Rhythm Pharmaceuticals (RYTM): Assessing Valuation as Citigroup Sparks Fresh Optimism with New 'Buy' Rating

Rhythm Pharmaceuticals (RYTM) shares are in focus after Citigroup initiated coverage with a Buy rating. This action joins a series of upbeat recommendations that highlight institutional optimism around the company’s long-term growth story and pipeline.

See our latest analysis for Rhythm Pharmaceuticals.

Momentum has clearly been building for Rhythm Pharmaceuticals, with recent gains such as the 7.2% share price return over the past week and a strong year-to-date price run of 81.6%. These figures reflect renewed optimism after Citigroup’s coverage and a wave of upbeat analyst sentiment. Over the long term, shareholders have also seen impressive results, with a three-year total return of 285.2%, showing solid growth through both the recent and broader market cycles.

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With shares trading about 16 percent below the average analyst price target and positive momentum in both price and sentiment, investors are left to wonder whether Rhythm Pharmaceuticals is still undervalued or if the market has already accounted for the next phase of growth.

Most Popular Narrative: 13.6% Undervalued

According to the most widely followed narrative, Rhythm Pharmaceuticals’ fair value is estimated at $126.31, which stands notably above the recent closing price of $109.09. This setup reflects high expectations for the company’s growth trajectory and the market-shaping catalysts anticipated on the horizon.

Upcoming potential regulatory approvals and launches for setmelanotide (IMCIVREE) in new indications such as acquired hypothalamic obesity and Prader-Willi syndrome, along with expansion into younger age groups, are expected to materially grow Rhythm's commercial opportunity and topline in the next several years. Extension of intellectual property protection to 2034 for the lead asset and to 2040 and beyond for next-generation compounds, combined with orphan drug exclusivity incentives in the U.S. and EU, create a multi-year window of strong pricing power and high net margins. This protects earnings from generic and biosimilar erosion.

Read the complete narrative.

Want to see what high-stakes assumptions drive this bullish target? The real eye-opener: aggressive forecasts for revenue, surging margins, and a profit multiple that defies sector norms. Discover what’s fueling these bold projections—one number might surprise you.

Result: Fair Value of $126.31 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, it is worth noting that ongoing operating losses and heavy reliance on setmelanotide could quickly shift the outlook if challenges arise.

Find out about the key risks to this Rhythm Pharmaceuticals narrative.

Another View: Discounted Cash Flow Model Points to Deeper Undervaluation

Zooming out from traditional price ratios, our SWS DCF model presents a compelling alternative. It estimates Rhythm Pharmaceuticals' fair value at $156.12 per share, which is well above the recent trading price. This suggests the market may be underestimating Rhythm’s growth prospects. Could the true potential lie even further ahead?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Rhythm Pharmaceuticals Narrative

If you think there’s more to the story or want a fresh perspective, dive into the numbers and craft your own narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Rhythm Pharmaceuticals.

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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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