How do you find the right stock price when the company is losing money? The conundrum is not a new one and afflicts biotech stocks in particular. Biotech stock Rhythm Pharmaceuticals retreated from its all-time high of 68.58 to form a long early-stage base. In recent action, the relative strength line has perked up, showing that the stock is outperforming the benchmark S&P 500 index as shares approach their buy point of 68.58. Rhythm stock is Thursday's selection for IBD 50 Stocks To Watch.
Rhythm makes drugs to treat rare disorders leading to obesity due to genetic changes in adult patients and children older than two years. The biotech company continues to lose money but it has steady sales growth going for it.
Over the past eight quarters, growth in revenue has ranged between 26% and 426%. For the first quarter ended March 31, sales grew 26% to $32.7 million. A loss of 81 cents per share was a massive improvement from a loss of $2.35 per share in the same quarter a year ago.
Its losses have hurt the stock's Earnings Per Share Rating, which lags at 32, but they have not kept mutual funds away. Funds have been loading up over the past 13 weeks, giving Rhythm stock an Accumulation/Distribution Rating of B- on a scale of A-E.
On IBD MarketSurge's side panel, fund ownership of Rhythm stock is seen growing steadily over the past seven quarters. In the Investor's Business Daily mutual fund index, the Federated Hermes Kaufmann Small Cap Fund and the T. Rowe Price New Horizons Fund hold shares of the biotech firm.
Narrower Losses Expected
Analysts also see more improvement ahead with continued losses. They see a narrower loss of $2.70 per share in 2025 after a steep $4.34 loss in 2024. In 2026, estimates sit at a smaller loss of $1.38 per share. The Up/Down Volume Ratio of 1.6 indicates strong demand for the stock over the past 50 trading days.
Also, the stock's Relative Strength Rating of 90 is a strong point while the Composite Rating of 73 does not quite make it to the recommended threshold of 80. The biotech group holds 54th place among IBD's 197 industry groups, according to IBD Stock Checkup.
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