Global Cord Blood Corporation (NYSE:CO), a CN¥972.64m 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. Moreover, the challenges facing the healthcare providers in particular, are complex and interrelated. A focus towards more collaborative and data-driven care models, which address behavioural and physical health of chronic illness or aging patients, may help improve patient outcomes and lowered costs. Healthcare analysts are forecasting for the entire industry, a strong double-digit growth of 10.41% in the upcoming year , and an enormous growth of 40.93% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is now the right time to pick up some shares in healthcare providers? In this article, I’ll take you through the sector growth expectations, as well as evaluate whether Global Cord Blood is lagging or leading its competitors in the industry.
What’s the catalyst for Global Cord Blood’s sector growth?
Providers that are finding it difficult to gain further cost and operational efficiencies after picking the low-hanging fruit are beginning to turn their attention to more transformative initiatives to bend the cost curve. In the past year, the industry delivered growth in the teens, though still underperforming the wider US stock market. Global Cord Blood leads the pack with its impressive earnings growth of over 100% last year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Global Cord Blood poised to deliver a 51.88% growth over the next couple of years compared to the industry’s 10.41%. This growth is a median of profitable companies of 25 Healthcare companies in US including Catasys, Cross Country Healthcare and Providence Service. This growth may make Global Cord Blood a more expensive stock relative to its peers.
Is Global Cord Blood and the sector relatively cheap?
The healthcare sector’s PE is currently hovering around 22.18x, in-line with the US stock market PE of 18.38x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 13.81% compared to the market’s 11.13%, potentially illustrative of past tailwinds. On the stock-level, Global Cord Blood is trading at a PE ratio of 25.29x, which is relatively in-line with the average healthcare provider stock. In terms of returns, Global Cord Blood generated 7.72% in the past year, which is 6.09% below the healthcare provider sector.
Global Cord Blood’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Global Cord Blood has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Global Cord Blood’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 CO’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 Global Cord Blood? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!