Investing in modestly sized growth stocks can lead to significant returns, but oftentimes it requires taking on a fair bit of risk and being willing to wait at least a few years for a payoff. There are, however, ways to reduce your risk, such as by targeting stocks with good financials and that already have approved products with a lot of potential.
One mid-cap stock that should be on your radar if you're serious about investing in growth stocks is CRISPR Therapeutics (CRSP 3.60%). At $6.2 billion, its market cap isn't all that big for a company with so much potential upside. The biotech company already has an approved treatment in its portfolio, and it's a relatively safe option to invest in. Here's why it could make for an ideal growth stock to buy and hold right now.
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Why CRISPR has a lot of room to grow
CRISPR has an approved product in Casgevy, which it developed with Vertex Pharmaceuticals. The companies will share in the profits on the therapy, which is approved for a couple of rare blood disorders -- sickle cell disease and transfusion-dependent beta thalassemia. It's such a game-changer for patients with these conditions that even at over $2 million, experts believe it would still be a cost-effective treatment because it is a one-time treatment and acts as a functional cure in the vast majority of cases.
The two companies are still in the early stages of rolling out Casgevy, which is why CRISPR's financials remain fairly underwhelming; it has incurred $468 million in losses over the trailing 12 months. But it's about the future growth potential that Casgevy has, along with other treatments in CRISPR's pipeline, that could make it a multibagger investment in the long run. One of the most promising ones to watch for is CTX211, a possible treatment for type 1 diabetes that's in early-stage trials and which could help patients produce insulin on their own.
The stock is a safer option than other biotechs
The market for gene-therapy treatments is fairly small, but CRISPR is already making great progress thus far. The CRISPR-based gene-editing market is worth an estimated $4.5 billion this year, but it will grow to $13.5 billion by 2033, as per analysts at Grand View Research. That averages out to a compounded annual growth rate (CAGR) of 14.7%.
Investors may be cautious about CRISPR's stock, however, due to its lack of profitability and ongoing cash burn. But the company is well funded, with CRISPR reporting $1.7 billion in cash and marketable securities as of the end of June. Meanwhile, it has burned through $325 million over the course of its day-to-day operations over the past 12 months. The company's disciplined management and relatively low rate of cash burn could help minimize the need for future stock offerings and thus keep the dilution risk low for investors. CRISPR also has just under $319 million in total long-term and short-term liabilities on its books, which is just a fraction of the size of its total assets (more than $2 billion).
Some stock offerings and dilution may be inevitable, but CRISPR is a safer-looking stock than many other biotech stocks, which oftentimes have more pressing cash-flow concerns.
Is CRISPR Therapeutics stock a good fit for your portfolio?
CRISPR has plenty of growth opportunities ahead, and unlike some stocks that have similar valuations, it already has an approved product under its belt in Casgevy. Its strong liquidity also makes it a safer investment than most other biotech stocks.
This isn't a risk-free investment by any means, but if you're willing to take on some risk and are able to remain invested for at least five-plus years, I think CRISPR Therapeutics could make for a solid growth stock to buy and hold.
