Botanix Pharmaceuticals Limited (ASX:BOT), a AUDA$32.59M small-cap, operates in the healthcare industry, which has experienced tailwinds from issues such as higher demand driven by an aging population and the increasing prevalence of diseases and comorbidities. 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, and also determine whether Botanix Pharmaceuticals is a laggard or leader relative to its healthcare sector peers. Check out our latest analysis for Botanix Pharmaceuticals
What’s the catalyst for Botanix Pharmaceuticals’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 previous year, the industry saw growth of 9.22%, beating the Australian market growth of 6.88%. Botanix Pharmaceuticals lags the pack with its lower growth rate of 7.15% over the past year, which indicates the company will be growing at a slower pace than its biotech peers. As the company trails the rest of the industry in terms of growth, Botanix Pharmaceuticals may also be a cheaper stock relative to its peers.
Is Botanix Pharmaceuticals and the sector relatively cheap?
The biotech sector’s PE is currently hovering around 29x, 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 did return a higher 16.12% compared to the market’s 11.87%, which may be indicative of past tailwinds. Since Botanix Pharmaceuticals’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Botanix Pharmaceuticals’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Botanix Pharmaceuticals has been a biotech industry laggard in the past year. If your initial investment thesis is around the growth prospects of Botanix Pharmaceuticals, there are other biotech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Botanix Pharmaceuticals fits into your wider portfolio and the opportunity cost of holding onto the stock.