Puma Biotechnology Inc (NASDAQ:PBYI), a US$1.86B 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 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 9.58% 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. Should your portfolio be overweight in the biotech sector at the moment? In this article, I’ll take you through the sector growth expectations, and also determine whether Puma Biotechnology is a laggard or leader relative to its healthcare sector peers. Check out our latest analysis for Puma Biotechnology
What’s the catalyst for Puma Biotechnology’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 13.66%. Puma Biotechnology lags the pack with its lower growth rate of 19.33% 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 55.81% in the upcoming year. This future growth may make Puma Biotechnology a more expensive stock relative to its peers.
Is Puma Biotechnology and the sector relatively cheap?
The biotech sector’s PE is currently hovering around 26.47x, above the broader US stock market PE of 18.53x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 18.07% compared to the market’s 11.19%, which may be indicative of past tailwinds. Since Puma Biotechnology’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Puma Biotechnology’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Puma Biotechnology’s industry-beating future is a positive for investors. If Puma Biotechnology 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 Puma Biotechnology’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 PBYI’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 Puma Biotechnology? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!