OHR Pharmaceutical Inc (NASDAQ:OHRP), a USD$20.01M 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. Healthcare analysts are forecasting for the entire industry, a relatively muted growth of 1.58% in the upcoming year , and an enormous growth of 39.93% 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. Today, I’ll take you through the sector growth expectations, and also determine whether OHR Pharmaceutical is a laggard or leader relative to its healthcare sector peers. Check out our latest analysis for OHR Pharmaceutical
What’s the catalyst for OHR Pharmaceutical’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 10.60%. OHR Pharmaceutical lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means OHR Pharmaceutical may be trading cheaper than its peers.
Is OHR Pharmaceutical and the sector relatively cheap?
Biotech companies are typically trading at a PE of 27x, higher than the rest of the US stock market PE of 20x. 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 10.46%, which may be indicative of past tailwinds. Since OHR Pharmaceutical’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge OHR Pharmaceutical’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? OHR Pharmaceutical recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto OHR Pharmaceutical as part of your portfolio. However, if you’re relatively concentrated in biotech, you may want to value OHR Pharmaceutical based on its cash flows to determine if it is overpriced based on its current growth outlook.