What Can We Expect for Cytori Therapeutics Inc (NASDAQ:CYTX) Moving Forward?

Cytori Therapeutics Inc (NASDAQ:CYTX), a USD$12.43M 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 9.04% in the upcoming year , and an enormous growth of 49.33% 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. Today, I will analyse the industry outlook, and also determine whether Cytori Therapeutics is a laggard or leader relative to its healthcare sector peers. See our latest analysis for Cytori Therapeutics

What’s the catalyst for Cytori 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 10.81%. Cytori Therapeutics leads the pack with its impressive earnings growth of 36.41% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Cytori Therapeutics poised to deliver a 60.01% growth over the next couple of years compared to the industry's 9.04%. This growth may make Cytori Therapeutics a more expensive stock relative to its peers.

Is Cytori Therapeutics and the sector relatively cheap?

Biotech companies are typically trading at a PE of 29x, higher than the rest of the US stock market PE of 20x. 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 10.46%, which may be indicative of past tailwinds. Since Cytori Therapeutics’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Cytori Therapeutics’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? Cytori Therapeutics’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Cytori Therapeutics as part of your portfolio. However, if you’re relatively concentrated in biotech, you may want to value Cytori Therapeutics based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If Cytori Therapeutics 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 Cytori Therapeutics’s future cash flows in order to assess whether the stock is trading at a reasonable price, as well as other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.

For a deeper dive into Cytori Therapeutics's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other healthcare stocks instead? Use our free playform to see my list of over 1000 other healthcare companies trading on the market.

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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.