Is Jazz Pharmaceuticals a Bargain After Product Launches and a 5% Weekly Dip?

• Wondering if Jazz Pharmaceuticals might be a hidden gem or overpriced? You are not alone, and figuring out whether it is trading below its true value can be surprisingly straightforward once you know what to look for.
• The stock has seen a 6.0% gain so far this year and is up 3.2% over the last 12 months, but with a recent dip of 5.2% in the past week, some investors are re-evaluating what is driving these swings.
• In the past few months, Jazz Pharmaceuticals has garnered headlines thanks to key regulatory updates and fresh product launches within its rare disease pipeline. These events have contributed to both optimism about future growth and questions about the sustainability of recent returns.
• Importantly, Jazz Pharmaceuticals currently boasts a valuation score of 6 out of 6, suggesting robust signals of undervaluation across every check we assess. Let us break down how this score was calculated using different valuation methods and explain why the most effective strategy for understanding value might surprise you by the end of this article.

Jazz Pharmaceuticals delivered 3.2% 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 truly worth by projecting its future cash flows and then discounting them back to their present value. This approach is widely used because it directly considers how much cash a company is expected to generate over time.

For Jazz Pharmaceuticals, the DCF analysis uses a 2-stage Free Cash Flow to Equity model in dollars. The company generated a Last Twelve Months Free Cash Flow of approximately $1.18 billion. Analyst forecasts project this figure growing considerably, with future cash flows expected to reach around $2.03 billion by 2029. Beyond five years, these projections rely on Simply Wall St's extrapolations, estimating steady cash flow growth into the next decade.

Based on these cash flow projections, the model calculates an intrinsic fair value of $769.12 per share. This estimate sits 82.9% above the current price, suggesting that Jazz Pharmaceuticals is significantly undervalued by the market according to the DCF approach.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Jazz Pharmaceuticals is undervalued by 82.9%. Track this in your watchlist or portfolio, or discover 878 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

The Price-to-Sales (P/S) ratio is often used to value companies like Jazz Pharmaceuticals, especially in cases where profits are volatile or reinvested for growth. The P/S ratio helps investors evaluate how much they are paying for each dollar of a company’s sales, making it effective for comparing businesses within similar industries.

Growth expectations and business risks play an important role in shaping what is considered a “normal” or “fair” P/S ratio. Fast-growing companies or those with stable, predictable revenue streams typically command higher ratios, while industries facing uncertainty tend toward lower multiples.

Jazz Pharmaceuticals is currently trading at a P/S ratio of 1.92x. This is below both the pharmaceuticals industry average of 4.01x and its selected peer group’s average of 7.33x. At first glance, this may suggest the stock is undervalued relative to its rivals and the sector overall.

However, Simply Wall St uses a proprietary “Fair Ratio” of 6.89x for Jazz Pharmaceuticals, which goes beyond simple peer or industry comparison. This Fair Ratio incorporates company-specific factors including future earnings growth, profit margins, risk profile, market capitalization, and the pharmaceutical sector’s characteristics. This approach provides a more tailored and accurate assessment of fair value.

Comparing the current P/S ratio of 1.92x to the Fair Ratio of 6.89x reveals a significant valuation gap. This suggests that Jazz Pharmaceuticals is notably undervalued, even more so than standard benchmarks might indicate.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1403 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Jazz Pharmaceuticals Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your story about a company, built from your personal perspective and expectations. It combines what you believe about Jazz Pharmaceuticals’ future with your own estimates for fair value, future revenue, earnings, and margins. Narratives link a company’s qualitative story, such as new therapies or emerging risks, to a set of financial forecasts and ultimately to a fair value estimate, making your investment thesis explicit and measurable.

Best of all, Narratives are available right inside the Simply Wall St Community page, used by millions of investors, so you can easily create and compare your view alongside others. This tool lets you see at a glance how your assumed Fair Value compares to the current Price, helping you decide whether to buy, hold, or sell. It also dynamically updates as news or earnings reports come in.

For Jazz Pharmaceuticals, some investors may believe continued portfolio expansion and successful launches justify a high fair value of $230 per share, while others worry about patent expirations and competition, setting a fair value closer to $147. Narratives give you the power to clearly define your reasoning, stay responsive to real-world changes, and invest with confidence.

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.

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