Ascendis Pharma A/S (NASDAQ:ASND), a USD$952.00M small-cap, operates in the healthcare 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 growth in development of new drugs for unmet needs, as well as the ongoing and increasing need for biotech drugs as Baby Boomer generation continues to age, are growth drivers for the positive outlook in the biotech industry over the long term. Healthcare analysts are forecasting for the entire industry, a positive double-digit growth of 18 percent in the upcoming year, and a massive growth of 52 percent over the next couple of years. This rate is larger than the growth rate of the Australian 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 ASND is a laggard or leader relative to its healthcare sector peers. See our latest analysis for ASND

What’s the catalyst for ASND'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. Over the past year, the industry saw growth of 7 percent, beating the Australian market growth of 6 percent. ASND lags the pack with its negative growth rate of -41 percent over the past year, which indicates the company will be growing at a slower pace than its biotech peers. Although ASND is poised to deliver a 2 percent growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 18 percent.

Is ASND and the sector relatively cheap?

The biotech sector's PE is currently hovering around 36 times, higher than the rest of the Australian stock market PE of 22 times. This means the industry, on average, is relatively overpriced compared to the wider market. However, the industry did return a higher 46 percent compared to the market’s 16 percent, which may be indicative of past tailwinds. Since ASND’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge ASND’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? ASND is a biotech industry laggard in terms of its future growth outlook. If your initial investment thesis is around the growth prospects of ASND, there are other biotech companies that are expected to deliver higher growth in the future, and perhaps trading at a discount to the industry average. Consider how ASND fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If ASND 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 biotech peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at ASND’s future cash flows in order to assess whether the stock is trading at a reasonable price.

For a deeper dive into Ascendis Pharma A/S'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.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.