Biotech stocks are not for investors with a low-risk tolerance. This sector has stocks that are either considered blue-chip names or pre-revenue lotto tickets. It is also one of the most important sectors that produce treatments and drugs for the betterment of mankind. Investing in biotech stocks can be risky since the clinical results of many of their treatments can be unpredictable. However, choosing the right companies can benefit both your portfolio and millions of patients in dire need of treatment.
Over the past year, the stock market has seen an incredible rally but not all biotech stocks have been included. Targeting these undervalued names is a great way to counter-trade the crowded plays in AI and semiconductors. Finding, these companies can be hard, but we have done the work for you!
These 3 undervalued biotech stocks have been left behind so far but things could begin to turn around as we head into March.
PDS Biotechnology Corporation (PDSB)
PDS Biotechnology Corporation (NASDAQ:PDSB) isn’t exactly a household name. It is an oncology firm on the fast track to developing a successful and innovative treatment for cancer. According to Yahoo Finance, the stock has a one-year price target range of $14.00 to $21.00 and an average price target of $17.67.
It’s rare to see such bullish sentiment from analysts but have the stock trading so much lower than the target price range. As we mentioned, PDS is flying very much under the radar. The market cap is a minuscule $169 million and the stock has fallen by about 20% over the past year. PDS targets a unique way to attack cancer cells that uses immunotherapies to activate T Cells. It has a growing pipeline of cancer treatments in clinical trials targeting cervical, prostate, breast, and many more.
PDSB is a true pre-revenue company so using traditional price multiples won’t do much for its valuation. Until PDSB’s treatments have received regulatory approval, this company won’t make a dime. That is a risky proposition for most investors but the stock is quite literally a small price to pay for what could potentially be a cure for cancer.
Regeneron Pharmaceuticals Inc (REGN)
Regeneron Pharmaceuticals (NASDAQ:REGN) is a much larger company than PDSB and has a market cap of more than $100 billion. It produces and sells a long list of key treatments. As per Yahoo Finance, Regeneron has a one-year price target range of $710.00 to $1,184.00, with an average price target of $1,023.41.
With this company, you are investing in one of the strongest drug lineups in the world as well as over 35 treatments currently in clinical phase testing. One of its strongest treatments is Dupixent, an eczema drug that it co-marketed with Sanofi. The FDA recently accepted Regeneron’s application to have Dupixent double as a treatment for COPD. This could potentially add billions of dollars in annual revenue.
While the share price is expensive, the stock is not when you consider Regeneron trades at just 21.6x forward earnings. Revenue has grown at a 5-year CAGR of 14% which is stronger than peers like Amgen, AbbVie, and Gilead Sciences. PDSB is more of a lotto ticket but Regeneron is a stock that can add stability and growth to your portfolio for decades to come.
Pfizer Inc (PFE)
Pfizer Inc (NYSE:PFE) is one of the world’s largest pharmaceutical companies that was established 175 years ago. Yahoo Finance shows that Pfizer is trading right at the low end of the one-year analyst price target range of $26.00 to $50.00. The 23 analysts who cover Pfizer’s stock also have an average price target of $32.22.
While the company has seen a decline in sales following the boost from COVID-19 vaccines, it still boasts an enviable lineup of drugs including Paxlovid, Prevnar, Celebrex, Advil, and Viagra to name a few. On top of its massive annual revenues and cash flow, Pfizer also pays out a dividend yield of 6.17% and has raised this dividend for 14 consecutive years.
Despite the drop off following the demand for the COVID-19 vaccines, Pfizer has still grown its revenues with a 5-year CAGR of 7.0%. As you might expect, when a stock falls as much as Pfizer’s has its valuation also shrinks. It is currently trading at 2.6x sales and just 12.25x forward earnings. Pfizer is at one of its cheapest points which makes this an attractive buy point in March.
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.
