Cellectis SA. (NASDAQ:CLLS), a US$1.03B small-cap, operates in the healthcare industry, which continues to be affected by the sustained economic uncertainty and structural trends, such as an aging population, impacting the sector globally. 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 fairly unexciting growth rate of 7.92% in the upcoming year , and a whopping 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. An interesting question to explore is whether we can we benefit from entering into the biotech sector right now. Below, I will examine the sector growth prospects, and also determine whether Cellectis is a laggard or leader relative to its healthcare sector peers. View our latest analysis for Cellectis
What’s the catalyst for Cellectis’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 teens, beating the US market growth of 9.86%. Cellectis 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 Cellectis may be trading cheaper than its peers.
Is Cellectis and the sector relatively cheap?
The biotech industry is trading at a PE ratio of 27.6x, above the broader US stock market PE of 18.81x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 16.06% compared to the market’s 10.48%, which may be indicative of past tailwinds. Since Cellectis’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Cellectis’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Cellectis’s uncertain outlook is concerning for investors, with the prospect of negative earnings persisting into the future. If Cellectis 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 Cellectis’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 CLLS’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 Cellectis? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!