3 Small-Cap Healthcare Stocks Wall Street Loves The healthcare industry is expected to witness robust growth driven by increased demand for medicines. Therefore, small-cap Wall Street healthcare favorites Amphastar Pharmaceuticals (AMPH), Catalyst Pharmaceuticals (CPRX), and Equillium (EQ)...
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The healthcare industry is expected to witness robust growth driven by increased demand for medicines. Therefore, small-cap Wall Street healthcare favorites Amphastar Pharmaceuticals (AMPH), Catalyst Pharmaceuticals (CPRX), and Equillium (EQ) might be ideal additions to your portfolio. Keep reading….
The healthcare industry is poised for substantial growth thanks to rising healthcare needs, the adoption of cutting-edge technologies, and the increasing demand for generic drugs. Given the industry's bright prospects, it could be wise to invest in fundamentally strong healthcare stocks, Amphastar Pharmaceuticals, Inc. (AMPH), Catalyst Pharmaceuticals, Inc. (CPRX), and Equillium, Inc. (EQ).
The healthcare market is set to expand significantly in the coming years, driven by factors such as the growing aging population, expanded health insurance coverage, government healthcare programs, increasing demand for generic drugs, and advancements in medical technology. In fact, the healthcare services market size is projected to grow at a CAGR of 5% by 2028, offering a promising investment opportunity.
Moreover, the healthcare industry is on the brink of exciting innovations. With an average of 50-55 new medicines expected to be launched per year over the next five years and increasing R&D on drug discovery, the total net spending on medicines in 2028 is projected to increase by $127 billion. This potential for innovation is a thrilling prospect for the healthcare market.
Considering these conducive trends, let's analyze the fundamentals of the three medical stock picks mentioned above. While the small market capitalization of these stocks might indicate a greater susceptibility to volatility, Wall Street analysts seem to love these.
Amphastar Pharmaceuticals, Inc. (AMPH)
AMPH is a biopharmaceutical company that develops, manufactures, markets, and sells generic and proprietary injectable, inhalation, and intranasal products in the United States, China, and France. The company has a $1.98 billion market capitalization.
On May 22, 2024, AMPH announced that the U.S. Food and Drug Administration (FDA) had granted approval for the company's Abbreviated New Drug Application for Albuterol Sulfate Inhalation Aerosol, previously known as AMP-008.
This product treats bronchospasm in patients four years of age and older with reversible obstructive airway disease and prevents exercise-induced bronchospasm in patients four years of age and older.
In terms of the trailing-12-month EBIT margin, AMPH's 31.29% is considerably higher than the 1.61% industry average. Likewise, its 37.79% trailing-12-month levered FCF margin is significantly higher than the 1.21% industry average. Furthermore, its 37.87% trailing-12-month EBITDA margin is 570.5% higher than the 5.65% industry average.
AMPH's total revenues for the first quarter that ended March 31, 2024, rose 12.6% year-over-year to $171.84 million. Its gross profit increased 22% year-over-year to $90.10 million. Likewise, the company's non-GAAP net income came in at $55.30 million, or $1.04 per share, up 72.1% and 67.7% year-over-year, respectively.
Street expects AMPH's revenue and EPS for the quarter ending June 30, 2024, to increase 19.1% and 19.5% year-over-year to $173.54 million and $0.78, respectively. It surpassed the consensus EPS and revenue estimates in three of the trailing four quarters, which is impressive.
The stock has lost marginally intraday to close the last trading session at $40.49. Based on four Wall Street analysts offering 12-month price targets for AMPH in the last three months, the average price target is $63.67, indicating a 57.2% upside, with a high forecast of $71 and a low forecast of $50.
AMPH's solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AMPH has a B grade for Growth and Value. It is ranked #23 out of 155 stocks in the Medical - Pharmaceuticals industry.
In addition to the POWR Ratings we've stated above, we also have AMPH ratings for Sentiment, Quality, Momentum, and Stability. Get all AMPH ratings here.
Catalyst Pharmaceuticals, Inc. (CPRX)
With a market cap of $1.78 billion, CPRX is a commercial-stage biopharmaceutical company that focuses on developing and commercializing therapies for people with rare, debilitating, chronic neuromuscular and neurological diseases in the United States.
On May 30, 2024, CPRX announced that the FDA had approved its supplemental New Drug Application (sNDA), increasing the indicated maximum daily dose of FIRDAPSE for adults and pediatric patients for the treatment of Lambert-Eaton myasthenic syndrome (LEMS). The increased maximum daily dose offers healthcare providers and patients greater flexibility in treatment regimens for LEMS management.
CPRX's trailing-12-month gross profit margin of 64.33% is 12.8% higher than the industry average of 57.06%. Its trailing-12-month EBITDA margin of 27.72% is 390.8% higher than the industry average of 5.65%.
For the fiscal first quarter that ended March 31, 2024, CPRX's total revenues increased 15.4% year-over-year to $98.51 million. Its operating income amounted to $27.13 million. For the same quarter, its non-GAAP net income and net income per share stood at $46.77 million and $0.38, respectively.
Analysts expect CPRX's revenue for the second quarter ending June 2024, to increase 12.4% year-over-year to $111.96 million. The company's EPS is expected to be $0.23 for the same quarter. Moreover, the company has surpassed revenue estimates in three of the trailing four quarters.
CPRX's stock has gained 27.3% over the past year to close the last trading session at $15.06.
Based on five Wall Street analysts offering 12-month price targets for CPRX in the last three months, the average price target is $26.50, indicating a 76% upside, with a high forecast of $29.00 and a low forecast of $24.00.
CPRX's bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Value and Quality. CPRX is ranked #41 in the same industry.
Click here to access all CPRX ratings (Momentum, Sentiment, Growth, and Stability).
Equillium, Inc. (EQ)
EQ is a biotech company specializing in treatments for severe autoimmune disorders. The company's lead product, itolizumab (EQ001), is in Phase III trials for acute graft-versus-host disease. It also has projects for conditions like cutaneous T-cell lymphoma and alopecia areata. The company has a market cap of $25.14 million.
On June 4, 2024, EQ announced positive topline data from its Phase 2, single-dose, proof-of-concept (PoC) study of EQ101 in adult patients with moderate, severe, or very severe alopecia areata, which is an autoimmune disease driven by an immune cell attack of the hair follicles that causes hair loss.
EQ's trailing-12-month gross profit margin of 100% is 74.8% higher than the industry average of 57.21%. Its trailing-12-month asset turnover ratio of 0.66x is 63.4% higher than the industry average of negative 0.40x.
For the first quarter, which ended March 31, 2024, EQ's revenue increased 20.4% year-over-year to $10.69 million. As of March 31, 2024, its total liabilities amounted to $22.50 million, compared to $27.96 million as of December 31, 2023. Moreover, its cash, cash equivalents, and short-term investments amounted to $32.29 million as of March 31, 2024.
Street expects EQ's revenue for the fiscal quarter (ending September 2024) to increase 181% year-over-year to $24.93 million, and its EPS for the same period is estimated to be $0.60. Further, EQ topped the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has gained 9.2% to close the last trading session at $0.71.
Based on two Wall Street analysts offering 12-month price targets for EQ in the last three months, the average price target is $6, indicating a 741.5% upside. The high forecast is $7, and the low forecast is $5.
EQ's POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Value and Quality. Within the Biotech industry, EQ is ranked #23 out of 354 stocks.
Click here to access additional ratings of EQ for Stability, Growth, and Momentum.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
AMPH shares closed at $40.49 on Friday, down $-0.14 (-0.34%). Year-to-date, AMPH has declined -34.54%, versus a 14.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program.Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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