Applied Genetic Technologies Corporation (NASDAQ:AGTC), a US$78.78m small-cap, is a healthcare company operating in an 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, a somewhat weaker growth of 9.66% in the upcoming year , and a whopping growth of 44.89% 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 biotech companies? Today, I will analyse the industry outlook, and also determine whether Applied Genetic Technologies is a laggard or leader relative to its healthcare sector peers. Check out our latest analysis for Applied Genetic Technologies
What’s the catalyst for Applied Genetic Technologies’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. In the past year, the industry delivered growth in the twenties, beating the US market growth of 13.73%. Applied Genetic Technologies lags the pack with its earnings falling by more than half over the past year, which indicates the company has been 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 Applied Genetic Technologies poised to deliver a -94.80% growth compared to the industry average growth rate of 9.66%. As an industry laggard, Applied Genetic Technologies may be a cheaper stock relative to its peers.
Is Applied Genetic Technologies and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 27.27x, higher than the rest of the US stock market PE of 18.37x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 18.07% compared to the market’s 11.18%, which may be indicative of past tailwinds. Since Applied Genetic Technologies’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Applied Genetic Technologies’s value is to assume the stock should be relatively in-line with its industry.
Applied Genetic Technologies is a biotech industry laggard in terms of its future growth outlook. If Applied Genetic Technologies 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 Applied Genetic Technologies’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 AGTC’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 Applied Genetic Technologies? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!