Medlab Clinical Limited (ASX:MDC), a A$199.70M small-cap, operates in the healthcare industry, which faces demand for new drug development to meet new or persistent chronic illnesses, and ongoing need for biotech drugs as Baby Boomers continue to age. Healthcare analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Medlab Clinical is lagging or leading in the industry. Check out our latest analysis for Medlab Clinical

What’s the catalyst for Medlab Clinical’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 past year, the industry delivered growth of 9.22%, beating the Australian market growth of 6.93%. Medlab Clinical lags the pack with its lower growth rate of 5.04% 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 27.76% in the upcoming year.

Is Medlab Clinical and the sector relatively cheap?

The biotech sector’s PE is currently hovering around 29.5x, higher than the rest of the Australian stock market PE of 17.8x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 16.12% compared to the market’s 11.87%, which may be indicative of past tailwinds. Since Medlab Clinical’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Medlab Clinical’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Medlab Clinical’s industry-beating future is a positive for investors. If Medlab Clinical 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 Medlab Clinical’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 MDC’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 Medlab Clinical? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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.