Will Summit Therapeutics’ Rally Continue After Upbeat Data on Imetelstat in 2025?

Deciding what to do with Summit Therapeutics stock? You’re not alone; investors everywhere have taken notice of this biotech’s rollercoaster ride. Over the past month, shares have climbed an impressive 16.0%, and year-to-date, the stock is up 14.4%. While that may feel like a solid upward trend, keep in mind that last week’s performance tipped slightly into negative territory at -1.7%. Over the longer haul, though, Summit Therapeutics stands out: it’s delivered an eye-popping 1,774.1% return over three years, and over the last five years, its stock has soared 541.9%.

With numbers like that, you might wonder if the current market price still offers any real value, or if investors have gotten ahead of themselves. Based on a range of common valuation checks, Summit Therapeutics currently scores a 2 out of 6 for being undervalued. That’s a signal there may be pockets of opportunity, but also areas where you’ll want to tread carefully.

Let’s break down the details using a few tried-and-true valuation approaches. Plus, stick around for something even more insightful on how to judge if Summit Therapeutics is truly trading at a bargain.

Summit Therapeutics scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Summit Therapeutics Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to their present value. This approach essentially asks what those future streams of cash are worth in today's dollars.

For Summit Therapeutics, the DCF model uses recent financials and expert projections. The company's latest reported Free Cash Flow stands at -$207.4 Million, reflecting the heavy up-front expenditures typical for biotech firms. Analysts expect these cash flows to recover and grow over time, with projections showing Summit moving into positive territory by 2028 and reaching $1.31 Billion in Free Cash Flow by 2029. Over the next decade, projections climb as high as $8.17 Billion by 2035. This trajectory is mostly extrapolated beyond the five-year window where analyst estimates are available.

Based on these forecasts, the DCF model calculates Summit Therapeutics' intrinsic value at $182.21 per share. This suggests the stock is trading at a substantial discount of 88.5% compared to its estimated fair value, implying it may be significantly undervalued by the market.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Summit Therapeutics is undervalued by 88.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Summit Therapeutics Price vs Book

The price-to-book (P/B) ratio is often a preferred valuation metric for companies in the biotech sector, especially those that are not yet profitable or have unpredictable earnings. It helps investors assess whether a company’s stock is trading above or below the value of its net assets, which is particularly relevant for biotechs whose future income streams can be uncertain.

Typically, companies with strong growth prospects or lower risk profiles command higher P/B multiples, as investors are willing to pay a premium for potential upside. Conversely, higher risk or slower-growing companies tend to trade at lower multiples, closer to the value of their tangible assets.

Summit Therapeutics currently trades at a P/B ratio of 60.1x. This is vastly higher than both the biotech industry average of 2.53x and the peer average of 4.8x. However, benchmarks like these can be a blunt instrument, since they ignore unique company-specific factors. That is where the Simply Wall St Fair Ratio comes in—it is designed to reflect what Summit’s multiple should be, accounting for important variables such as expected growth, profit margins, risk exposure, and market capitalization. By providing a more tailored comparison, the Fair Ratio gives a holistic view of whether the stock is trading at a premium or discount, rather than relying solely on broad industry measures.

When we line up Summit Therapeutics’ current P/B ratio of 60.1x with its Fair Ratio, the large premium suggests the stock is significantly overvalued relative to the company’s fundamentals. This is a clear signal to approach with caution.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your Summit Therapeutics Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, powerful tool that lets you create your own story about a company by combining your perspective on future growth, earnings, and margins to arrive at your own fair value for the stock. This approach bridges the gap between the company’s story, the financial forecast, and what you believe is a reasonable price to pay.

Narratives are available to everyone on the Simply Wall St Community page, used by millions of investors, and make it easy for you to compare your outlook directly with others. By updating dynamically when new information like news or earnings comes out, Narratives help you decide when to buy or sell, based on how each Fair Value stacks up against the current market price. For example, some investors might project high future revenues for Summit Therapeutics and see it as significantly undervalued, while others might be more cautious, arriving at much lower valuations based on conservative assumptions.

Do you think there's more to the story for Summit Therapeutics? Create your own Narrative to let the Community know!

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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