BARD1 Life Sciences Limited (ASX:BD1), a AUDA$5.19M small-cap, is a healthcare company operating in an industry, which faces a shift towards more data-driven approached to address behavioural and physical health issues of chronic illness and aging patients. Healthcare analysts are forecasting for the entire industry, a somewhat weaker growth of 7.85% in the upcoming year , and a low 9.91% growth over the next couple of years. This rate 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 BARD1 Life Sciences is lagging or leading in the industry. View our latest analysis for BARD1 Life Sciences
What’s the catalyst for BARD1 Life Sciences’s sector growth?
Providers that are finding it difficult to gain further cost and operational efficiencies after picking the low-hanging fruit are beginning to turn their attention to more transformative initiatives to bend the cost curve. In the previous year, the industry saw growth of 7.70%, beating the Australian market growth of 6.90%. BARD1 Life Sciences 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 BARD1 Life Sciences may be trading cheaper than its peers.
Is BARD1 Life Sciences and the sector relatively cheap?
The healthcare sector’s PE is currently hovering around 23x, above the broader Australian stock market PE of 18x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 11.34% on equities compared to the market’s 11.87%. Since BARD1 Life Sciences’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge BARD1 Life Sciences’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? BARD1 Life Sciences has been a healthcare provider industry laggard in the past year. If your initial investment thesis is around the growth prospects of BARD1 Life Sciences, there are other healthcare provider companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how BARD1 Life Sciences fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If BARD1 Life Sciences has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its healthcare provider 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 BARD1 Life Sciences’s future cash flows in order to assess whether the stock is trading at a reasonable price.