AC Immune SA (NASDAQ:ACIU), a US$664.85M 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, a somewhat weaker growth of 7.92% in the upcoming year , and an enormous growth of 39.93% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the US stock market as a whole. Is the biotech industry an attractive sector-play right now? Today, I will analyse the industry outlook, as well as evaluate whether AC Immune is lagging or leading its competitors in the industry. Check out our latest analysis for AC Immune
What’s the catalyst for AC Immune’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 in the teens, beating the US market growth of 9.87%. AC Immune 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 biotech peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with AC Immune poised to deliver a -5.94% growth compared to the industry average growth rate of 7.92%. As an industry laggard, AC Immune may be a cheaper stock relative to its peers.
Is AC Immune and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 28x, above the broader US stock market PE of 18.85x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 16.06% compared to the market’s 10.49%, which may be indicative of past tailwinds. Since AC Immune’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge AC Immune’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:AC Immune is a biotech industry laggard in terms of its future growth outlook. If AC Immune 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 AC Immune’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 ACIU’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 AC Immune? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!