Athenex Inc (NASDAQ:ATNX) And The Healthcare Sector Outlook 2018

Athenex Inc (NASDAQ:ATNX), a US$996.72M 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 7.24% in the upcoming year , and an enormous growth of 32.56% 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 now the right time to pick up some shares in biotech companies? Below, I will examine the sector growth prospects, as well as evaluate whether Athenex is lagging or leading its competitors in the industry. See our latest analysis for Athenex

What’s the catalyst for Athenex'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. Over the past year, the industry saw growth in the teens, beating the US market growth of 9.97%. Athenex lags the pack with its negative growth rate of -99.83% over the past year, which indicates the company will be growing at a slower pace than its biotech peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 61.85% in the upcoming year. This future growth may make Athenex a more expensive stock relative to its peers.

Is Athenex and the sector relatively cheap?

The biotech sector's PE is currently hovering around 28.46x, higher than the rest of the US stock market PE of 18.95x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 16.36% compared to the market’s 10.35%, which may be indicative of past tailwinds. Since Athenex’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Athenex’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Athenex’s industry-beating future is a positive for investors. If Athenex has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the biotech industry. However, before you make a decision on the stock, I suggest you look at Athenex'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 ATNX'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 Athenex? 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.