Has Insmed’s 988% Three Year Surge Already Priced In Its Growth Story?

• Wondering if Insmed is still a smart buy after its massive run up, or if you are late to the party? This breakdown will help you decide whether the current price actually makes sense.
• Despite a slight pullback of around -1.2% over the last week, Insmed is still up 9.0% over 30 days, 195.4% year to date, and an eye catching 988.5% over three years, so the market clearly thinks something big has changed.
• Those gains have been fueled by a wave of bullish sentiment around Insmed's pipeline and regulatory progress, with investors increasingly focused on the long term commercial potential of its key respiratory and rare disease treatments. At the same time, upbeat analyst coverage and target price upgrades have reinforced the idea that Insmed is transitioning from a speculative biotech story into a more established growth name.
• Even with that backdrop, Insmed only scores a 3/6 valuation score, so we will walk through what different valuation approaches are saying about the stock, and then finish with a more holistic way to judge whether the current price truly reflects its long term potential.

Insmed delivered 185.2% returns over the last year. See how this stacks up to the rest of the Biotechs industry.

Approach 1: Insmed Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth today by projecting its future cash flows and then discounting them back to the present using a required rate of return.

For Insmed, the latest twelve month free cash flow is a negative $906.7 Million, reflecting heavy investment and ongoing losses. Analysts and extrapolations expect cash flows to improve steadily, turning positive by 2028 at around $703.4 Million and reaching roughly $7.6 Billion by 2035, all in $. These projections assume a 2 stage Free Cash Flow to Equity model, with earlier years guided by analyst forecasts and later years extended by Simply Wall St based on estimated growth rates.

When all those future cash flows are discounted back, the model arrives at an intrinsic value of about $578.83 per share. Relative to the current market price, this implies Insmed is trading at roughly a 64.3% discount. This suggests investors are still pricing in considerable execution and regulatory risk.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Insmed is undervalued by 64.3%. Track this in your watchlist or portfolio, or discover 935 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 Insmed.

Approach 2: Insmed Price vs Book

For established and profitable companies, the price to book ratio is a useful way to see how much investors are paying for each dollar of net assets, especially in capital intensive or research heavy sectors where the balance sheet reflects years of investment.

In theory, the higher a company’s growth outlook and the lower its perceived risk, the more investors are willing to pay above book value. As a result, a “normal” or “fair” price to book multiple will typically rise when growth is stronger and fall as risk increases.

Insmed currently trades at around 46.60x book value, which is far richer than the broader Biotechs industry average of about 2.68x and still below the more growth focused peer group average of roughly 75.16x. Simply Wall St’s Fair Ratio, a proprietary estimate of what Insmed’s price to book multiple should be given its growth profile, profitability trajectory, risk, industry, and market cap, offers a more tailored yardstick than blunt peer or industry comparisons. Because it explicitly adjusts for those factors, it can flag when a premium or discount is actually warranted rather than just different. On this framework, Insmed screens as materially overvalued versus its Fair Ratio.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Insmed Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to turn your view of Insmed’s story into concrete revenue, earnings and margin forecasts. You can then link those forecasts to a fair value, and compare that fair value to today’s share price to decide whether to buy, hold or sell, all within an easy to use tool on Simply Wall St’s Community page that updates dynamically as new news, earnings and clinical data arrive. One investor might build a bullish Insmed Narrative that assumes rapid global uptake of brensocatib, TPIP success and a fair value closer to the upper analyst target of about $214 per share. A more cautious investor might focus on regulatory delays, payer pushback and slower adoption, leading them to a Narrative with far more conservative revenue growth, margins and a fair value nearer the low end of recent targets around $89. Both perspectives are clearly quantified and comparable in one place.

Do you think there's more to the story for Insmed? 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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