The pharmaceutical sector has taken a hit this year, with the S&P 500 Pharmaceutical Index down by more than 7%. However, many of the stocks in the sector are currently undervalued.
Saqib Iqbal, a financial analyst at Trading.Biz, is currently watching this pharma stock, which is significantly undervalued and has over 100% upside potential.
- Royalty Pharma PLC (NASDAQ: RPRX) stands out in the pharmaceutical sector and has over 100% upside potential.
- It dominates the drug development sector by 55%.
- RPRX boasts a P/E ratio of 11.11 and a P/B ratio of 1.64x, with forecasted earnings growth of 34.87%.
He says, “Royalty Pharma PLC (NASDAQ: RPRX) ticks all the boxes when it comes to stock valuation. The P/E ratio, financials, and growth prospects all go in favour of RPRX. In addition, Royalty Pharma has a 55% market share in drug development and has an economic moat. It’s trading way below fair value estimates. It is trading just above $28, and according to Ben Graham’s formula, the stock is currently priced at $69.”
Royalty Pharma PLC (NASDAQ: RPRX) is a biotechnology business. The business pays a flat payment for royalties from research hospitals, other for-profit organizations, or academic institutions.
You don’t even have to look at the weight-loss medicine boom to see that the worth of biotech royalties has surged tenfold over the last nine years. The pharma company has a significant market share in the drug development business, so naturally, it has a competitive advantage.
Coming to the financials, the current P/E ratio of RPRX is 11.11, which is less than the biotech industry average of 15. Regarding book value, RPRX outperforms the industry, having a P/B ratio of 1.64x vs the biotech average of 5.83x.
If we look at the forecasts, earnings are predicted to increase by 34.87% each year, surpassing the biotech industry’s 6.86% and the overall market’s 28.59%. Revenues are predicted to expand at an annual rate of 11.31%, which is more attractive than the market average of 9.43%.
Lastly, RPRX has a multiple times higher return on assets (6.8%) than the biotech sector average of 2.48%.
Saqib believes that the numbers, together with the moat, make this a stock worth watching.
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