You don’t have to be particularly astute to recognize the importance of the most undervalued biotech stocks to buy. Fundamentally, the enterprises that undergird these names operate on the cutting edge of medical science. At the same time, the established players tend to be pricey. By picking up underappreciated names, it’s possible to secure significant upside down the line.
However, anytime a discussion about the most undervalued biotech stocks to buy materializes, a question comes up: how does one interpret undervalued? Moreover, some companies may appear undervalued on paper but in reality, might be terrible investments. How do market participants avoid such bull traps?
While no perfect methodology exists, here’s how this list breaks down. First, by undervalued, I’m referring to discounts relative to trailing 12-month (TTM) earnings. Second, I’m only including companies that feature a minimum Altman Z-Score of 3, indicating a modicum of fiscal stability. Finally, every one of these enterprises enjoys a consensus buy rating (even if it’s from a single analyst). With that out of the way, below are the most undervalued biotech stocks to buy in February.
Starting from the least appreciated (from a market sense) name on this list of the most undervalued biotech stocks to buy, Chimerix (NASDAQ:CMRX) specializes in developing novel therapeutics for patients facing deadly diseases. Currently, the market prices CMRX at a trailing multiple of 1.01. In terms of discount against sector earnings, CMRX ranks better than 97.19% of the competition.
Further, Chimerix attracts speculators for other reasons. Looking at its balance sheet, the company enjoys a robust cash-to-debt ratio of 128.33 times. As well, its equity-to-asset ratio stands at 0.93 times, beating out over 89% of sector players. Finally, its Altman Z-Score is 4.35, reflecting low bankruptcy risk.
Finally, Wall Street analysts rate Chimerix as a consensus moderate buy. Further, their average price target pings at $8, implying an upside potential of nearly 352%. Also, sentiment among hedge funds rates as positive. Therefore, CMRX easily ranks among the most undervalued biotech stocks to buy.
iTeos Therapeutics (ITOS)
An oncology specialist, iTeos Therapeutics (NASDAQ:ITOS) is pioneering the discovery and development of highly differentiated immuno-oncology therapeutics for patients. Although incredibly relevant, the market didn’t see it that way. In the trailing year, ITOS gave up over 44% of its equity value. Still, positive sentiment returned early this year, with ITOS gaining nearly 13% since the January opener.
Presently, the market prices ITOS at a trailing multiple of 3.03. Per Gurufocus.com, this stat ranks better than 93.68% of the competition in terms of discount to TTM earnings. That’s not all. The market also prices ITOS at 1.72 times trailing sales and 1.17 times book value. Both stats rank favorably on their respective sector median values.
Similar to Chimerix above, iTeos enjoys a robust balance sheet. For instance, its cash-to-debt ratio stands at a stratospheric 167.35 times. Also, its Altman Z-Score is 6.53, reflecting a very low bankruptcy risk.
Finally, one analyst covers ITOS with a buying rating. Moreover, the lone expert assigned ITOS a price target of $54, implying an upside potential of over 158%. Thus, it’s well worth considering it among the most undervalued biotech stocks to buy.
Arriving into the spotlight because of its forwarding of a coronavirus vaccine, BioNTech (NASDAQ:BNTX) primarily develops and manufactures active immunotherapies for patient-specific approaches to the treatment of diseases. Despite its proven relevance, BNTX slipped conspicuously in 2022. In the trailing year, BNTX gave up 20% of its equity value. And for full transparency, it’s down 3.5% in the new year.
Still, bargain-hunting contrarians may want to consider BNTX as one of the most undervalued biotech stocks to buy. Currently, the market prices BNTX at a trailing multiple of 3.32. Regarding discount to earnings, BioNTech ranks better than 92.28% of the competition.
Further, BNTX trades hands at 1.83 times sales and 1.91 times book value. Both rate significantly lower than their respective median values. Also, BioNTech enjoys excellent strengths in the balance sheet. Perhaps most notably, it features a cash-to-debt ratio of 49 times.
Lastly, Wall Street analysts rate BNTX as a consensus moderate buy. Their average price target of over $191 implies an upside potential of 33.5%. Again, it’s worth serious consideration for the most undervalued biotech stocks to buy.
