Stoke Therapeutics (STOK): Valuation Insights After Q3 Sales Surge and Return to Profitability

Stoke Therapeutics (STOK) released its third quarter results, highlighting a sharp year-over-year jump in sales for the period. While quarterly losses widened, the company reported a strong return to profitability for the first nine months of 2025.

See our latest analysis for Stoke Therapeutics.

Stoke Therapeutics’ strong nine-month results and renewed profitability have reinvigorated investor enthusiasm, fueling a dramatic 102.84% year-to-date share price return. While short-term momentum has faded after a stellar run, the company’s one-year total shareholder return of 64.70% puts recent volatility in perspective as part of a bigger turnaround story.

If Stoke’s big earnings swing has you rethinking what’s possible, now is an ideal time to broaden your search and discover fast growing stocks with high insider ownership

With shares still well below analyst price targets despite huge gains this year, the key question for investors is whether Stoke Therapeutics remains undervalued or if the market has already factored in its future growth potential.

Price-to-Earnings of 32.2x: Is it justified?

Stoke Therapeutics trades at a price-to-earnings ratio of 32.2x, which is significantly higher than both the industry average and the broader peer group. This suggests its recent profitability may be fully priced in or even overextended by the market.

The price-to-earnings (P/E) ratio shows how much investors are willing to pay for each dollar of current earnings. In biotech, where profits can be volatile or recently achieved, a high P/E may signal confidence in future breakthroughs. It can also mean the market is already factoring in optimistic expectations.

Stoke's 32.2x multiple far exceeds the US Biotechs industry average of 16.2x and also tops its peer group average of 25.1x. Compared to the estimated fair P/E ratio of 16.6x, this premium leaves little margin of safety and signals aggressive investor optimism about continued profitability.

Explore the SWS fair ratio for Stoke Therapeutics

Result: Price-to-Earnings of 32.2x (OVERVALUED)

However, shrinking annual revenues and declining net income growth raise important questions about whether Stoke Therapeutics can sustain its newfound profitability.

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

Another View: Our DCF Model Weighs In

Taking a different approach, the SWS DCF model estimates Stoke Therapeutics shares are overvalued, with the current price of $22.86 sitting well above our fair value estimate of $13.68. This challenges the optimism implied by its lofty price-to-earnings ratio. Could the market have outpaced the fundamentals?

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

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Stoke Therapeutics for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 875 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Stoke Therapeutics Narrative

If you see the story differently or want to dive deeper into the numbers, you can craft your own Stoke Therapeutics outlook in just minutes. Do it your way

A great starting point for your Stoke Therapeutics research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

Ready for Your Next Opportunity?

Unlock the potential of your investment journey by targeting stocks with strong fundamentals, remarkable growth prospects, or leading-edge innovation. Don't let standout opportunities pass you by.

• Capture value with these 875 undervalued stocks based on cash flows, which may be trading below their intrinsic worth based on robust cash flow analysis.
• Boost your income potential by starting with these 16 dividend stocks with yields > 3%, offering yields above 3% for long-term compounding power.
• Stay ahead with these 24 AI penny stocks, positioned to transform industries and benefit from the rapidly growing demand for artificial intelligence solutions.

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