MannKind Corporation (NASDAQ:MNKD), a US$252.93M small-cap, is a healthcare company operating in an 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 fairly unexciting growth rate of 2.40% in the upcoming year , and a massive growth of 30.34% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is the biotech industry an attractive sector-play right now? In this article, I’ll take you through the sector growth expectations, as well as evaluate whether MannKind is lagging or leading its competitors in the industry. View our latest analysis for MannKind
What’s the catalyst for MannKind’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 previous year, the industry saw growth in the twenties, beating the US market growth of 11.54%. MannKind 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. However, the future seems brighter, as analysts expect an industry-beating growth rate of 24.48% in the upcoming year. This future growth may make MannKind a more expensive stock relative to its peers.
Is MannKind and the sector relatively cheap?
The biotech sector’s PE is currently hovering around 25.84x, higher than the rest of the US stock market PE of 18.14x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 18.20% compared to the market’s 10.67%, which may be indicative of past tailwinds. Since MannKind’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge MannKind’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:MannKind’s industry-beating future is a positive for investors. If MannKind 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 MannKind’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 MNKD’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 MannKind? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!