Denali Therapeutics (DNLI): Assessing Valuation Following Recent 20% Share Price Rebound

Denali Therapeutics (DNLI) shares have seen some movement in recent trading sessions, catching the attention of investors who are curious about the drivers behind the change. Over the past month, the stock climbed 20%.

See our latest analysis for Denali Therapeutics.

Denali Therapeutics’ recent 20% share price surge over the past month stands in contrast to what has otherwise been a tough year for shareholders, with the 1-year total shareholder return down nearly 39%. Momentum has shifted to the upside in the short term, even as long-term holders have yet to break even.

If this rebound has you rethinking your portfolio’s potential, now might be the perfect moment to discover fast growing stocks with high insider ownership.

With short-term momentum gaining strength but long-term returns still lagging, investors are left to wonder: Is Denali Therapeutics currently undervalued, or is all of its future potential already factored into the price?

Price-to-Book of 2.3x: Is it justified?

Denali Therapeutics is trading at a price-to-book ratio of 2.3x, notably lower than its US Biotechs industry peers. At the latest closing price of $15.95, this suggests the stock is more attractively valued than many direct competitors.

The price-to-book ratio compares a company’s market value to its net assets on the balance sheet. For biotech firms like Denali Therapeutics, this multiple offers insight into how much investors are willing to pay today relative to what the company owns.

This lower price-to-book multiple implies the market may be cautious given Denali’s current unprofitability and lack of meaningful revenue. At the same time, it indicates that there may still be more value here compared to some other biotech names. Compared to the industry average of 2.6x and peer average of 5.2x, Denali’s figure stands out as compelling in a sector where valuation premiums often run high.

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

Result: Price-to-Book of 2.3x (UNDERVALUED)

However, investors should note that continued unprofitability and the absence of current revenue could weigh on Denali Therapeutics’ outlook and future share performance.

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

Another View: The SWS DCF Model Indicates Overvaluation

While Denali Therapeutics appears undervalued versus its peers by price-to-book, our DCF model provides a different perspective. The SWS DCF calculation estimates fair value at just $3.22 per share, which is well below the current price of $15.95. This suggests the market may be overly optimistic about future cash flows. How should investors weigh these conflicting signals?

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 Denali 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 Denali Therapeutics Narrative

If you see things differently or want to dig into the numbers yourself, you can craft your own perspective in just a few minutes. Do it your way.

A great starting point for your Denali Therapeutics research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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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.

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