Evaluating Xenon Pharmaceuticals (XENE)’s Valuation After Its Recent Share Price Rebound

Xenon Pharmaceuticals (XENE) has quietly outperformed the market over the past month, climbing about 15% even as many biotech peers tread water and putting its late stage epilepsy pipeline back in focus for investors.

See our latest analysis for Xenon Pharmaceuticals.

Zooming out, the stock’s 30 day share price return of about 15% and solid 90 day share price gain suggest momentum is rebuilding after a more muted 4.42% one year total shareholder return.

If Xenon’s move has you rethinking your healthcare exposure, this could be a good moment to explore other specialist names through our curated healthcare stocks.

With shares still trading at a roughly 24% discount to consensus price targets despite impressive multi year returns, the key question now is whether Xenon remains mispriced value or if markets are already baking in its future growth.

Price to Book of 6.2x: Is it justified?

Based on Xenon Pharmaceuticals last close at 44.61, its price to book ratio of 6.2 times screens as expensive versus both biotech peers and the wider industry.

The price to book multiple compares a company’s market value with the accounting value of its net assets. It is a common yardstick for asset light, research heavy biotech names where profits are still in the future.

For Xenon, paying 6.2 times book value means investors are assigning a substantial premium to its pipeline and future growth options, even though the company is currently loss making and is forecast to remain unprofitable over the next three years.

That premium looks punchy when set against the US biotechs industry average price to book of 2.7 times and an already elevated peer group average of 5.5 times. This underlines how much optimism is embedded in today’s valuation.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price to Book of 6.2x (OVERVALUED)

However, setbacks in pivotal epilepsy trials or delays in regulatory timelines could quickly puncture today’s optimism and force a sharp rethink on valuation.

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

Another View: DCF points to downside risk

While the 6.2 times price to book ratio paints Xenon as richly valued, our DCF model is even more cautious, pointing to fair value of about 33 per share. This suggests the stock looks overvalued both on cash flow assumptions and on assets. Could enthusiasm be overshooting 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 Xenon Pharmaceuticals 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 908 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 Xenon Pharmaceuticals Narrative

If you would rather dig into the numbers yourself and challenge these assumptions, you can build a personalized view in just a few minutes: Do it your way.

A great starting point for your Xenon Pharmaceuticals research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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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