Is Sarepta Therapeutics a Bargain After FDA Approval and Last Week's 27.8% Rally?

• Wondering if Sarepta Therapeutics is finally trading at a bargain price? You are not alone, as savvy investors often watch for signs the stock might be undervalued.
• Sarepta’s share price has surged 27.8% in just the last week, but despite that jump, it is still down almost 85% over the past year. This volatility hints at changing risk perceptions and possible upside.
• Recent headlines highlight Sarepta’s FDA approval for a key gene therapy, which has revitalized sentiment and contributed to the latest rally. At the same time, investor attention is shifting to what this new milestone means for future growth and risk.
• On our valuation checks, Sarepta scores an impressive 5 out of 6, suggesting it might be a rare undervalued find in a volatile biotech sector. In this article, we will weigh up different valuation methods and reveal a smarter way to understand the full story at the end.

Find out why Sarepta Therapeutics's -84.8% return over the last year is lagging behind its peers.

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

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's dollars. This approach helps investors determine what the company might genuinely be worth based on expected long-term performance.

For Sarepta Therapeutics, the latest reported Free Cash Flow (FCF) is -$360 million, indicating the company currently burns cash as it invests in future growth. Analysts project that by 2029, Sarepta's annual FCF could reach $383 million. Over the next ten years, both analyst estimates and further projections suggest consistent FCF growth, moving from about $333 million (discounted) in 2026 up to around $166 million (discounted) by 2035. These figures are all reported in US dollars.

Based on this model, Sarepta's intrinsic fair value is calculated at $57.39 per share. The DCF analysis implies that the stock is trading at a 63.5% discount to this estimate, making it appear substantially undervalued relative to its projected future cash flows.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Sarepta Therapeutics is undervalued by 63.5%. Track this in your watchlist or portfolio, or discover 926 more undervalued stocks based on cash flows.

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

Approach 2: Sarepta Therapeutics Price vs Sales

The price-to-sales (P/S) ratio is often used to value biotech companies like Sarepta Therapeutics, especially when they are not yet profitable. This multiple focuses on the value investors are placing on each dollar of the company’s revenue, which is particularly relevant for businesses in high-growth industries where profits may still be years away.

Growth expectations and risk play a big role in determining what counts as a "normal" or "fair" P/S ratio. Companies with faster expected growth or lower risk can often support higher P/S ratios, while riskier or slower-growing firms typically trade at lower multiples. Comparing Sarepta’s numbers, the company currently trades at 0.91x. This is far below both the biotech industry average of 13.12x and the peer average of 15.98x.

Simply Wall St’s proprietary “Fair Ratio” goes beyond a simple peer comparison by estimating the multiple Sarepta deserves based on its unique profile, considering its earnings growth, profit margins, industry, market cap, and company-specific risks. For Sarepta, the Fair Ratio is 1.29x. This is a more tailored benchmark than just looking at sector averages.

With a current P/S ratio of 0.91x versus the Fair Ratio of 1.29x, Sarepta appears undervalued, trading below what its fundamentals would justify.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sarepta Therapeutics Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is an easy-to-use tool that lets you connect your personal story or perspective on Sarepta Therapeutics to your own financial forecast and fair value. Narratives go beyond the numbers, allowing you to set your own assumptions for future revenue, profit margins, and growth, and see how these beliefs translate into a company’s fair value.

On Simply Wall St’s Community page, millions of investors use Narratives to quickly model different scenarios and see if Sarepta’s current price presents a buying or selling opportunity. In addition, they update automatically as new news or earnings reports emerge. Narratives provide a living picture of how changing business trends or unexpected events might shift the investment case, making your process more dynamic and personalized.

For example, some investors might be optimistic, expecting revenue to rebound quickly and setting a fair value above $80, while more cautious participants who are concerned about safety setbacks or regulatory risk might see a fair value closer to $5. This range of perspectives illustrates exactly how Narratives help you shape, test, and refine your own investment decisions as the story unfolds for Sarepta Therapeutics.

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