PTC THERAPEUTICS INC (NASDAQ:PTCT) – A Strong Growth Stock at a Fair Valuation

Investors looking for growth opportunities at fair prices often consider the "Affordable Growth" strategy, which finds companies with strong growth prospects that are not overvalued. This method looks for stocks with a growth score above 7, good profitability and financial stability, and a valuation score above 5, ensuring the chosen companies are growing steadily while remaining priced fairly compared to their fundamentals. PTC THERAPEUTICS INC (NASDAQ:PTCT) meets these conditions, making it a potential choice for investors focused on growth at a reasonable price (GARP).

Growth Potential

PTC Therapeutics has a Growth rating of 7, backed by strong past and expected performance. Over the last year, the company’s earnings per share (EPS) rose by 189.25%, and revenue increased by 91.12%. Its long-term revenue growth has also been steady, averaging 21.32% per year in recent years. Analysts predict EPS will grow by 21.94% yearly, with revenue expected to rise by 11.69% annually. While future growth may be slower than past results, it still exceeds industry averages, confirming PTCT’s status as a growth-focused biopharmaceutical company.

Valuation Metrics

Despite its growth, PTCT is priced fairly, with a Valuation rating of 6. Key figures highlight its affordability:

• The Price/Earnings (P/E) ratio of 8.55 is much lower than the industry average (84.29) and the S&P 500 (28.05), placing PTCT in the top 2.5% of biotechnology stocks for valuation appeal.
• Its Enterprise Value to EBITDA and Price/Free Cash Flow ratios are also attractive, ranking better than 99% and 98.7% of competitors, respectively.
• While the forward P/E is negative due to expected short-term losses, the PEG ratio (factoring in growth) suggests the stock is still fairly priced relative to its earnings outlook.

Profitability and Financial Health

PTCT’s Profitability rating of 5 reflects a mix of strengths and weaknesses. The company has leading margins, including a Gross Margin of 96.87% (better than 96.9% of peers) and an Operating Margin of 49.27% (top 0.2% of the sector). However, its earnings history is uneven, with losses in four of the past five years, which affects its overall profitability score.

Financially, PTCT has a Health rating of 6, showing stability with some risks. Strengths include:

• A solid liquidity position, with a Current Ratio of 3.89 and Quick Ratio of 3.85, indicating no immediate solvency issues.
• A reasonable debt level, with a Debt-to-FCF ratio of 3.47 (better than 93.7% of peers), meaning it could repay debts in under 3.5 years.
  However, its Altman-Z score (1.81) and recent share dilution raise minor concerns, though bankruptcy risk is low.

Why This Fits the Affordable Growth Strategy

The Affordable Growth approach favors companies like PTCT that offer strong growth at fair prices, avoiding overhyped stocks. PTCT’s steady revenue growth, high margins, and low valuation multiples fit this strategy, while its stable liquidity and manageable debt limit downside risks. For investors, this balance helps avoid speculative bubbles while still benefiting from PTCT’s work in rare disease treatments.

For more details, see PTCT’s full fundamental report here.

Find More Affordable Growth Stocks

Looking for similar opportunities? The Affordable Growth Screen highlights other stocks meeting these criteria, providing a list of growth-at-a-fair-price options.

Disclaimer: This article is not investment advice. Always do your own research or consult a financial advisor before making investment decisions.