Valneva SE (ENXTPA:VLA), a €87.49M small-cap, operates in the healthcare industry, which faces key trends such as rising demand fuelled by an aging population and the growing prevalence of chronic diseases. The demand for new drug development to meet new or persistent chronic illnesses, as well as the ongoing need for biotech drugs as Baby Boomers continue to age, are growth drivers for the optimistic outlook for the biotech industry in the long run. Healthcare analysts are forecasting for the entire industry, an extremely robust growth of 52.01% in the upcoming year . An interesting question to explore is whether we can we benefit from entering into the biotech sector right now. Today, I will analyse the industry outlook, and also determine whether Valneva is a laggard or leader relative to its healthcare sector peers. Check out our latest analysis for Valneva
What’s the catalyst for Valneva’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. In the past year, the industry delivered growth of over 100%, beating the FR market growth of 12.85%. Valneva lags the pack with its lower growth rate of 77.50% over the past year, which indicates the company will be growing at a slower pace than its biotech peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with Valneva poised to deliver a 11.64% growth compared to the industry average growth rate of 52.01%. As an industry laggard, Valneva may be a cheaper stock relative to its peers.
Is Valneva and the sector relatively cheap?
The biotech sector’s PE is currently hovering around 25.72x, above the broader FR stock market PE of 19.2x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 17.10% compared to the market’s 10.84%, which may be indicative of past tailwinds. Since Valneva’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Valneva’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Valneva is a biotech industry laggard in terms of its future growth outlook. If Valneva has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth is expected to be lower than its healthcare peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Valneva’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 VLA’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 Valneva? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!