Shareholders of Collegium Pharmaceutical would probably like to forget the past six months even happened. The stock dropped 36.3% and now trades at $30.47. This might have investors contemplating their next move.
Is now the time to buy Collegium Pharmaceutical, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Collegium Pharmaceutical Not Exciting?
Even though the stock has become cheaper, we’re cautious about Collegium Pharmaceutical. Here are two reasons why there are better opportunities than COLL, plus one stock we’d rather own.
1. Fewer Distribution Channels Limit Its Ceiling
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With just $796.3 million in revenue over the past 12 months, Collegium Pharmaceutical is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.
2. Shrinking Adjusted Operating Margin
Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.
Analyzing the trend in its profitability, Collegium Pharmaceutical’s adjusted operating margin decreased by 6.4 percentage points over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 58.1%.
Final Judgment
Collegium Pharmaceutical’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at $30.47 per share (or a forward price-to-sales ratio of 1.4×). The market typically values companies like Collegium Pharmaceutical based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere. We’d recommend looking at a dominant aerospace business that has perfected its M&A strategy.
Stocks We Would Buy Instead of Collegium Pharmaceutical
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
