Tuesday's IBD 50 Stocks To Watch pick — biotech leader Catalyst Pharmaceuticals — is one of the top stocks to watch, but has become too extended.
Stocks To Watch: Catalyst Pharmaceuticals
Catalyst Pharmaceuticals sells a treatment for a rare autoimmune condition called Lambert-Eaton myasthenic syndrome, or LEMS. The disease affects communication between the nerves and muscles, and saps away at muscle strength. It's closely tied to cancer.
Catalyst also is looking to expand its pipeline through an acquisition or partnership. A deal could be close, Chief Executive Patrick McEnany said on the company's third-quarter earnings call Nov. 10.
"Currently, we are in advanced stages of due diligence to acquire commercial-stage products and/or companies," he said. "And while no agreements have been reached to date, we are hopeful that we will be in a position to announce a transaction later this year."
In early November, Catalyst trounced Wall Street's third-quarter forecasts and raised its full-year outlook. During the September quarter, its Firdapse drug generated a record $57.2 million in sales. Sales surged more than 59% year over year and easily beat forecasts for $53.7 million, according to FactSet. Earnings more than doubled vs. this time last year to 22 cents per share and topped expectations by 3 cents.
Catalyst's IBD Stock Ratings
This stock shows a strong 99 Earnings Per Share Rating, out of 99, and an SMR Rating of "A," according to IBD Stock Checkup.
Over the last three quarters, Catalyst's EPS growth accelerated from 64% to 75% to 86%, according to IBD MarketSmith. Earnings acceleration is a bullish fundamental metric. Looking forward, earnings are expected to jump 97% in 2022 and another 21% in 2023. It booked a solid 42% pretax profit margin in 2021, as well as a great 31% return on equity.
Boasting a perfect 99 IBD Composite Rating due to strong fundamental and technical metrics, Catalyst stock is the top-ranked stock in the biotech industry group. Among the other biotech leaders, Neurocrine Biosciences is trying to find support around its 50-day line. A strong rebound from here would offer an alternate buying opportunity for the IBD Leaderboard stock.
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CPRX Stock Breaks Out
CPRX stock broke out Nov. 22, surging past a 16.76 buy point in a cup with handle, according to IBD MarketSmith chart analysis. The 5% buy zone goes up to 17.60, so shares were out of the buy range in late trading Tuesday.
Bullishly, the relative strength line hit a new high on the breakout day, reiterating Catalyst's status as a market leader. The RS line measures a stock's price performance vs. the S&P 500. Given the biotech leader's fundamental and technical strength, Catalyst is one of the top stocks to buy and watch in the current market.
Other IBD 50 Stocks To Watch
These are three recent IBD 50 Stocks To Watch picks.
| Company Name | Symbol | Correct Buy Point | Type Of Base |
|---|---|---|---|
| Allegro MicroSystems | 32.07 | Cup with handle | |
| UnitedHealth | 558.20 | Flat base | |
| New Fortress Energy | 60.43 | Cup with handle |
Source: IBD Data As Of Dec. 12, 2022
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on top stocks to buy and watch and the stock market.
