Is Novavax Now a Bargain After a 94.1% Five Year Share Price Slump?

• If you are wondering whether Novavax at around $6.84 is a beaten down bargain or a value trap, you are not alone. That is exactly what this breakdown is going to tackle.
• The stock has slipped recently, with returns of about -1.6% over the last week, -13.5% over the last month and -20.2% year to date, on top of a rough -94.1% over five years.
• Those moves reflect shifting sentiment around Novavax's vaccine pipeline and its ability to carve out a sustainable niche in a post pandemic market. Investors have also been reacting to ongoing updates on partnerships, regulatory progress and funding, which all feed directly into expectations for future cash flows and risk.
• Right now, Novavax scores a 3/6 valuation check, suggesting the market might be underpricing it on some measures but not others. We will walk through those methods next while also pointing to an even better way to think about valuation at the end of the article.

Find out why Novavax's -17.6% return over the last year is lagging behind its peers.

Approach 1: Novavax Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company is worth by projecting its future cash flows and discounting them back to today in dollar terms. For Novavax, the 2 Stage Free Cash Flow to Equity model starts from last twelve months free cash flow of roughly -$413.7 million, highlighting that the business is still burning cash rather than generating it.

Analysts then project a swing into positive territory, with free cash flow reaching about $304 million in 2026 before turning negative again in 2027 and stabilising at more modest positive levels, such as around $27 million by 2035. Only the first few years are based on analyst forecasts, with Simply Wall St extrapolating the remaining years to complete the 10 year cash flow path.

When these future cash flows are discounted back, the model arrives at an intrinsic value of about $4.60 per share. With the stock trading around $6.84, the DCF suggests Novavax is roughly 48.6% overvalued on this basis.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Novavax may be overvalued by 48.6%. Discover 919 undervalued stocks or create your own screener to find better value opportunities.

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

Approach 2: Novavax Price vs Earnings

For profitable companies, the price to earnings, or PE, ratio is a useful yardstick because it links what investors pay today to the profits the business is actually generating. In general, faster earnings growth and lower perceived risk justify a higher normal PE, while slower growth and higher risk usually mean a lower fair multiple.

Novavax currently trades on a PE of about 3.3x, well below both the broader Biotechs industry average of roughly 19.2x and the peer group average of around 17.1x. At first glance that discount might look like a bargain, but simple comparisons like these ignore company specific factors such as volatility in earnings, balance sheet strength and long term growth prospects.

This is where Simply Wall St's Fair Ratio comes in. It estimates what a reasonable PE should be for Novavax, given its earnings growth profile, margins, risk, size and industry, and comes out at about 8.5x. Because this Fair Ratio is tailored to Novavax rather than a generic peer set, it provides a more nuanced anchor for valuation. Comparing the two suggests the market multiple of 3.3x sits well below the Fair Ratio of 8.5x, which indicates that Novavax appears materially undervalued on this basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Novavax Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce Narratives, a simple way to attach your own story about Novavax to the numbers by linking your assumptions for future revenue, earnings and margins to a clear financial forecast, a Fair Value estimate, and ultimately an investment view that you can build and update easily on Simply Wall St's Community page, where millions of investors share their perspectives. For example, one investor might create a bullish Novavax Narrative around a successful shift to a high margin licensing model, robust royalties and a Fair Value closer to the upper analyst target of $25. Another could build a more cautious Narrative that assumes partnership setbacks, weaker long term vaccine demand and a Fair Value nearer $6. As fresh information like earnings, regulatory decisions or new deals comes in, these Narratives and their Fair Values update dynamically, allowing you to continually compare your Fair Value to the live share price and decide whether Novavax now looks attractive, fairly priced or expensive based on the story you actually believe.

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