Assessing Harrow’s Value After a 22.8% Surge and Recent Earnings Release

If you have been watching Harrow stock lately, you probably have a decision to make. Should you stick with it after that 22.8% surge over the past month, or does the recent 3.5% dip in the last week have you worried? Looking further back, Harrow’s long-term performance is hard to ignore, with returns of 279.5% over three years and a staggering 701.2% over five years, even if the stock is still down 9.8% in the last year. These big moves have been shaped by broader market optimism for the sector, with investors rewarding companies showing resilience and innovation as the landscape evolves.

So, is it still a smart buy, or is the best part of the ride behind us? That is where valuation gets interesting. On a standard set of six value checks, Harrow scores a solid 4, meaning it looks undervalued in four areas that matter to savvy investors. But are these scorecards enough to tell the whole story?

Let’s dig into the key methods experts use to assess whether Harrow is truly undervalued, and see how those measures stack up. Stick around, though, because I think there is an even better lens to look through, one that goes beyond the textbook approaches.

Why Harrow is lagging behind its peers

Approach 1: Harrow Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s true value by projecting its future cash flows and discounting them to today’s dollars. This helps investors gauge what shares are really worth, based on fundamentals rather than market buzz.

For Harrow, the latest data shows current Free Cash Flow (FCF) sitting at -$89.4 million. Analysts provide detailed projections up to five years out, forecasting FCF to grow steadily, with future estimates showing $291.4 million by 2029. Beyond that, cash flows up to 2035 have been extrapolated, still showing continued growth but using slightly more conservative estimates.

Once all those future cash flows are tallied and discounted back to today, the DCF model arrives at an intrinsic value of $247.78 per share. Compared to the current market price, this implies Harrow could be 81.7% undervalued according to this method.

For investors who care about the numbers, this is as strong a case as you can get that the stock is trading at a substantial discount to its underlying business potential.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Harrow is undervalued by 81.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Harrow Price vs Sales

The Price-to-Sales (P/S) ratio is a widely used valuation metric, particularly helpful for evaluating companies like Harrow that may not yet be consistently profitable but are showing strong revenue growth. Since it looks at how much investors are paying for each dollar of sales, it is especially relevant in industries where earnings can be volatile or heavily influenced by research and development costs.

Generally, growth expectations and perceived risk affect what is considered a “normal” or “fair” P/S ratio. If a company is expected to grow faster than its peers, the market may tolerate a higher ratio. On the flip side, higher risk or inconsistent revenue may warrant a lower multiple.

Currently, Harrow trades at a P/S ratio of 7.4x. That is considerably higher than the pharmaceuticals industry average of 4.9x, and it also sits above the average of similar peers at 3.0x. At first glance, this could signal overvaluation. However, it is important to consider more than just averages when judging a stock’s value.

The Simply Wall St Fair Ratio cuts through the noise by factoring in Harrow’s projected growth rates, profit margins, market capitalization, and sector-specific characteristics. This approach goes deeper than headline numbers by adapting to the company’s actual fundamentals, strengths, and risks, making it a more holistic comparison than industry or peer benchmarks.

In Harrow’s case, the Fair Ratio is calculated at 7.66x, which is strikingly close to the current P/S ratio of 7.4x. That means Harrow’s valuation based on this metric looks quite reasonable given its unique position and outlook.

Result: ABOUT RIGHT

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

Upgrade Your Decision Making: Choose your Harrow Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your story and perspective about Harrow, connecting what you believe about its future, like sales growth or profit margins, to a financial forecast and ultimately a fair value. This approach helps you move beyond static numbers by letting you test your own assumptions, build a forecast, and see the “why” behind your potential buy or sell decision, all within the Community page on Simply Wall St where millions of investors contribute.

Narratives make it easy to track how new information, such as earnings announcements, product launches, or news, dynamically impacts fair value estimates and upgrades your view in real-time. For Harrow, for example, some investors may focus on the upside from specialty ophthalmics and assume a fair value of $76.0 per share, while others might emphasize margin risks and prefer a conservative $42.0. Both can transparently compare those views against today’s market price and adjust their stance as the facts change.

Do you think there's more to the story for Harrow? Create your own Narrative to let the Community know!

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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