Biotech is one of the great wealth-producing industries in the world.
Take Galapagos NV (NASDAQ: GLPG), for example, which is up nearly 600% since Money Morning Executive Editor Bill Patalon recommended it to readers in 2012.
The biotech stock you pick might have the next big blockbuster drug in its pipeline… or its investments could get hung up in trials and leave shareholders with nothing.
We’ve solved that problem with today’s stock. It has all the advantages of a biotech stock, as it makes new profitable treatments possible. In fact, its earnings are projected to nearly triple in four years.
Best of all, it does it without having to pour resources into a make-or-break therapy that could go sour.
That’s because this biotech play isn’t a pharmaceutical company. It specializes in medical products both at the research level and the diagnostics and treatment level.
Whether we’re talking about studying the brain, curing infectious diseases, genetic research, or even food safety, major organizations turn to this company for their high-tech equipment.
The company has been advancing scientific discovery and healthcare for more than half a century. And thanks to a series of recent investments and a big acquisition, it will be making new medical breakthroughs possible for years to come.
Plus, it just got a top score from our Money Morning Stock VQScore™ system.
And it will be saving lives and changing the world as it puts money in your pockets…
This Mom-and-Pop Shop Is Ready to Take Off with Its New Biotech Arsenal
Bio-Rad Laboratories Inc. (NYSE: BIO) was founded in 1952 by a husband-and-wife team of Berkeley grads, David and Alice Schwartz. What began as a small operation in a Quonset hut is now an $8 billion company with more than 8,000 employees in 36 countries on six continents.
The company has maintained its independent streak even as it has grown. When they decided to take Bio-Rad public in 1966, for example, David and Alice skipped the middleman and offered shares directly to their customer base. This was a half-century before Spotify Technology S.A. (NYSE: SPOT) made a similar decision.
Over the decades, the family-run company had to reinvent itself a number of times. Its first products were geared toward nuclear research, when nuclear energy was one of the most exciting new frontiers in technology. Later the focus shifted to aerospace, and then electronics.
Today, with David and Alice’s son Norman at the helm, Bio-Rad offers thousands of products to enable the biotech breakthroughs that are revolutionizing healthcare.
In 2017, for example, Bio-Rad released its Single-Cell Sequencing Solution product in partnership with Illumina Inc. (NASDAQ: ILMN) – another Money Morning favorite. This gives researchers a view into individual cells in order to observe how genes are expressed in complex tissue.
That kind of capability is a must for genetic research, as well as the study of genetic diseases and their treatment.
Around the same time, Bio-Rad received FDA approval for its IH-1000 blood-typing instrument. Designed specifically for labs that experience a high daily volume, this device is also equipped with management and connectivity software to ensure speed, accuracy, and immediate usability of its data. And the FDA approval has opened up a giant market the company hadn’t yet penetrated with its flagship blood-typing product.
Another huge opportunity came when Bio-Rad acquired RainDance last year.
RainDance was a major rival in Droplet Digital PCR, a technology that allows the “amplification” of DNA. By multiplying single strands of DNA many times over, lab professionals are able to observe and work with them more easily.
Droplet Digital PCR enables easy detection of diseases – especially cancer – much earlier than was previously possible. This is the kind of technology that’s already saving lives and could eventually help wipe some of our worst afflictions off the face of the planet.
This technology is also used to ensure food safety.
In November, Bio-Rad was awarded a contract with the USDA’s Food Safety and Inspection Service to use the iQ-Check Prep Automation System to detect pathogens such as salmonella and E. coli in the American food supply.
That’s a big win in a market worth over $7 billion, and projected by MarketsandMarkets to grow at a 7.8% compound annual growth rate between now and 2020. And with the recent outbreak of E. coli in romaine lettuce from California, Bio-Rad’s technology is needed now more than ever.
The acquisition of RainDance ended a period of investment that temporarily slowed down Bio-Rad’s earnings. But over the past year, those investments have started to pay off in a big way. The company is looking at potentially tripling earnings per share (EPS) in just four years if current projections hold up.
That’s why now might be the perfect time to grab this overlooked stock.
Why Now Is the Time to Buy BIO
Bio-Rad shares slipped with the rest of the market over the last couple months. They’re down about 12.5% since late September. But the numbers suggest it’s a bargain.
According to FactSet, its EPS is projected to grow from 3.82 in 2017 to 10.57 in 2021. That’s 176% growth in four years.
That comes as the company’s balance sheet has drastically improved following its period of investment. Free cash flow went from -$7.45 million in 2017 to $147.82 over the last 12 months (ending in September). And net operating cash flow has jumped from $103.9 million to $249.8 million in the same time.
Based on the financials, it shouldn’t be surprising that analyst Brandon Couillard at Jefferies set a target price for BIO shares at $400 – a 46% rise from where it is now. That’s also well above where shares were before they started to drop earlier this year.
But BIO’s valuation metrics suggest the stock is even more undervalued than that. Its price-to-book ratio of 1.66 comes in at a 59% discount compared to the industry average.
Its price/earnings ratio for the last 12 months is 6.48, just 16% of the industry average.
Even if we only looked at the projected earnings growth, Bio-Rad is a stock to buy now. But when we look at its performance over the last 12 months, compared to its share price, it looks even better.
In other words, like its products, Bio-Rad stock may very well be a must-have.
— Stephen Mack
Source: Money Morning