Galapagos (ENXTAM:GLPG) Valuation in Focus After Decision to Exit Cell Therapy Business

Galapagos (ENXTAM:GLPG) has announced plans to wind down its cell therapy business after a comprehensive strategic review. This significant decision refocuses the company’s resources and signals a shift in its long-term priorities.

See our latest analysis for Galapagos.

Over the past year, Galapagos' total shareholder return slipped just 0.5%, despite the company making some big moves. These include a leadership shakeup last week and now a major refocus away from cell therapy. Meanwhile, its share price has seen a modest uptick year-to-date, hinting that investors are cautiously optimistic but still waiting for proof that these structural changes will translate into long-term momentum.

If you’re exploring where else innovation and leadership changes are sparking opportunity, now’s the perfect moment to discover fast growing stocks with high insider ownership

The bigger question for investors now is whether Galapagos’ recent refocus and leadership changes mean the stock is undervalued, or if the market has already factored in all the potential for future growth.

Price-to-Sales of 6.7x: Is it justified?

Galapagos trades at a price-to-sales (P/S) ratio of 6.7x, noticeably higher than the peer average and the estimated fair value. With a last close of €27.88, this suggests the market is pricing in greater growth potential or strategic value, despite current unprofitability.

The price-to-sales ratio shows what investors are willing to pay for each euro of revenue. For biotechs like Galapagos, where profits can be elusive, the P/S multiple is often used to gauge forward-looking expectations tied to pipeline progress or management changes.

At 6.7x, Galapagos stands out as more expensive than its sector peers. The European Biotechs industry average is 9.1x, and the peer average is 5.4x. However, the estimated fair ratio is just 2.6x, indicating that the current valuation may be running ahead of fundamentals and could eventually revert toward that fair level.

Explore the SWS fair ratio for Galapagos

Result: Price-to-Sales of 6.7x (OVERVALUED)

However, disappointing clinical results or sluggish revenue growth could challenge investor optimism and prompt a reassessment of Galapagos' valuation premium.

Find out about the key risks to this Galapagos narrative.

Build Your Own Galapagos Narrative

If you want to dig deeper or challenge this view, you can review the data and shape your own perspective in just a few minutes, then Do it your way

A great starting point for your Galapagos research is our analysis highlighting 2 important warning signs that could impact your investment decision.

Looking for More Investment Ideas?

Don't miss your chance to get ahead of the trends. Smart investors are always searching for new opportunities before the crowd catches on. Give yourself an edge with these targeted approaches:

• Grow your income by tapping into reliable payouts with these 17 dividend stocks with yields > 3% offering attractive yields above 3%.
• Seize the potential of next-generation medicine by checking out these 33 healthcare AI stocks transforming the healthcare landscape with artificial intelligence.
• Unlock opportunities others overlook by reviewing these 881 undervalued stocks based on cash flows that are currently trading below their intrinsic value based on future cash flows.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com