February Insights Into Healthcare Stocks: Pluristem Therapeutics Inc (NASDAQ:PSTI)

Pluristem Therapeutics Inc (NASDAQ:PSTI), a US$149.73M small-cap, is a healthcare company operating in an industry, which has experienced tailwinds from issues such as higher demand driven by an aging population and the increasing prevalence of diseases and comorbidities. 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 somewhat weaker growth of 7.24% in the upcoming year , and a whopping growth of 32.26% 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 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 Pluristem Therapeutics is lagging or leading its competitors in the industry. View our latest analysis for Pluristem Therapeutics

What’s the catalyst for Pluristem Therapeutics'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. Over the past year, the industry saw growth in the teens, beating the US market growth of 9.84%. Pluristem Therapeutics lags the pack with its lower growth rate of 4.60% over the past year, which indicates the company will be growing at a slower pace than its biotech peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with Pluristem Therapeutics poised to deliver a -10.70% growth compared to the industry average growth rate of 7.24%. As an industry laggard, Pluristem Therapeutics may be a cheaper stock relative to its peers.

Is Pluristem Therapeutics and the sector relatively cheap?

The biotech industry is trading at a PE ratio of 27.83x, higher than the rest of the US stock market PE of 18.93x. 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 10.31%, which may be indicative of past tailwinds. Since Pluristem Therapeutics’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Pluristem Therapeutics’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Pluristem Therapeutics is a biotech industry laggard in terms of its future growth outlook. If Pluristem Therapeutics has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth is expected to be lower than its healthcare peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Pluristem Therapeutics'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 PSTI'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 Pluristem Therapeutics? 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.