decision on the stock, I suggest you look at Invitrocue’s fundamentals in order to build a holistic investment thesis.
- 1. 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.
- 2. Historical Track Record: What has IVQ’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.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Invitrocue? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!