Vir Biotechnology (VIR)
Headquartered in San Francisco, California, Vir Biotechnology (NASDAQ:VIR) ultimately seeks to facilitate a world without infectious diseases. Obviously relevant because of the terrible Covid-19 pandemic, Vir should attract positive attention on paper. However, in the trailing year, VIR stock tumbled 16%. Still, it might not be the end of the world. Since the January opener, VIR gained almost 19% of its equity value.
Currently, the market prices VIR at 3.48 times trailing earnings. As a discount to profitability per share, Vir ranks better than 91.93% of sector rivals. Further, the company’s shares trade hands at 1.72 times trailing sales. This is significantly lower than the sector median value of 10.47 times. However, for full disclosure, Gurufocus.com warns that VIR might be a value trap.
Still, Wall Street analysts seem to have a much different opinion, rating shares a consensus strong buy. Moreover, their average price target of $57.50 implies an upside potential of almost 95%. Thus, contrarians should target VIR as one of the most undervalued biotech stocks to buy.
Another company that generated considerable headlines because of its Covid-19 vaccine, Moderna (NASDAQ:MRNA) seeks to leverage its newfound acumen in messenger-RNA-based vaccines and therapeutics. Interestingly, MRNA posted an above-water performance in the trailing year, gaining nearly 2%. However, since the January opener, it’s down roughly 2%.
Nevertheless, in the long run, MRNA may attract investors because of its bargain pricing. Currently, MRNA trades hands at a trailing multiple of 6.37. As a discount to profitability, Moderna ranks better than 87.37% of the competition
As with the other names on this list of most undervalued biotech stocks to buy, Moderna benefits from other stats. For instance, MRNA trades at 3.65 times sales, ranked better than 75% of sector players in terms of the revenue-based discount.
Wall Street analysts continue to support Moderna, rating the business a consensus moderate buy. As well, their average price target stands at $221.15, implying an upside potential of almost 26%.
AbCellera Biologics (ABCL)
Based in Vancouver, British Columbia, AbCellera Biologics (NASDAQ:ABCL) researches and develops human antibodies. Per its public profile, the company is best known for its leading role in the Pandemic Prevention Platform, a project of the Defense Advanced Research Projects Agency (DARPA)’s Biological Technologies Office. Given its relevancies, ABCL stock gained 13% of equity value in the trailing year.
Still, ABCL surprisingly ranks among the most undervalued biotech stocks to buy. Currently, the market prices ABCL at 13.33 times trailing earnings. As a discount to earnings, AbCellera ranks better than 75.79% of its peers. Moreover, ABCL trades at 5.37 times sales, ranked better than 67.49% of the biotech industry.
Even better, Wall Street maintains substantial optimism for AbCellera. Right now, experts rate shares as a consensus (and unanimous) strong buy. The good stuff doesn’t stop there as their average price target stands at $31.83, implying over 202% upside potential. Just for good measure, sentiment among hedge funds pings as very positive.
Regeneron Pharmaceuticals (REGN)
Coming to the forefront in somewhat of a controversial manner during the Covid-19 crisis, Regeneron Pharmaceuticals (NASDAQ:REGN) specializes in the study of both cytokine and tyrosine kinase receptors. Building off its scientific acumen during the pandemic, REGN gained nearly 24% of equity value in the trailing year. That makes it one of the top performers among the most undervalued biotech stocks to buy.
But that’s also the point – objectively, Regeneron offers investors a discount. Presently, the market prices REGN at a trailing multiple of 16. Per data from Gurufocus.com, this ranks better than 69% of the competition. Notably, REGN also trades hands at a forward multiple of 18.79. This ranks superior to 66.67% of the biotech industry.
Lastly, Wall Street maintains a positive assessment of Regeneron, rating REGN as a consensus moderate buy. In terms of hard numbers, their average price target stands at $824.43, implying an upside potential of 8.7%. While not the most robust outlook, sentiment among hedge funds rates as very positive, making REGN a worthwhile choice among the most undervalued biotech stocks to buy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.