Pharmaceutical Industry : The Best Performing Industry, Based On Stock Performance

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One of the most prominent sectors of the market has been healthcare. 2 The healthcare sector makes up 14.0% of the S&P 1500 and has had the highest 1 year, 3 year, and 5 year returns at 28.58, 30.51, and 23.85. 1 According the 2014 stock prices, investments within the healthcare sector have outperformed the S&P 1500 by 11.9%. The healthcare sector is made up of two industries, health care equipment & services group (37% of the healthcare sector) and pharmaceuticals, biotechnology & life sciences group (63% of the healthcare sector). According to the S&P industry analysis, the biotechnology industry has been the best performing industry, based on stock performance. In each of the last four years the biotechnology industry has outperformed…show more content…
This can be interpreted as, 41.7% of every dollar contributes to net income. Debt to capitalization is used to measure the amount of debt that in the capital structure. Companies with high debt to capitalization show weak financial strength in that more of its operations are financed through debt rather than equity, which increases default risk. The biotechnology industry of the S&P 1500 has been constant for the most part, only slightly increasing over the past several years due to mergers and acquisitions. To establish a valuation estimate of the biotechnology industry, the PEG ratio (price to earnings growth ratio) is analyzed. The average PEG ratio for the biotechnology industry is 1.2%, which is just higher than the ideal value representing a fair tradeoff between cost and growth. This means that the industry is slightly overvalued in terms of its growth. According to one year data, today’s market suggest that the overall state of the market is in an upward positive trend. The industries that provided the most potential for profit, revenue, and growth are ideal. Therefore, it is recommended to invest and overweight the biotechnology industry because of its performance and expected growth. Biogen (BIIB) is an S&P 500 company that has a 95.12 billion dollar valuation. It is part of the healthcare sector and one of the world’s oldest independent company in the biotechnology industry. Biogen develops, markets and

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