Has Exact Sciences Rally of Over 50% Left Room for Further Upside?

• If you are wondering whether Exact Sciences is still a smart buy after its big run, or if you are late to the party, this breakdown will help you assess whether the current price reflects the company’s long term potential.
• The stock has cooled slightly over the last week, down 0.2%. However, that follows a 51.2% jump over the last month, gains of 77.9% year to date, and 57.9% over the past year. This naturally raises questions about how much upside may remain.
• Recent moves have been driven by growing optimism around Exact Sciences position in cancer diagnostics, as investors continue to focus on the adoption of its flagship screening tests and its expansion into new indications. Broader market interest in innovative healthcare names has also contributed to a re rating of the stock as sentiment around long term growth in precision medicine improves.
• Right now, Simply Wall St gives Exact Sciences a valuation score of 4/6, meaning it screens as undervalued on most of our checks, but not all. This makes it a useful case study for walking through different valuation approaches and then finishing with a more complete framework for thinking about what the market might be missing.

Exact Sciences delivered 57.9% returns over the last year. See how this stacks up to the rest of the Biotechs industry.

Approach 1: Exact Sciences Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model projects a company’s future cash flows and then discounts them back to today’s value to estimate what the business is worth now. For Exact Sciences, Simply Wall St uses a 2 stage Free Cash Flow to Equity approach in $.

The company generated around $222 million of free cash flow over the last twelve months, and analysts expect this to dip to about $78 million in 2024 as the business continues to invest for growth. Beyond near term volatility, free cash flow is projected to climb steadily, reaching roughly $1.3 billion by 2035 according to the extended forecasts used in the model.

When these projected cash flows are discounted back, the intrinsic value comes out at about $119.31 per share. Based on the current market price, this implies the stock trades at roughly a 15.1% discount to its estimated fair value. This indicates that investors may not be fully pricing in the longer term cash flow potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Exact Sciences is undervalued by 15.1%. Track this in your watchlist or portfolio, or discover 908 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Exact Sciences.

Approach 2: Exact Sciences Price vs Sales

For companies like Exact Sciences that are still working toward consistent profitability, the price to sales ratio is often a more useful yardstick than earnings based metrics. Sales are typically more stable than earnings for high growth healthcare businesses, making this multiple a clearer way to compare how the market is valuing each dollar of revenue.

What counts as a reasonable price to sales multiple depends heavily on growth expectations and risk. Faster revenue growth and a more defensible competitive position can justify paying a higher multiple, while execution risk, regulatory uncertainty, or intense competition usually warrant a discount.

Exact Sciences currently trades on a price to sales ratio of about 6.22x. That is meaningfully below the Biotechs industry average of 11.58x, and also sits under the peer group average of around 7.53x. Simply Wall St goes a step further with its Fair Ratio estimate of 6.93x, which represents the price to sales multiple that might be expected given Exact Sciences growth outlook, profitability profile, risk factors, market cap and industry context.

This Fair Ratio is more tailored than a simple peer or industry comparison because it adjusts for company specific factors rather than assuming all biotech names deserve the same valuation.

Comparing the Fair Ratio of 6.93x with the actual 6.22x indicates that the stock is trading at a discount to what would be justified by its fundamentals.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Exact Sciences Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, an approach where you write a simple story about Exact Sciences based on your view of its products, competition, and industry tailwinds, then connect that story to a set of numbers such as future revenue, earnings, margins, and a fair value estimate.

A Narrative links three pieces together: what you believe about the business, the financial forecast that flows from those beliefs, and the fair value that those cash flows justify, giving you a clear and consistent way to decide whether the current share price looks attractive or stretched.

On Simply Wall St, Narratives live inside the Community page used by millions of investors. There you can quickly adjust assumptions, see the fair value that drops out, and compare it to today’s price to help guide your own decisions.

Because Narratives are updated dynamically when new information like earnings results, product announcements, or deal news arrives, they help you keep your thesis current. For example, one investor might now anchor their Exact Sciences Narrative around the Abbott offer price, while another focuses on execution risks and assigns a meaningfully lower standalone fair value.

Do you think there's more to the story for Exact Sciences? Head over to our Community to see what others are saying!

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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