Schrödinger (SDGR) Valuation in Focus Following Q3 Revenue Surge and Key Technical Milestone

Schrödinger (SDGR) delivered a strong Q3 2025 earnings report, as total revenue jumped sharply thanks to gains in both its Software and Drug Discovery businesses. The company also updated its financial guidance along with news of a major technical catalyst milestone.

See our latest analysis for Schrödinger.

Schrödinger’s recent breakthroughs in partnership with Copernic Catalysts, coupled with its strong Q3 revenue growth, have sparked renewed attention. However, the stock has experienced a year-to-date share price decline of 10.3% and a 1-year total shareholder return of -17.8%. Momentum has been choppy, but these catalysts are building expectations for longer-term growth and a potential shift in sentiment among investors eager for innovation-driven value.

If advances in scientific software and discovery are on your radar, now is a great moment to see how other healthcare leaders are performing. See the full list for free.

With shares still trading at a sizable discount to analyst price targets and mixed analyst sentiment, investors are left to ponder whether Schrödinger is now undervalued or if the market has already factored in future growth.

Most Popular Narrative: 33% Undervalued

Schrödinger’s widely followed narrative values the stock at $27.30, a solid premium over the last close of $18.29. This sets the stage for a story built on future growth and optimism in both software and drug discovery.

Expansion of large-scale strategic partnerships and collaborations (for example, with Novartis, Lilly, and Otsuka), combined with consistent 100% retention among largest customers and robust renewal discussions, increase near and long-term earnings visibility and reduce churn risk, stabilizing future earnings and free cash flow.

Read the complete narrative.

Curious what bold forecasts allow for such an ambitious fair value? The secret may lie in fast-rising revenues, robust recurring software income, and margin dynamics. What is really driving this target? Find out which critical financial leaps underpin the valuation and could change how you see Schrödinger.

Result: Fair Value of $27.30 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent margin pressures from rising costs and heavy reliance on milestone revenues could undermine the growth story if these headwinds intensify.

Find out about the key risks to this Schrödinger narrative.

Another View: The Sales Ratio Gap

While many investors look to future growth for comfort, the current market pricing tells a different story. Schrödinger trades at a price-to-sales ratio of 5.2x, which is much higher than both its industry peers at 2.8x and the fair ratio of 2.7x. This premium suggests investors may be overestimating the near-term payoff and raises the stakes if future growth falls short. Could this mean extra risk for buyers at today’s price?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Schrödinger Narrative

If you see the numbers differently or want to conduct your own analysis, you can uncover your personalized investment narrative in just a few minutes. Do it your way

A great starting point for your Schrödinger research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for More Investment Ideas?

Turn today's insights into genuine action by uncovering hidden investment opportunities other traders might overlook. Don't let the best ideas slip past you this time.

• Spot high-yield opportunities and maximize your income by browsing these 16 dividend stocks with yields > 3% with standout dividend potential and reliable returns.
• Get ahead of tomorrow’s breakthroughs in medicine and patient care by assessing these 32 healthcare AI stocks at the forefront of healthcare innovation.
• Capture the upside of ongoing tech disruption by examining these 24 AI penny stocks using artificial intelligence to transform industries and redefine success.

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