Rhythm Pharmaceuticals broke out of a cup-with-handle base at a buy point of 50.22 on Monday as the biotech's excellent sales growth overshadows continued losses. Rhythm Pharmaceuticals is today's selection for IBD 50 Stocks To Watch.
Shares are just below the entry within the early stage base, and not far from their all-time high of 53.92, according to IBD MarketSurge chart analysis. Although the company has yet to turn profitable, strong sales growth has helped the stock outperform several other pharma stocks.
Rhythm Pharma stock rose above the 50-day moving average after it announced second-quarter results Aug. 6 and traded mostly above the 10-week moving average before breaking out. Tight price action as the stock formed the right side of the pattern is another positive feature of the base.
Sales growth ranged between 51% and 665% over the past eight quarters, which is one reason the company made it onto the IBD 50 list despite years of losses.
Biotech Stock's Loss Narrows
During the second quarter, a loss of 55 cents per share on sales of $29.1 million was an improvement from the prior year, when the company saw a loss of 82 cents per share. It also followed a severe loss of $2.35 per share in the prior quarter.
Analysts expect losses to continue and to amount to $4.43 a share in 2024, but they see the bottom line improving in 2025 with a loss of $2.72 per share. Most young biotechs are unprofitable.
The biotech stock has outperformed 95% of stocks in the Investor's Business Daily database in 12-month price performance. The Composite Rating of 79 is below the 90 minimum that leading stocks should have, and that's mainly due to the company's losses: Its EPS Rating is 16.
Rhythm provides treatments for weight management in obese patients. Mutual funds own 74% of shares outstanding, according to MarketSurge.
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