IDEAYA Biosciences (IDYA) recently reported the first patient enrolled in a Phase 1 trial combining IDE849, a DLL3 targeting antibody drug conjugate, with PARG inhibitor IDE161 in several DLL3 upregulated solid tumors.
See our latest analysis for IDEAYA Biosciences.
The Phase 1 combination update has come as IDEAYA’s share price has eased slightly in the short term, with a 7 day share price return of 3.47% and a 1 year total shareholder return close to 100%. This reflects how recent trial news can quickly influence sentiment without necessarily changing the longer term picture.
If this kind of oncology pipeline story interests you, it can be helpful to widen the lens and see what else is available through our screener of 34 healthcare AI stocks
With IDEAYA now valued at about US$2.9b, a recent 1 year total return near 100%, and an analyst target that sits above the current US$32.48 share price, should you still see upside on the table or assume markets are already pricing in future growth?
Preferred Price to Sales of 13.4x: Is It Justified?
On one hand, IDEAYA is trading at a steep 87.2% discount to the SWS DCF model estimate of future cash flow value. On the other hand, its current P/S ratio of 13.4x sits well above both the US Biotechs industry average of 10.2x and a fair P/S estimate of 3x.
The P/S multiple compares the company’s market value to its revenue, which is often used for unprofitable biotech names where earnings are not yet a reliable guide. With IDEAYA still loss making, investors are effectively paying a higher price today for each dollar of revenue while the SWS DCF model suggests the market price is well below the value implied by projected future cash flows.
Compared with peers, the 13.4x P/S ratio is significantly richer than the US Biotechs industry average of 10.2x and far above the estimated fair P/S ratio of 3x that the model suggests the market could move towards over time. That gap highlights a tension between a premium revenue multiple and a DCF view that points to a large margin between price and estimated future cash flow value.
Explore the SWS fair ratio for IDEAYA Biosciences
Result: Preferred multiple of Price-to-Sales of 13.4x (OVERVALUED)
However, investors still face meaningful risks, including clinical setbacks across IDEAYA’s multi asset pipeline or sentiment turning if recent share price gains reverse sharply.
Find out about the key risks to this IDEAYA Biosciences narrative.
Another View Using The SWS DCF Model
Price to sales points to an expensive stock, yet the SWS DCF model indicates a very different picture, with IDEAYA trading about 87% below an estimated future cash flow value of $259.69 per share. If revenue forecasts are met, is the richer P/S multiple or the deep DCF discount closer to how the market ultimately prices the stock?
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 IDEAYA Biosciences 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 58 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
The mixed signals on valuation and trial progress can feel unclear, so consider the information carefully while the data is fresh and weigh both sides for yourself. To see how the positives and concerns stack up in one place, review the 2 key rewards and 1 important warning sign
Looking for more investment ideas?
If IDEAYA has caught your attention, do not stop here, spreading your research across a few high quality ideas can help you build a more resilient portfolio over time.
- Scan for quality at a discount by checking companies in the 58 high quality undervalued stocks that pair solid fundamentals with prices that sit below many investors’ radar.
- Strengthen your income stream by reviewing the 12 dividend fortresses focused on companies with higher yields that still show signs of resilience.
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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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