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Pharmaceutical Stocks Affect the iShares NASDAQ Biotechnology ETF

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Aug. 26 2015, Updated 4:55 p.m. ET

The iShares Nasdaq Biotechnology ETF (IBB): Pharmaceutical sector valuations

The pharmaceutical subgroup of the iShares NASDAQ Biotechnology ETF (IBB) has 62 stocks in its portfolio. Of these, 49 stocks fell during the week ending August 7, 2015. The subgroup’s weekly average PBV (price-to-book ratio) came in at 9.75x. In the previous week, ended July 10, 2015, the subgroup’s PBV finished at 11.17x. Valuations fell ~12% overall.

 

The above graph reflects the PBV of the stocks that brought down the pharmaceutical subgroup’s valuation to 9.75x. Akorn (AKRX), Clovis Oncology (CLVS), Acadia Pharmaceuticals (ACAD), and Endo International (ENDP) fell 6.59%, 4.61%, 19.81%, and 4.33%, respectively.

PBV is a good way to determine if a stock is overpriced or undervalued. Although the ratio fluctuates largely according to the price movement, a stock that’s trading at less than its book value is likely undervalued and possibly a good investment opportunity.

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Pharmaceutical subgroup overall

On August 7, 2015, 34.55% of the stocks were trading above the pharmaceutical subgroup average PBV, and 65.45% of stocks were trading below it. In the previous week, ended July 31, 2015, the percentages were 33% and 67%, respectively.

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