A Fresh Look at Akero Therapeutics (AKRO) Valuation Following Positive Phase 2b HARMONY Trial Results

Akero Therapeutics (AKRO) just revealed the final 96-week results from its Phase 2b HARMONY trial for efruxifermin, an investigational therapy for people living with MASH and significant liver fibrosis. The data, published in The Lancet, showed sustained improvements in fibrosis and markers of metabolic health. This is a meaningful milestone for patients and investors alike. Given the complexity of MASH and the unmet need for new treatments, this clinical update is likely to influence how the market values Akero's potential in the coming years.

This latest update arrives as Akero's stock has experienced considerable volatility over the past year. The stock has gained 80% compared to last year and has surged 75% year-to-date, despite some pullbacks in the past month. Momentum appears to be building around the potential of Akero's lead therapy, particularly following each major pipeline announcement and as anticipation grows for the pivotal Phase 3 readouts. For investors tracking signals of long-term value creation, these developments follow continued progress in Akero's clinical programs.

After this series of positive clinical data and a substantial run-up in the share price, it raises the question: Is Akero Therapeutics undervalued relative to its future potential, or is the market already pricing in high expectations?

Price-to-Book of 3.8x: Is It Justified?

Akero Therapeutics currently trades at a price-to-book ratio of 3.8x, which is significantly higher than the US Biotechs industry average of 2.2x. This indicates that the stock is trading at a premium compared to its peers.

The price-to-book multiple compares a company’s market value to its net asset value and is frequently used for evaluating biotech and pharmaceutical companies that may not yet be profitable. In Akero’s situation, the higher ratio may reflect investor confidence in its pipeline or anticipated future potential instead of current profitability.

In summary, Akero’s premium price-to-book ratio suggests the market is factoring in substantial future success and may be attributing more near-term value than is currently supported given the company has yet to generate significant revenue.

Result: Fair Value of $28.62 (OVERVALUED)

See our latest analysis for Akero Therapeutics.

However, persistent losses and zero revenue, combined with lofty expectations, could expose Akero’s shares to sharp corrections if key milestones disappoint.

Find out about the key risks to this Akero Therapeutics narrative.

Another View: What Does the DCF Model Say?

Taking a fresh look with the SWS DCF model, we arrive at an alternative perspective. This approach also points to Akero Therapeutics as overvalued, supporting the concerns raised by the earlier valuation. Could the market be running ahead of itself?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Akero Therapeutics for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Akero Therapeutics Narrative

If you think there's another side to Akero's story or want to dive deeper into the data yourself, you can build your own narrative in under three minutes and do it your way.

A great starting point for your Akero Therapeutics research is our analysis highlighting 4 important warning signs that could impact your investment decision.

Looking for More Smart Investment Ideas?

Don’t limit your research to just one stock. Some of the market’s most intriguing opportunities are waiting to be uncovered. Use the Simply Wall Street Screener to target unique growth stories that could give your portfolio an edge. Check out these standout angles right now:

• Uncover AI-driven healthcare innovators reshaping patient outcomes by checking out healthcare AI stocks.
• Access a shortlist of steady-dividend companies yielding over 3 percent to boost your income potential with dividend stocks with yields > 3%.
• Tap into the future of tech with a handpicked shot at quantum computing stocks, where quantum advancements are transforming global industries.

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