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Why Harmony Biosciences Stock Is Up 15% Today

By James Brumley – Oct 19, 2021 at 12:49PM

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The young biopharma outfit is set to become part of a major market index, which means a buying spree is on the radar.

What happened

Shares of Harmony Biosciences Holdings (HRMY 1.15%) were trading more than 15% higher as of midday Tuesday following news that the company is to become part of the S&P 600 small-cap stock index.

So what

S&P Global's S&P Dow Jones Indices division made the announcement after yesterday's close, reporting that along with LendingTree, Harmony Biosciences would officially become an S&P 600 constituent before this coming Friday's opening bell rings.

Rising bar chart drawn on a chalkboard.

Image source: Getty Images.

Aside from being something of an accolade, being chosen as part of an index means any institution that manages an S&P 600 index-based mutual fund or exchange-traded fund will now be adding this stock to their investment pools. This en masse buying translates into bullish buying pressure on shares. Today's frenzied buying is the market's anticipation of Friday's big impending buy-in.

Now what

Credit must be given where it's due. Harmony Biosciences Holdings has earned its place within the S&P 600. Last year's top line of $159.7 million was the first meaningful revenue the young company has produced, driven by the approval of its Wakix (pitolisant) tablets for the treatment of narcolepsy. Yet, it was enough to pull Harmony out of the red and into the black... at least on an operating basis. This year's projected top-line growth of 92% should improve upon last year's adjusted per-share profit of $0.21 to $1.10, en route to next year's estimated (operating) per share earnings of $2.84.

The biopharma outfit is clearly on a growth track. And even with today's big rally, shares are still down 16% from November's post-IPO peak. In a bigger-picture sense, however, there's still plenty of room for more upside.

In light of the sheer strength of today's pop, though, the impending inclusion in the S&P 600 isn't quite enough to merit stepping in now. 

James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends S&P Global. The Motley Fool has a disclosure policy.

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