Healthcare Industry Trends And Its Impact On Evgen Pharma plc (LON:EVG)

Evgen Pharma plc (AIM:EVG), a UK£12.03M 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 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 UK 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 Evgen Pharma is a laggard or leader relative to its healthcare sector peers. See our latest analysis for Evgen Pharma

What’s the catalyst for Evgen Pharma'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. Over the past year, the industry saw growth in the twenties, beating the UK market growth of 11.85%. Evgen Pharma lags the pack with its sustained negative earnings over the past couple of years. The company's outlook doesn't seem to be much better given that analysts are forecasting continued unprofitability going forward. This lack of growth means Evgen Pharma may be trading cheaper than its peers.

Is Evgen Pharma and the sector relatively cheap?

Biotech companies are typically trading at a PE of 22.21x, relatively similar to the rest of the UK stock market PE of 17.81x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 13.79% on equities compared to the market’s 11.98%. Since Evgen Pharma’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Evgen Pharma’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Evgen Pharma's uncertain outlook is concerning for investors, with the prospect of negative earnings persisting into the future. If Evgen Pharma has been on your watchlist for a while, now may not be the time to enter into the stock. However, before you make a decision on the stock, I suggest you look at Evgen Pharma'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 EVG'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 Evgen Pharma? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.