10 Biotech Stocks With Falling P/E And Rising Earnings

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 |  Includes: CELG, CEPH, GILD, HITK, MED, RDY, TEVA, TMO, UTHR, WX
by: Kapitall

When a company’s P/E ratio has fallen over time, while earnings steadily rise, it is a sign that price has not proportionately increased with earnings. In other words, the company’s earnings may not be fully priced into the stock, and the stock may be undervalued.

We ran a screen on stocks from the biotech industry for those exhibiting these trends: a falling P/E ratio (comparing the trailing-twelve-month ratio to the 3-year average) and rising EPS over the same time period.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month.

(Click chart for more detail)

Do you think the market is undervaluing these names? Use this list as a starting-off point for your own analysis.

List sorted by market cap.

1. Teva Pharmaceutical Industries Limited (NYSE:TEVA): Drug Manufacturers Industry. Market cap of $36.48B. TTM P/E at 11.13 vs. 3-year average at 22.12. Last year diluted EPS at $3.66 vs. 2-year prior EPS at $0.78. The stock is currently stuck in a downtrend, trading 8.27% below its SMA20, 15.42% below its SMA50, and 21.12% below its SMA200. The stock has performed poorly over the last month, losing 17.6%.

2. Gilead Sciences Inc. (NASDAQ:GILD): Biotechnology Industry. Market cap of $28.77B. TTM P/E at 10.79 vs. 3-year average at 15.31. Last year diluted EPS at $3.32 vs. 2-year prior EPS at $2.10. Might be undervalued at current levels, with a PEG ratio at 0.72, and P/FCF ratio at 9.13. The stock has performed poorly over the last month, losing 10.77%.

3. Celgene Corporation (NASDAQ:CELG): Biotechnology Industry. Market cap of $25.03B. TTM P/E at 25.04 vs. 3-year average at 76.77. Last year diluted EPS at $1.88 vs. 2-year prior EPS at -$3.46. The stock has gained 1.19% over the last year.

4. Life Technologies Corporation (NASDAQ:LIFE): Biotechnology Industry. Market cap of $6.55B. TTM P/E at 18.67 vs. 3-year average at 44.35. Last year diluted EPS at $1.99 vs. 2-year prior EPS at $0.29. The stock is currently stuck in a downtrend, trading 15.41% below its SMA20, 24.64% below its SMA50, and 30.43% below its SMA200. It's been a rough couple of days for the stock, losing 6.01% over the last week.

5. Cephalon Inc. (NASDAQ:CEPH): Biotechnology Industry. Market cap of $6.24B. TTM P/E at 11.77 vs. 3-year average at 15.11. Last year diluted EPS at $5.27 vs. 2-year prior EPS at $2.92. The stock has gained 36.29% over the last year.

6. Dr. Reddy's Laboratories Ltd. (NYSE:RDY): Drug Manufacturers Industry. Market cap of $5.36B. TTM P/E at 21.10 vs. 3-year average at 112.18. Last year diluted EPS at $1.46 vs. 2-year prior EPS at -$0.69. The stock is currently stuck in a downtrend, trading 7.35% below its SMA20, 8.33% below its SMA50, and 12.57% below its SMA200. The stock has gained 12.64% over the last year.

7. United Therapeutics Corp. (NASDAQ:UTHR): Drug Manufacturers Industry. Market cap of $2.86B. TTM P/E at 21.27 vs. 3-year average at 115.76. Last year diluted EPS at $1.78 vs. 2-year prior EPS at -$1.01. The stock is currently stuck in a downtrend, trading 5.93% below its SMA20, 8.22% below its SMA50, and 20.31% below its SMA200. The stock has performed poorly over the last month, losing 11.01%.

8. WuXi PharmaTech (Cayman) Inc. (NYSE:WX): Drug Manufacturers Industry. Market cap of $896.40M. TTM P/E at 9.63 vs. 3-year average at 22.44. Last year diluted EPS at $0.15 vs. 2-year prior EPS at -$0.03. The stock is currently stuck in a downtrend, trading 14.57% below its SMA20, 21.59% below its SMA50, and 25.26% below its SMA200. It's been a rough couple of days for the stock, losing 9.5% over the last week.

9. Hi Tech Pharmacal Co. Inc. (NASDAQ:HITK): Drugs Industry. Market cap of $329.07M. TTM P/E at 7.70 vs. 3-year average at 9.46. Last year diluted EPS at $3.36 vs. 2-year prior EPS at $0.84. The stock is a short squeeze candidate, with a short float at 14.35% (equivalent to 7.52 days of average volume). The stock has performed poorly over the last month, losing 15.17%.

10. Medifast Inc. (NYSE:MED): Specialty Retail Industry. Market cap of $235.15M. TTM P/E at 10.31 vs. 3-year average at 21.82. Last year diluted EPS at $1.35 vs. 2-year prior EPS at $0.38. The stock is a short squeeze candidate, with a short float at 36.39% (equivalent to 9.64 days of average volume). The stock is currently stuck in a downtrend, trading 13.91% below its SMA20, 25.17% below its SMA50, and 31.87% below its SMA200. It's been a rough couple of days for the stock, losing 12.63% over the last week.

*P/E and EPS data sourced from Screener.co, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.