Applied Genetic Technologies Corporation (NASDAQ:AGTC), a US$87.81M small-cap, is a healthcare company operating in an industry, which continues to be affected by the sustained economic uncertainty and structural trends, such as an aging population, impacting the sector globally. 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 fairly unexciting growth rate of 8.61% in the upcoming year , and an enormous growth of 45.48% 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? Below, I will examine the sector growth prospects, and also determine whether Applied Genetic Technologies is a laggard or leader relative to its healthcare sector peers. View our latest analysis for Applied Genetic Technologies
What’s the catalyst for Applied Genetic Technologies’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 twenties, beating the US market growth of 13.44%. Applied Genetic Technologies 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 Applied Genetic Technologies may be trading cheaper than its peers.
Is Applied Genetic Technologies and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 25.39x, higher than the rest of the US stock market PE of 18.25x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 18.01% compared to the market’s 11.12%, 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.
Next Steps:Applied Genetic Technologies’s uncertain outlook is concerning for investors, with the prospect of negative earnings persisting into the future. If Applied Genetic Technologies 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 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!