Relay Therapeutics (RLAY): A Fresh Board and Narrower Losses—What Does It Mean for Valuation?

Relay Therapeutics (RLAY) shared its third quarter results, highlighting a notable narrowing of net losses compared to the prior year, even as revenue came in lower. Investors also learned of changes to the Board of Directors.

See our latest analysis for Relay Therapeutics.

Relay Therapeutics’ board appointments and tightened losses have helped fuel momentum for the stock, with an impressive 81% share price return over the last three months and a positive 23% total shareholder return over the past year. While long-term holders are still well below their entry points, the latest results and experienced new directors may shift investor perceptions and suggest the prospect of a turnaround is gaining traction.

If you’re interested in discovering what else is picking up pace in healthcare, see the full list for free with our curated See the full list for free..

With the share price still trading at more than 50% below analyst targets despite an 81% rally in the past quarter, investors are now asking whether Relay Therapeutics remains undervalued or if the market has already taken future growth into account.

Price-to-Book Ratio of 1.8x: Is it justified?

Relay Therapeutics is trading at a price-to-book ratio (P/B) of 1.8x, which suggests the stock is valued below both its industry peers and the broader market. With a last close of $6.29, this valuation points to potential underappreciation by investors, especially when compared to the U.S. Biotechs industry average P/B of 2.5x and a peer average of 5x.

The price-to-book ratio measures how much investors are willing to pay per dollar of net assets and is particularly meaningful for companies in asset-heavy sectors such as biotechnology. For a company like Relay Therapeutics, which is still unprofitable but possesses significant assets and R&D potential, a lower P/B ratio can signal the market’s cautious optimism or skepticism about future returns.

Relay’s P/B ratio stands out as considerably lower than its peer group and the broader industry. This substantial discount could reflect doubts around near-term profitability or market recognition of the inherent risks in biotech innovation. If the company achieves its growth potential, the market could see its valuation move toward peer averages in the future.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Book of 1.8x (UNDERVALUED)

However, risks remain, including persisting net losses and uncertainty around sustained revenue growth. These factors could dampen optimism if progress stalls.

Find out about the key risks to this Relay Therapeutics narrative.

Build Your Own Relay Therapeutics Narrative

If you’d rather draw your own conclusions or take a hands-on approach to the data, you can build your own view in under three minutes. Do it your way.

A great starting point for your Relay Therapeutics research is our analysis highlighting 1 key reward and 4 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Smart investors never stop searching for their next big opportunity. Turn your curiosity into real momentum by exploring fresh, tailored stock ideas most people are missing.

• Maximize your returns by targeting reliable income opportunities with these 16 dividend stocks with yields > 3%, which offers yields above 3% and solid financials.
• Gain an edge on the market by spotting innovative breakthroughs from early-stage tech using these 25 AI penny stocks, as these companies are harnessing artificial intelligence for rapid growth.
• Tap into future leaders by sorting for untapped potential with these 894 undervalued stocks based on cash flows; see which stocks are trading below their true worth right now.

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