Biotech is an industry full of opportunity. It’s also known as one of the riskiest sectors to invest in. Why is this the case? Well, many of these companies are very small and focused on researching new drugs. These drugs, being their products, are thus in development and thus the future revenue is not assured. The future revenue hinges on successful FDA approvals and the ability to actually sell the drug. As such, this industry is known for companies that tank 50% in just days following poor clinical results for their drugs.
However, the opposite is also possible. If a revolutionary drug gets approved, it can mean loads of money coming in for the company that was created over the next few years. However, as investors we want to minimize risk and maximize reward. As such, we have researched this risky market for you to find the three best biotech stocks you should consider buying.
Halozyme Therapeutics, Inc. (HALO)
Halozyme Therapeutics, Inc. (NASDAQ:HALO) develops and commercializes cancer treatments by targeting the tumor’s microenvironment. Yahoo Finance estimates the stock a one-year price range of $39 to $72, with an average of $51.
The company currently holds four FDA-approved drugs, with the most popular being ENHANZE. This drug partners Halozyme with major players in the therapeutics industry, as ENHANZE allows seven other game-changing therapeutic treatments to be administered.
Halozyme’s innovation and finances are equally strong, as the company boasts a year-over-year profit growth of 22% as well as a current profit margin of 77%. Along with staggering profit margins and growth, Halozyne holds a P/E ratio of 19.09x, a discount from its five-year average of 33.03x and industry average of 19.50x. With amazing products and financials, Halozyme is definitely an undervalued stock that you should consider buying.
Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb (NYSE:BMY) is a biopharmaceutical company that focuses on developing drugs and therapies. The stock is down over 20% in the past year, but Yahoo Finance analysts have a high-end 1-year price target of $69.03, indicating great upside potential from the current price.
Recently, its drug Augtyro received FDA approval for use in the U.S. This drug aims to target a type of lung cancer called ROS1-positive non-small cell lung cancer. This drug is a first of its kind, showing the innovative nature of this company to break into untapped markets.
Now lets look at its numbers. The company’s EPS is expected to hit $7.09 by the end of next year. This would only be somewhat modest growth for the company. However, this is a fairly mature company that pays out a dividend of 4.62% and as such, the main appeal of investing in a company like this would not be for the revenue or earnings growth. It is a well-established company, providing solid returns with minimal risk.
Eli Lilly (LLY)
Eli Lilly (NYSE:LLY) is another well-established company that researches and produces various pharmaceuticals. The stock has been on quite the run and is up over 130% in the past year. Additionally, analysts have an average price target of around $845, indicating there is still room to run.
The company has recently received approval for its drug Zepbound. This drug is aimed at helping individuals lose weight and is set to be a challenger to the popular drug Wegovy. This market has a huge demand with such a large share of people in the world dealing with weight problems.
The company has phenomenal growth potential with EPS expected to grow at over 97% by the end of this year! What’s more, is that this growth is expected to continue in the following years with EPS expected to grow over 45% year over year for the next year after. With this explosive potential, this stock should be worth considering for any investor.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (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.
