A FTSE 250 growth share I’d buy to target a multibagger return

Engineer Project Manager Talks With Scientist working on Computer

Buying FTSE 250 shares can sometimes give us a white-knuckle ride. But then, the mid-cap index has trounced the FTSE 100 in long-term returns.

We’re looking at a long-term average return from the smaller index of around 11% per year, against closer to 7%.

FTSE 250 stocks have been falling back again in the past few years, but they’re starting to make gains once more.

FTSE 250 growth

There are some big dividends from the FTSE 250, but today I have my eye on a pure growth stock.

It’s biotech research firm PureTech Health (LSE: PRTC). And its share price over the past five years has been… how pale are those knuckles again?

Explosive growth?

Let’s look at an obvious negative. PureTech is not producing regular profit, and forecasts don’t show any in the next couple of years.

But, the company has just completed a share buyback to the tune of $100m. Isn’t it a bit strange for a company that’s not in profit to be returning cash? Well, yes.

But the $14bn sale of the PureTech-founded Karuna Therapeutics to Bristol Myers Squibb made a big difference to the cash pile.

And at the end of the last full year on 31 March, the company reported cash, equivalents, and short-term investments of $573m. The board reckons there’s enough to keep it going for the next few years.

Clinical research

The future is all about the possibilities for PureTech’s research. It specialises in medicines related to the brain, gut, and immune system. And it has a number of candidates making their way through the regulatory systems in the EU and the US.

As well as it’s own research, PureTech has fingers in a lot of other pies, through its ‘Founded Entities’ approach… like that Karuna success.

It has stakes in a range of firms, working in the neuropsychiatric, oncology, immunology, and other fields.

The way forward

It’s all down to hopes for PureTech’s research pipeline, and those of its Founded Entities. But for me, I see the approach here as more attractive than most in this business.

Speaking of the firm’s internal research targets, CEO Bharatt Chowrira spoke of the options open to advance them.

He spoke of “progressing them in Founded Entities or through partnerships” as one way. And when the firm launches a new firm like this, they’ve recently been oversubscribed.

Oh, and the CEO also pointed out that “We take great pride in our track record of clinical success, which is six times the industry average“.

A buy?

Buying PureTech Health shares now would be very speculative. We just don’t have the usual measures to value it. There’s no useful price-to-earnings (P/E) ratio, no dividend yield, etc.

But, analysts do expect strong sales from PureTech in the next couple of years.

It’s tricky weighing this against the other stocks on my wanted list. But if I buy, it’ll only be small amount, as there’s a chance of losing it. But if it comes good, I might hope for a multibagger here.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More reading

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.