When you're evaluating most new stocks, it makes good sense to look at technical indicators – such as price-to-earnings ratio (P/E), profit margins, or revenue per share, to name a couple – so you know what you're buying.
But here's the rub. When you're scouting a promising biotech stock, the indicators I mentioned just won't tell you what you need to know.
Of course, we're dealing with a sector that can hand out uncommonly large profits, so our approach needs to be a little different.
Weigh these before you take your next biotech position, and you'll enjoy much bigger potential profits and lower your risk…
Why the Usual Indicators Just Won't Work
The reason is pretty straightforward: many small- and mid-cap biotechs haven't yet made a profit and probably won't for years to come.
Unlike big pharmaceutical companies, these smaller startups focus their time, money, and effort on research and development, rather than marketing new products.
About the Author
Ernie Tremblay has more than 25 years of experience in following and analyzing the latest developments in health, medicine, and related technologies. He understands the FDA approval process, as well as the "hard science" behind new, experimental drugs and the market demand for them - and has a comprehensive grasp of the complex dynamics that determine whether a new drug will be a breakthrough winner, or just another casualty of the FDA approval process.