Now that the FED is looking to lower interest rates this year, cheaper money and more accessible financing will let investors venture into riskier places in the economy and the stock market. While not that risky of an industry, the biotech space can often be speculative. This is because biotech stocks tend to move according to their trials and approvals for new technologies or drugs.
Today, you are about to see how the markets have left enough evidence to figure out which of these will rise. It may be due to their managerial merit, or by the announcements that typically come to give the sector rallies. This is how the market speaks. If you are after outsized returns, it would be wise to get stuck in the following translations.
Biotech Stocks That Could Be Multibaggers: Xenon Pharmaceuticals (XENE)
Developing novelty products with a vast pipeline of neurological therapies aiming to treat patients with neurological disorders (mainly in Canada for now), Xenon Pharmaceuticals (NASDAQ: XENE) is calling the market’s attention in all of the right ways today. Even analysts seem to be on board with this one.
On their investor relations website, management has released a press release to let shareholders and markets know what could be coming later this year. In a key milestone opportunity outline, the company has rolled out the XEN1101 Phase 3 Program. This will treat major depressive disorders for their patients.
Of course, this sort of thing is up to regulator approval to significantly impact the stock price as a result of higher earnings. So, amid uncertainty, there are two things that you can check today. First, you can rest assured of the 107.8% earnings per share growth analysts expect to see from this firm in the next 12 months.
Second, by looking over the forward price-to-earnings ratio, you can gauge how much markets are willing to pay today for tomorrow’s expected earnings. The saying “It must be expensive for a reason” applies here. So, don’t be afraid to overpay for a good thing when the rest of the market is doing so.
Does 538.0 times forward P/E sound high to you? Investors probably thought that a 250.0 times P/E for NVIDIA (NASDAQ: NVDA) stock was high last year. The stock has broken many ceilings since then.
Argenx (ARGX)
As is true biotech fashion, this company had its management take a whole section of its website dedicated to the entire product pipeline that it holds, along with how far along each product is. Here is why Argenx (NASDAQ: ARGX) comes to shine.
You will notice right away that at least a dozen projects are about to break out of their proof of concept space, and be launched into registration. In dealing with autoimmune diseases in the United States and overseas, this company is highly exposed to major medical trends across different patient demographics.
Currently, in Phase One, the ARGX-118 project is one that could grab a lot of attention soon. It prevents airway inflammation. This theme has been a top concern for most patients since the COVID-19 pandemic.
Markets are showing similar excitement about the potential future of this company. Markets have bid up the stock’s forward P/E up to 111.7 times on the back of analysts’ projections for roughly 240.0% EPS growth in the coming year. The valuation seems justified on the bet that the ARGX-118 could soon pass its Phase 1. This is easily one of the top biotech stocks on the market.
IntraCellular Therapies (ITCI)
On a similar theme, IntraCellular Therapies (NASDAQ: ITCI) deals with neurological disorders in the U.S. (to diversify from Xenon’s Canada presence), mainly in the bipolar depression and Parkinson’s disease treatment space.
This stock has the lowest forward P/E of the three; at 88.8 times, it is still at the top of the industry due to its potential to surprise investors with a new announcement. However, this company likes to drop the big bombs during quarterly earnings calls rather than at random timely intervals like its other two peers.
Nonetheless, there must be something big enough cooking behind the scenes at the company since analysts feel comfortable pushing for projected EPS growth of 225.8% for this year as well. The one thing that could trigger such explosive expansion is their current Lumateperone pipeline, which will imminently break out of Phase 3 trials. If you are looking for the top biotech stocks, start here.
As of this writing, Gabriel Osorio-Mazzilli 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
