Small-Cap Catalyst Pharmaceuticals Is Among Market’s Best Price Performers

Published on
  • Small-cap biotech Catalyst Pharmaceuticals recently joined the S&P 600 index, which means institutions must own shares to track the index
  • The company has a steady history of price appreciation going back one year, even while the broad market declined
  • Catalyst has been outpacing the S&P 600 index by a wide margin
  • The company’s earnings and revenue growth accelerated in the past three quarters, and analysts see double-digit top- and bottom-line growth ahead

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q2 2022 hedge fund letters, conferences and more


Find A Qualified Financial Advisor

Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.

If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Catalyst Pharmaceuticals Joins The S&P 600 Small-Cap index

Small-cap biotech Catalyst Pharmaceuticals (NASDAQ:CPRX) has been outperforming the broader market, amid recent earnings and revenue acceleration.

The company also got some good news last month, as it joined the S&P 600 Small-Cap index, replacing defense contractor ManTech, which was acquired by private equity giant The Carlyle Group (NASDAQ:CG).

Joining a major index, such as the S&P 600, means funds tracking that index must purchase shares and maintain weightings roughly in line with the benchmark’s composition.

This means Catalyst, makes amifampridine, a medication for a rare autoimmune condition called Lambert-Eaton myasthenic syndrome. This affects the neuromuscular and neurological systems. This condition can be associated with lung cancer patients, but also occurs in those without cancer.

Catalyst has a market capitalization of $1.35 billion. The company went public in 2006, so is somewhat out of the 15-year post-IPO zone, when companies often notch their biggest price gains. However, the stock has posted significant increases recently:

  • 1 week: +8.09%
  • 1 month:-5.24%
  • 3 month: +83.02%
  • Year-to-date: +89.51%
  • 1 year: +142.08%

Shares rallied to an all-time high of $17.22 on September 13, on news of the index inclusion. But as the small-cap index, along with the broader market fell, Catalyst got swept up in the downtrend.

Nonetheless, it’s instructive to compare the stock’s performance against its index. You can track the S&P 600 by a number of ETFs, such as the SPDR Portfolio S&P 600 Small Cap ETF (NYSEARCA:SPSM).

The index is down 24.71% year-to-date, and also in shorter rolling time frames. Small caps underperformed Monday as large caps posted solid rallies. Catalyst bucked that trend, with a gain of 2.42%, or $0.31, finishing the session at $13.14. Trading volume was below normal.

Here’s one thing to watch for with a small stock like this: If you look at a one-minute chart, you’ll see gaps between price movements. That’s because with 87.4 million shares in float, and with 14% of shares owned by management, there aren’t really too many buyers and sellers. Sometimes that means it can take a minute (literally) to find an agreement on a price.

Despite that potential drawback, which actually doesn’t affect retail investors much at all, the company has plenty of positives: Revenue growth accelerated in the past three quarters, from 23% to 46%.

Its three-year revenue growth rate is 36%.

The three-year earnings growth rate is 54%. Earnings growth also accelerated in the past three quarters, from 17% to 75%.

The company reports its third quarter on November 8, with analysts eyeing earnings of $0.19 per share on revenue of $53.35 million. Those would be increases of 36% and 48%, respectively.

MarketBeat earnings data show that Catalyst has a rocky history when it comes to beating or missing both top- and bottom-line views.

The company’s return on equity is a very strong 31%, an indication of good management.

Analyst ratings compiled by MarketBeat show that Catalyst has been designated a “moderate buy” with a price target of $14.81, a potential upside of 12.81%. That’s a more realistic buy zone, at the moment, rather than watching for the stock to zip past that prior high of $17.22, given the current market conditions.

As a whole, biotechs are among the market’s biggest winners right now, with companies such as Apellis Pharmaceuticals (NASDAQ:APLS), Aerie Pharmaceuticals (NASDAQ:AERI), Belite Bio (NASDAQ:BLTE), Verona Pharmaceuticals (NASDAQ:VRNA) and Revance Therapies (NASDAQ:RVNC) being some of the top price performers in the market right now, among all industries and sectors.

With the exception of Apellis, which is a mid-cap, all the others fall into the small-cap category, where you’ll often find stocks with outstanding price action. As noted earlier, a small market cap and small float can help a stock rise to the top without much institutional support, but always use caution, especially in the notoriously volatile biotech sector, where a disappointing clinical trial can send a stock plummeting.

Catalyst Pharmaceuticals

Should you invest $1,000 in Catalyst Pharmaceuticals right now?

Before you consider Catalyst Pharmaceuticals, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Catalyst Pharmaceuticals wasn't on the list.

While Catalyst Pharmaceuticals currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Article by Kate Stalter, MarketBeat