Any time investors look for companies growing sales the most, one area that almost always stands out is the up and coming biotech stocks. After all, sales can grow from close to nothing into the hundreds of millions or billions of dollars if the U.S. Food & Drug Administration approves a drug. 24/7 Wall St. is looking at the best stocks for each sector ahead of the year-end to see where the best growth and value opportunities exist for investors in 2014.
The focus here is on the biggest revenue growers in the established biotech sector. While many emerging and development stage companies may have massive growth in the years ahead, we have focused on companies with approved products and treatments, and these are all either profitable now or they are making the turn into profitability.
In order to keep this report ranked in groups, sales growth was based on multiple valuation tiers. The first tier was the big four biotechs with market capitalization of $50 billion and higher. The second tier drops all the way down to $10 billion and up to $50 billion. The last tier was the $2 billion to $10 billion range. Due to the already very speculative nature of biotechs, companies worth less than $2 billion with pending approvals and very mixed expectations were not included.
Companies that have no approved products with existing sales for most of 2013 were also screened out, otherwise some revenue growth figures could have been exponential. Companies where the products were just approved, or where persistent losses were expected to continue, were also screened out.
We picked the top grower for the big four biotech stocks, two of the biotech stocks from the $10 billion to $50 billion tier and three of the top revenue growers in the $2 billion to $10 billion biotech stock range. These selections were based on the most impressive growth figures, as well as how many peers there are in each group.
In order to avoid any dominance on just one company, these have simply been ranked in descending order by market capitalization. Earnings and revenue estimates were taken from Thomson Reuters. Due to the smaller biotech tier identified here ($2 billion to $10 billion) all having ramping sales and likely the first year of real earnings in 2014, the expected multiples on earnings and sales were not included. The driving force behind each company’s growth also has been addressed.
> 2014 Sales Growth: 26%
> Market Cap: $109 billion
Gilead Sciences Inc. (NASDAQ: GILD) is the largest biotech by market value, with a market cap of $109 billion. Its $71 price handle is within about $2 of its all-time highs put in recently. While the largest by size, Gilead is expected to have the best growth of the largest biotechs in 2014 despite lower growth in 2013. It is expected to have more than 50% earnings growth on 26% revenue growth. That puts earnings at $3.08 per share and revenue at $13.7 billion in 2014, creating forward multiples of about 23 times for earnings and about eight times for revenue. Credit Suisse recently suggested that its back-of-the-envelope calculations suggest a ballpark of $4 billion hepatitis C virus market size in 2014, and Gilead’s 2014 Sofosbuvir revenue estimate was raised to $3 billion, which will be the new sales growth driver.