Last year, the Federal Reserve began hiking interest rates in an effort to slow down the economy. Today, interest rates are at their highest levels since the early 2000s. For many businesses, an increase in interest rates has led to investors feeling less bullish on their stocks as borrowing costs rise and growth becomes more difficult.
But three stocks that are up big even as the Fed began hiking rates are Eli Lilly (LLY 1.19%), Axsome Therapeutics (AXSM 0.27%), and TransMedics Group (TMDX 3.17%). Let's see what their prospects look like from here -- and whether they can continue the momentum.
1. Eli Lilly
Since March 2022, shares of Eli Lilly are up close to 130%. Rising interest rates simply haven't been enough to slow down this business -- and for good reason. Lilly generates strong financial results that allow it to manage rising interest costs. Its profit margin, for instance, is fairly high at 16% of revenue. Last year, the company also generated $4.6 billion in free cash flow.
Lilly also has some incredibly encouraging growth prospects that are proving to be too enticing to keep investors away. With an Alzheimer's treatment in donanemab and a possible game changer for the weight-loss industry in Mounjaro, the company has a couple of promising assets that could soon obtain approval from regulators and generate billions in revenue.
That optimism and bullishness is why even at a multiple of more than 40 times its estimated future profits, Eli Lilly remains a hot buy. For long-term investors, there is still tons of value here as Mounjaro on its own might be able to bring in over $50 billion in annual revenue at its peak.
2. Axsome Therapeutics
Another stock that hasn't been slowed down by rising interest rates is Axsome Therapeutics. Since March of last year, its shares have risen 110%. Previously a small-cap stock, Axsome is now worth more than $3 billion as its business has become much stronger. The company has gone from generating no revenue to now having multiple assets in its portfolio that it can rely on for sales.
In August 2022, the Food and Drug Administration (FDA) approved its treatment for major depressive disorder, Auvelity. It is a fast-acting treatment that can help people see results in as little as one week. At its peak, it could generate $1.8 billion in sales, according to analyst projections.
Combined with Sunosi, the company's narcolepsy drug, Axsome generated just under $58 million in revenue in its most recent quarter, which ended on Sept. 30; that amounts to a 244% growth rate in its top line.
The company still isn't profitable, incurring a net loss of $62.2 million last quarter, but there are encouraging signs that the business is moving in the right direction with the approval of Auvelity.
There's more risk with Axsome than there is with Eli Lilly, but the company is also early in its growth stages, and there could still be much more upside for this healthcare stock in the years ahead.
3. TransMedics Group
Shares of TransMedics have been falling in recent months, but overall this healthcare stock's value has increased 130% since March 2022. TransMedics has been on a steady incline for much of that stretch, but this is still a small-cap stock with a valuation of around $1.4 billion.
The medical device company has an organ-care system, which the FDA has approved for transporting multiple organs, potentially offering life-saving solutions to patients in need of transplants.
This year, TransMedics anticipates it will generate as much as $230 million in annual revenue, which would be more than double what it reported last year ($93 million).
The company has been a growth machine, and there's still lots of potential for the business to get much bigger in the years ahead. With fantastic gross margins north of 60%, TransMedics should continue to improve its bottom line along with all the growth it has been generating, and hopefully reach breakeven in the future.
Given its small market capitalization and strong revenue growth, TransMedics is a stock that still has plenty of room to rise even higher.
