Indivior (NasdaqGS:INDV): Is the Stock’s Valuation Justified After Upgraded Earnings Outlook?

Indivior (NasdaqGS:INDV) raised its full-year earnings outlook after reporting third quarter results. Net income climbed to $42 million from $22 million a year ago. Investors often watch these guidance updates closely.

See our latest analysis for Indivior.

Indivior’s sharp 134.96% share price return year-to-date stands out, especially after the company’s upgraded outlook and improved third quarter profits. The momentum has clearly accelerated in recent weeks, and the 219.93% total shareholder return over the past year makes Indivior one of the sector's star performers.

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With the stock already showing explosive gains and analysts forecasting further growth, the key question is whether Indivior is still trading below its true value or if the market has already priced in all the good news.

Price-to-Earnings of 49.6x: Is it justified?

Indivior currently trades at a price-to-earnings (P/E) ratio of 49.6x, which is substantially higher than both its direct sector peers and the broader US pharmaceuticals market. At the last close of $29.37, investors are paying a steep premium relative to expected earnings.

The price-to-earnings ratio compares a company’s market price to its per-share earnings, serving as a quick snapshot of how much investors are willing to pay per dollar of profit. For high-growth pharmaceutical firms, elevated P/E ratios often reflect optimism about future profit expansion. However, they may also signal heightened expectations that the company must meet or exceed to justify its valuation.

Indivior’s P/E outpaces the US pharmaceuticals industry average of 18.1x, as well as the estimated fair P/E ratio of 33.2x suggested by our model. This positions Indivior’s stock as expensive not just against its listed competitors, but also relative to what the market might consider a fair multiple for its growth profile. Any reversion towards the fair ratio could have notable implications for the share price.

Explore the SWS fair ratio for Indivior

Result: Price-to-Earnings of 49.6x (OVERVALUED)

However, slowing annual revenue growth and a lofty valuation mean that Indivior's performance could quickly reverse if market optimism wanes.

Find out about the key risks to this Indivior narrative.

Another View: SWS DCF Model Suggests Deep Undervaluation

While the steep price-to-earnings multiple raises eyebrows, our SWS DCF model offers a very different perspective. It suggests Indivior is actually trading 72.2% below its fair value, even though its valuation appears high when measured against earnings. Could the market be overlooking an important factor, or is this a risk that warrants attention?

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 Indivior 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 844 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 Indivior Narrative

If you see the story differently or want to dive deeper into the data, you can shape your own analysis in just a few minutes, and Do it your way.

A great starting point for your Indivior research is our analysis highlighting 4 key rewards and 3 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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