- If you are wondering whether Arcus Biosciences is reasonably priced or getting ahead of itself, the current share price invites a closer look at what investors may actually be paying for.
- The stock last closed at US$26.06, with returns of 5.1% over the past 7 days, 13.5% over 30 days, 11.9% year to date, and 220.9% over the last year, which points to a stock that has already seen significant movement.
- Recent coverage around Arcus Biosciences has focused on its position in the biotech space and how investors are reacting to developments in its drug pipeline and partnerships. This backdrop helps explain why the stock's sharp 1 year return is attracting fresh attention from both new and existing shareholders.
- On Simply Wall St's valuation checks, Arcus Biosciences scores 3 out of 6. It therefore sits in the middle of the pack. The rest of this article will walk through traditional valuation approaches before finishing with a more complete way to think about what the stock may be worth.
Approach 1: Arcus Biosciences Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting the company’s future cash flows and discounting them back to today’s value.
For Arcus Biosciences, the latest twelve month free cash flow stands at a loss of $494.7 million. Analysts provide explicit forecasts through 2030, with free cash flow estimated at $247 million in that year. Simply Wall St then extends the projections out to 2035 using a 2 Stage Free Cash Flow to Equity model. Across 2026 to 2035, the projections move from free cash flow losses in the earlier years into positive territory later in the period.
When these projected cash flows are discounted back to today and combined with an estimate for cash flows beyond the explicit forecast period, the model arrives at an intrinsic value of about $158.55 per share. Compared with the recent share price of $26.06, this implies the stock is 83.6% undervalued on this DCF view.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Arcus Biosciences is undervalued by 83.6%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.
Approach 2: Arcus Biosciences Price vs Sales
For companies where profits are not yet the main reference point, the P/S ratio is often a useful way to think about valuation because it compares what investors are paying to the revenue the business is generating.
Growth expectations and risk both influence what counts as a reasonable P/S ratio. Higher expected growth and lower perceived risk usually support a higher multiple, while lower growth and higher risk tend to justify a lower one.
Arcus Biosciences currently trades on a P/S of 13.25x. This sits above the broader Biotechs industry average P/S of 10.82x, but below the peer group average of 18.64x. Simply Wall St’s Fair Ratio framework goes a step further by estimating what a more tailored multiple might look like based on factors such as earnings growth, profit margins, industry, market cap and company specific risks.
Because it folds these drivers into a single figure, the Fair Ratio of 0.90x is designed to be more insightful than a simple comparison against peers or the industry alone. When set against the current P/S of 13.25x, the stock screens as priced above this Fair Ratio based view.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Arcus Biosciences Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you turn your view of Arcus Biosciences into a clear story that links assumptions about future revenue, earnings and margins to a forecast and then to a Fair Value. The Community page shows different versions, such as a cautious view closer to US$20 per share and a more optimistic view around US$49 per share. Both of these update automatically when new news or earnings arrive, so you can compare each Narrative’s Fair Value with the current price and decide whether the stock looks expensive or cheap based on the story you find most reasonable.
For Arcus Biosciences however we'll make it really easy for you with previews of two leading Arcus Biosciences Narratives:
Fair value in this bullish narrative: US$34.00 per share
Implied discount to this fair value at US$26.06: around 23% below the narrative fair value
Revenue trend used in the model: 10.8% annual decline
- Focuses on late stage development of casdatifan in renal cell carcinoma with Phase 3 trials such as PEAK-1 and additional kidney cancer studies targeting a large patient pool.
- Builds in a long cash runway into mid 2027 and support from partnerships, which together allow continued investment in multiple oncology programs.
- Analyst consensus fair value of US$34.00 reflects expectations for casdatifan, other trials in gastric and lung cancer, and assumes the stock trades on a very high future P/E to justify that target.
Fair value in this bearish narrative: US$20.00 per share
Implied premium to this fair value at US$26.06: around 30% above the narrative fair value
Revenue trend used in the model: 8.76% annual decline
- Highlights reliance on partnerships, especially with Gilead and AstraZeneca, and a concentrated pipeline where setbacks in a few key assets could have an outsized impact.
- Flags risks from drug pricing pressure, payer focus on generics and biosimilars, and high R&D spend without approved late stage commercial products.
- Uses a fair value of US$20.00 that aligns with the lower end of analyst targets, with the model assuming declining revenue, higher discount rates and a high future P/E despite these pressures.
Whichever side you find more convincing, the key is to decide which set of assumptions around trial outcomes, partnerships and future earnings feels more realistic for your own investment approach, then compare that narrative fair value with where the stock trades today.
To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Arcus Biosciences on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.
Do you think there's more to the story for Arcus Biosciences? 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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