A Closer Look at Septerna (SEPN) Valuation Following Wave of Analyst Upgrades and Profitability Turnaround

Septerna (SEPN) grabbed attention this week following a wave of positive analyst sentiment, with recent upgrades reflecting renewed confidence in the company’s trajectory. This comes just after Septerna reported a strong earnings turnaround.

See our latest analysis for Septerna.

After those upbeat earnings and high-profile conference presentations, Septerna's momentum has been unmistakable. The stock just surged 20.9% in a single day and is now up 112.9% over the last 90 days, signaling that investors are starting to price in the company’s growth story, even as the one-year total shareholder return is still slightly negative. If momentum keeps building like this, Septerna could quickly turn a corner in the eyes of the market.

If you’re interested in other companies intriguing investors right now, it’s a great moment to discover fast growing stocks with high insider ownership.

But after such a dramatic run higher, the key question remains: is Septerna still trading at a bargain, or has the market already factored in all of its future upside, leaving little room for further gains?

Price-to-Sales Ratio of 47.3x: Is it justified?

At a last close price of $23.27, Septerna trades at a price-to-sales (P/S) ratio of 47.3 times, far above both industry peers and its estimated fair value. This premium points to elevated market expectations on revenue potential despite a lack of current profitability.

The price-to-sales ratio is useful for early-stage or unprofitable biotech companies like Septerna because it focuses on revenue rather than earnings, which can remain negative for years due to high R&D costs. However, an unusually high P/S can mean investors are paying now in hopes of significant future growth.

Septerna’s 47.3x multiple is almost twelve times the US pharmaceuticals industry average of 4x and nearly double the peer average of 24.8x. More striking, the estimated fair price-to-sales ratio is only 5.9x. This gap suggests Septerna’s shares may be pricing in a best-case scenario that has yet to materialize.

Explore the SWS fair ratio for Septerna

Result: Price-to-Sales Ratio of 47.3x (OVERVALUED)

However, Septerna's limited annual revenue growth and ongoing net losses could quickly weigh on its valuation if market sentiment shifts or results disappoint.

Find out about the key risks to this Septerna narrative.

Build Your Own Septerna Narrative

If you have your own perspective or want to dig into the numbers yourself, you can easily craft your own take in just a few minutes with Do it your way.

A great starting point for your Septerna research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Broaden your portfolio with innovative opportunities before the crowd rushes in. Let Simply Wall Street point you toward fast-moving stocks and strategies you might be missing.

• Tap into long-term income by targeting stable companies with robust yields using these 16 dividend stocks with yields > 3%.
• Spot the overlooked opportunities by starting with these 906 undervalued stocks based on cash flows that the market hasn't caught onto yet.
• Position yourself at the frontier of technology by investing in these 26 AI penny stocks, which are redefining industries through artificial intelligence breakthroughs.

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