Are Jazz Pharmaceuticals Shares Still Attractive After a 25% Climb and New Pipeline Developments?

• Curious if Jazz Pharmaceuticals is a hidden value in the biotech sector or if its recent run means the best opportunities have already passed? You are not alone. Plenty of investors are asking the same question.
• Over the past year, Jazz shares have climbed 24.6%, while they are up 11.2% year-to-date. Shorter-term moves have been more muted, with a -0.6% return in the past week and -1.3% over the last month.
• Much of this momentum is tied to ongoing positive news about Jazz's expanding treatment pipeline and notable licensing partnerships. The market has taken a keen interest, as these developments could improve both growth prospects and long-term competitive positioning.
• On the valuation front, Jazz Pharmaceuticals scores a 6 out of 6 on our value checks, suggesting it looks undervalued across multiple metrics. Stick with us as we break down the traditional approaches to valuing Jazz and keep an eye out for an even smarter way to spot true value, coming up at the end of this article.

Jazz Pharmaceuticals delivered 24.6% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

Approach 1: Jazz Pharmaceuticals Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is really worth by projecting its future cash flows and discounting them back to today's dollars. For Jazz Pharmaceuticals, this method relies on two-stage free cash flow to equity projections, starting with current figures and extending up to ten years using analyst and in-house estimates.

Right now, Jazz's free cash flow stands at $1.13 billion. According to analyst forecasts, this is expected to grow significantly, with free cash flow reaching an estimated $2.03 billion by 2029. Projections for the following years continue upward, with Simply Wall St extrapolating cash flows to nearly $2.57 billion by 2035. All cash flows are calculated in US dollars.

Based on these forecasts, the DCF model produces an intrinsic value of $771.24 per share. This figure suggests Jazz Pharmaceuticals stock is trading at an 82.2% discount to its fair value. This indicates it is substantially undervalued compared to where it could be, based on long-term cash flow expectations.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Jazz Pharmaceuticals is undervalued by 82.2%. Track this in your watchlist or portfolio, or discover 840 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 Jazz Pharmaceuticals.

Approach 2: Jazz Pharmaceuticals Price vs Sales

For companies like Jazz Pharmaceuticals with positive and growing revenue, the Price-to-Sales (P/S) ratio is a solid valuation measure. This metric tells us how much investors are willing to pay for each dollar of Jazz's sales, which is especially useful for pharmaceutical firms with fluctuating profits or non-GAAP adjustments.

What counts as a “normal” or “fair” P/S ratio can depend on expectations for the company’s sales growth, profit potential, and risk profile. Higher growth or stronger margins often justify higher ratios, while more risk or uncertainty tends to bring them lower.

Jazz currently trades at a P/S ratio of 2.04x. This is significantly below both the average for its industry (4.24x) and its peer group (4.31x). On the surface, this suggests Jazz may be trading at a discount relative to comparable companies in the space.

However, instead of just comparing Jazz against broad averages, Simply Wall St uses a “Fair Ratio” in this case, 7.00x calculated by factoring in Jazz’s specific growth outlook, risk, margins, and market cap. This proprietary measure gives a more nuanced view, as it incorporates real company fundamentals rather than just how its peers are priced.

Looking at Jazz’s current P/S of 2.04x versus its Fair Ratio of 7.00x, the stock appears considerably undervalued by this methodology, reinforcing what the DCF analysis signaled.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1414 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Jazz Pharmaceuticals Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives.

A Narrative is your personal take on a company's story, where you connect what you believe about Jazz Pharmaceuticals’ products, markets, and future with your assumptions for revenue, earnings, and fair value.

Narratives add meaning to the numbers by linking your understanding of Jazz’s potential, such as its drug pipeline, competition, or leadership, to an actual financial forecast and valuation. This gives context to every buy or sell decision.

This tool is accessible to all investors on Simply Wall St’s Community page, where millions are using Narratives to create, share, and update their perspectives visually and easily.

By comparing your calculated fair value from the Narrative to today’s share price, you can see if Jazz looks like a buy, sell, or hold. As new company news or earnings are released, Narratives update automatically to reflect the latest outlook.

For example, one investor might believe Jazz’s expansion in rare diseases justifies a $230 price target. A more cautious Narrative that emphasizes generic threats could put fair value at only $147, highlighting how your chosen story shapes your investment conclusions.

Do you think there's more to the story for Jazz Pharmaceuticals? 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com