Please ensure Javascript is enabled for purposes of website accessibility

2 High-Growth Stocks I'd Buy Right Now

By George Budwell - Updated Apr 15, 2019 at 2:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Catalyst Pharmaceuticals and HEXO could both be on the verge of a long-tailed growth trend.

With the economy showing signs of cooling off, investors will have to tread carefully when it comes to buying growth stocks. That said, there are still a handful of names worth buying, even in this uncertain economic climate.

The rare-disease drugmaker Catalyst Pharmaceuticals (CPRX 2.43%) and the Canadian pot grower HEXO (HEXO 3.11%) are perfect examples. These two names are on the cusp of some truly mind-boggling levels of top-line growth, making them great additions to any portfolio. Here's what investors need to know right now. 

Jars filled with dried marijuana flowers sitting on a table top.

Image source: Getty Images.

A bright future

Catalyst's shares have more than doubled in value since the start of the year. The reason? The drugmaker's shares have taken flight in response to the strong commercial start for its newly approved Lambert-Eaton myasthenic syndrome (LEMS) treatment Firdapse. LEMS is a rare autoimmune disorder that reportedly affects around 3,000 individuals in the United States. 

What's the big deal? While Catalyst garnered a fair amount of criticism for pricing Firdapse at $375,000 for a year's supply, the drug reportedly isn't getting much pushback from insurance companies in terms of coverage. That's especially good news since there is a far cheaper alternative called 3,4 DAP, which has been on the market for over 20 years at this point.

The long and short of it is that this cheaper version of the drug was expected to dampen Firdapse's commercial opportunity -- or at least slow its adoption rate in a big way. But that key threat simply hasn't materialized in the marketplace since the drug's launch earlier this year.

Although Firdapse's initial target market consists of the 300 or so patients presently on 3,4 DAP, the company expects to ramp up the number of patients on therapy to about 1500 in the next few years. If the market remains stable and Catalyst can maintain this premium pricing point going forward, there's a good chance that Firdapse will generate over $600 million in peak sales for this single indication by 2025. 

As an added bonus, Catalyst is also close to two late-stage readouts for Firdapse in congenital myasthenic syndromes and myasthenia gravis. Later down the line, the company hopes Firdapse will prove to be viable therapy for a form of spinal muscular atrophy as well. These additional indications could push Firdapse into blockbuster sales territory. 

All told, Catalyst's stock appears to be grossly undervalued based on its tiny market cap of $413 million. Firdapse, after all, is now a de-risked commercial asset with a bright future.  

Check out the latest earnings call transcripts for Catalyst Pharmaceuticals and other companies we cover.

A cheap Canadian pot play

Valuations across the Canadian pot landscape have reached unsightly levels -- except for perhaps HEXO's. Even though HEXO's stock has shot up by 85% so far this year, this under-the-radar pot stock could still have a lot more room to run.

What's the lowdown? HEXO's shares have been on fire ever since the company announced the acquisition of Newstrike Brands in an all-share transaction valued at around $197 million. This deal should catapult HEXO into the upper echelon of Canadian pot growers with a peak annual production capacity of about 150,000 kilograms

The key issue to understand is that the only true form of economic moat that exists in this emerging industry is sheer production output. By having a top-flight production capacity, companies can more easily establish a bulkhead in other, more lucrative market segments like edibles, beverages, etc. Dried flower prices, after all, appear to be on the cusp of a dramatic decline.

Why is HEXO's stock still worth buying? While most of its peers are trading well over 10 times next year's sales, HEXO's shares are probably hovering around something like four to six times the company's 2020 revenue haul. That forward-looking valuation is far more attractive than that of any of the top players in the field right now -- many of which may struggle to justify their rich premiums once dried flower prices start to come under pressure within the next 18 months.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

HEXO Stock Quote
$0.41 (1.22%) $0.01
Catalyst Pharmaceuticals, Inc. Stock Quote
Catalyst Pharmaceuticals, Inc.
$7.17 (2.43%) $0.17
HEXO Stock Quote
$0.33 (3.11%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.