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.