Biotechnology Stocks With Bullish Prospects

BOSTON (TheStreet) -- Biotechnology companies are rife with opportunity. And risk. The following biotech stocks may offer superlative rewards, according to TheStreet's quantitative equity model, which is more conservative than many research tools. Plus, sell-side analysts are overwhelmingly bullish on their prospects.

3. Cephalon(CEPH) develops products for the central nervous system, inflammatory diseases and oncology therapeutics.

Quarter: Fourth-quarter profit multiplied 19 times to $97 million, or $1.23 a share, as revenue gained 6.5% to $575 million. The operating margin widened from 25% to 31%. Cephalon holds $1.6 billion of cash, translating to a quick ratio of 1.5, and $1.2 billion of debt, equating to a debt-to-equity ratio of 0.5.

Stock: Cephalon gained 9.4% during the past year, underperforming U.S. indices. The stock trades at a price-to-projected-earnings ratio of 9.6, a 58% discount to its peer-group average. Its PEG ratio, a measure of value relative to expected growth, is low at 0.3. A PEG ratio below 1 implies cheap shares.

Consensus: Of analysts covering Cephalon, 17, or 68%, advise purchasing its shares while eight recommend holding them. Soleil Securities expects the stock to climb 30% to $92. UBS, Bank of America and JPMorgan also rate it "buy." TheStreet's model projects the stock will hit $81.07.

Catalyst: Full-year oncology sales gained 81% to $336 million, boosted by Treanda, Cephalon's lymphoma-treating drug. A pending acquisition of Mepha, a Swiss generic-pharmaceuticals specialist, is expected to double Cephalon's international business and add to full-year earnings per share.