Growth stocks have resoundingly outperformed value and dividend stocks since the 2008 financial crisis. While this trend is a reversal relative to historical norms, growth stocks are likely to continue to deliver outstanding returns over the long term due to the emergence of powerful secular trends in healthcare, information technology, and alternative energy, among other areas of the global economy.
Which growth stocks are worthy of consideration right now? Kura Oncology(NASDAQ: KURA) and Hims & Hers Health, Inc.(NYSE: HIMS) have both trounced the S&P 500 through the first five months of 2024, which says a lot given the relative strength of this benchmark index this year. Here's why savvy investors may want to add these two red-hot healthcare stocks to their portfolios right now.
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The case for buying Kura Oncology stock
Kura Oncology, headquartered in San Diego, is a developmental biopharmaceutical company focusing on crafting oral small-molecule drugs aimed at pivotal cancer signaling pathways. This year, Kura's stock has surged by 46% to date, a testament to investor confidence in the drugmaker's menin inhibitor, ziftomenib.
This novel oral treatment for leukemia has the potential to surpass $1 billion in sales if it secures regulatory nods in both the front- and later-line settings for a specific form of acute myeloid leukemia, according to Credit Suisse analysts.
What's the big deal? Kura currently has a market cap of approximately $1.6 billion. As cancer drugs are renowned for their pricing power and long commercial shelf lives, biotechs developing oncology drugs often trade at well over 3 times the peak sales estimate of their flagship medication.
Although ziftomenib still has a long way to go in the clinic to unlock its full potential, there's a solid case to be made that Kura's shares may be deeply undervalued at current levels. Wall Street, in fact, has a consensus price target on the stock that implies an upside potential of 44% over the next 12 months.
What's the risk? Leukemia drugs have a high failure rate in the clinic, and a major setback for ziftomenib would surely cause Kura's shares to revert to the mean. Given this stark reality, this cancer drug stock is arguably only suited for investors with a high tolerance for volatility and risk.
The case for buying Hims & Hers Health stock
Hims & Hers Health, an innovative player in the online sexual health and pharmaceutical space, has demonstrated resilience and growth despite recent market turbulence caused by its CEO's controversial remarks.
The company's stock has delivered a robust 30.9% return on capital year to date. This impressive performance is backed by the company's first-quarter report for 2024, which showcased a record increase in net new subscribers, now totaling 1.7 million on its platform.
The company's escalating subscriber count is a direct reflection of a significant ongoing demographic shift -- a steadily aging American population. Projections from census.gov indicate that by 2050, there will be a 45% increase in the population of Americans aged 65 and older.
As the need for Hims & Hers' core offerings grows with age, these products are poised to transition from elective to essential, ensuring a sustained quality of life for this demographic.
Wall Street analysts have also picked up on this favorable tailwind. The current consensus price target on the stock implies that Hims & Hers' shares might be undervalued by up to 33%.
Over the next 10 to 15 years, the healthcare company's stock could yield multi-fold returns, thanks to this demographic shift. However, execution will undoubtedly be key to unlocking its full value proposition over this period.
Should you invest $1,000 in Kura Oncology right now?
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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
