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Why Most Analysts Are Bullish on NovoCure

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Operational performance

NovoCure (NVCR) is expected to incur SG&A (selling, general, and administrative) expenses of $35.4 million in the second quarter, compared with $31.38 million in the second quarter of 2017, an increase of 12.8%. NovoCure’s R&D (research and development) expenses are expected to increase 47.06% from $9.37 million in the second quarter of 2017 to $13.78 million in the second quarter.

NovoCure’s total operating expenses are expected to increase 18.1% from $40.75 million in the second quarter of 2017 to $48.13 million in the second quarter.

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Bottom line

NovoCure is expected to report a net loss of $14.45 million in the second quarter, compared with a net loss of $21.17 million in the second quarter of 2017. This translates into EPS of -$0.16 in the second quarter compared with EPS of -$0.24 in the second quarter of 2017. Analysts expect this improvement in NovoCure’s performance to continue and forecast net income of $0.28 per share for fiscal 2019.

Analysts’ recommendations

Two of the six analysts covering NovoCure in July gave the stock a “strong buy” rating, and four analysts gave it a “buy” rating. The mean rating for NovoCure is 1.67 with a target price of $34.17.

Among its peers, Johnson & Johnson (JNJ), Intuitive Surgical (ISRG), and Bristol-Myers Squibb (BMY) have mean ratings of 2.29, 2.06, and 2.55, respectively, and target prices of $143.20, $562.40, and $57.56, respectively.

Price performance

After ranging from $20 to $22 in 2018 until March, NovoCure stock has steadily risen to its current level of $37. Currently, NovoCure trades at a forward price-to-earnings multiple of 219.71x. Its price-to-sales ratio is 17.44, and its price-to-book ratio is 31.81. The company’s enterprise-value-to-revenue ratio stands at 15.06.

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