In a sector in which so many stocks seem wildly overpriced, one in particular looks extraordinarily cheap, explains David Milstead in Kiplinger's Personal Finance.

Bubble or not, biotech investors have been having a blast.  Over the past five years, iShares Nasdaq Biotechnology ETF (IBB) earned an annualized 31.2%.

There are legitimate reasons for the fervor. Industry insiders say the pace of innovation has never been greater and the Food and Drug Administration is approving more drugs more quickly than ever.

Finding success stories remains a challenge, however. “To invest in individual names in this field, you need nerves of steel and confidence that you understand the science,” says Morningstar analyst Robert Goldsborough.

We should note that in a sector in which so many stocks seem wildly overpriced, one in particular looks extraordinarily cheap.

Gilead Sciences (GILD) is the largest biotech company, with a market value of $150 billion and expected revenues this year of $28.1 billion.

The stock has stalled since October and it now sells for 11 times analysts’ average 2015 earnings estimate of $9.53 per share, which represents an 18% increase from last year’s profit. By contrast, the price-earnings ratio of the S&P 500 is 17.

Gilead’s core business is treatments for HIV, but the firm has been branching out, via acquisition, into other fields.

Its newest drugs, Harvoni and Sovaldi, have already given Gilead a dominant share of the market for treating hepatitis C, says analyst Jeffrey Loo, of S&P Capital IQ. But competition is heating up, which may explain why the stock is so cheap.

Gilead’s shares appear to be way too cheap to ignore. Analysts Phil Nadeau and Marc Frahm, of Cowen & Co., have a 12-month price target of $125. Loo is even more bullish, with a one-year target of $143.

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