With the potential for impressive gains, it’s no surprise that biotech investing is so popular. The phenomenon has become even more pronounced after the stellar gains that weight loss drugs like Ozempic and Wegovy have netted their creators.
But let’s be real — runaway successes like those are few and far between. Biotech stocks are volatile and risky, and the nature of the beast is that most of these ventures simply fizzle out after a time.
But now and again, there’s an exception like Rigel Pharmaceuticals Inc (NASDAQ: RIGL).
Rigel focuses on discovering and developing therapies for autoimmune diseases, cancers, and hematologic disorders. At present, per our proprietary quant rating system, this is the top-rated stock in the entire biotech industry. It carries an overall Zen Rating of A — and stocks with this rating have historically delivered average annual returns of 32.52% for the past 2 decades.
RIGL stands apart from the pack as a biotech company that has secured stellar returns since the year started, trading at an attractive price after a pullback, and with plenty of potential growth in the cards. Let’s take a closer look.
At writing, RIGL is up 45% YTD … But recently, the price has receded to a point that may make a potential entry point.
In late November, it reached prices as high as $27.88 per share — which represented a 90.96% increase when compared to prices at the beginning of the year.
Now, at the time of writing, prices have dipped down to $18.79 — a figure that equates to a 29.11% year-to-date (YTD) return.
Here’s why that might be a good thing.
The drop appears to be plain old profit-taking. Nothing happened to lessen the value proposition at play here fundamentally — on the contrary, the news has been quite positive.
So, why did investors decide to lock in their gains? Because the company’s last earnings call, covering Q3 2024, was a standout success — analysts expected to see earnings per share (EPS) of just $0.01 — and the company delivered $0.7. Revenues came in at $55.3 million, whereas consensus estimates were at $38.3 million.
There’s plenty to like here — even among stocks with a Zen Rating of A, it’s rare to see more than one or two component grades with the highest rating. Rigel Pharmaceuticals has three — with the Growth rating, Value rating, and Sentiment rating all being strong suites. (See all 7 component grades here)
In terms of the first two factors, we can kill two birds with one stone — the company’s price-to-earnings growth (PEG) ratio stands at a very favorable 0.85x — indicating that it’s most likely significantly undervalued when compared to expected growth. And that expected rate of growth is quite something — at 88.99% per year, it blows both the wider market average of 17.17% and the biotech industry average of 12.03% out of the water.
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What about sentiment, then? Less than two weeks ago, one of the company’s treatments, R289, received fast-track designation from the FDA. Some of the best-rated equity researchers from top Wall Street firms see a double-digit upside in the cards for RIGL stock — the two most recent ratings, although they are “Holds”, see upsides of 31.51% and 20.99%, respectively.
That’s not to say that everything is perfect — biotech is as biotech does, so there is an increased degree of volatility here, compared to your average stock. But once all is said and done, a promising small-cap biotech company like this is hard to pass on — especially at these prices.
—> Click here to research Rigel Pharmaceuticals. If the industry interests you, take a gander at our Best Biotech Stocks screener
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