NEW YORK (TheStreet) -- In the chart above, J.P. Morgan biotech analysts Geoff Meacham and Cory Kasimov make another argument for why the biotech bull market should continue to run higher. Price-to-earnings multiples for large-cap biotech are on the rise, but that's okay because so earnings growth is also accelerating.
The sector's P/E expansion that began in early 2012 has gone almost parabolic in 2013. Take a look at the near-vertical slope of that blue line, with P/Es for stocks like Celgene (CELG) ,Gilead Sciences (GILD), Amgen (AMGN) and Biogen Idec (BIIB) approaching 20 and poised to move even higher into the second half of the year.
Is the biotech multiple expansion a concern? The J.P. Morgan team thinks not because the 2012-2015 compounded annual growth rate for biotech earnings is forecast to reach 18%. Right now, the projected 2015 P/E for large-cap biotech is 14-16x.It may be hard to believe, but revenue and earnings expectations for this year are still on the low side. Check out the slide on the next page.
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