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Why Novocure Gained 33% in August

By Demitri Kalogeropoulos – Sep 10, 2018 at 10:31AM

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Wall Street is excited about the growing potential for the company's cancer-fighting treatments.

What happened

Novocure (NVCR 0.62%) stock far outpaced the market by gaining 33% last month compared to a 3% rise in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts.

The increase added to a sharp rally for shareholders, who've seen their stock more than double so far in 2018.

So what

Last month's rally continued a streak of rising optimism on Wall Street about Novocure's growth potential as its approach to cancer therapy gains traction in the healthcare industry. Electric field therapy is seeing strong prescription trends for certain types of brain cancer, but its potential applications don't end there. In fact, Novocure announced in mid-August that it is launching a new study aimed at assessing the effectiveness of its treatment on pancreatic cancer, one of the deadliest types of cancer.

Two scientists performing medical research.

Image source: Getty Images.

Now what

If the trial demonstrates improved survival rates, then Novocure's addressable market will likely extend far beyond its current footprint of mostly glioblastoma patients. But investors have to balance that promising potential against the company's rich valuation, given that shares are trading at a heady 20 times the past year's revenue following last month's rally.

Demitrios Kalogeropoulos 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.

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