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Biotech remains undervalued: Oppenheimer

July 4, 2017

Analyst Leah Rush Cann says the biotechnology sector continues to be undervalued in a late Sunday research note. The second half of the year is typically when investor interest in the sector increases, Cann comments. She says that using the Price-to-Earnings-Growth metric (PEG) indicates that the sector is two standard deviations below the level that would trigger a sell-signal in her model and this comes after a strong positive move in the sector in June.

“Using relative PEG as a valuation metric, our model indicates that even after a strong positive move in June, the sector is still two standard deviations below a level that would trigger a sell signal.”

She further comments “We continue to believe the biggest potential catalyst to increase relative values for this sector would be increased expectations for earnings growth in 2018. We are starting to see an increase in expectations with anticipated 2018 earnings growth for the sector increasing to 6.4% in June from 6.1% in May, with expectations for S&P 500 earnings growth unchanged at 11.6%.”

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