Is Incyte (INCY) Still Attractive After A 51% One Year Share Price Gain

• If you are wondering whether Incyte shares still offer value at current levels, you are not alone. This article is designed to walk you through that question step by step.
• Incyte's share price closed at US$110.57 recently, with total returns of 11.9% over 7 days, 14.3% over 30 days, 9.0% year to date, 51.2% over 1 year, 38.8% over 3 years and 19.2% over 5 years. This naturally raises questions about what is already priced in.
• Recent news around Incyte has focused on its position in the pharmaceuticals and biotech sector and how investors are weighing its pipeline and product portfolio against peers. This context helps explain why the stock's performance over different timeframes has caught more attention from both new and existing shareholders.
• On our valuation checks, Incyte currently scores 4 out of 6, which suggests some measures point to value while others are more cautious. Next we will look at how different valuation methods assess the stock, before closing with a more holistic way to think about what it could be worth.

Incyte delivered 51.2% returns over the last year. See how this stacks up to the rest of the Biotechs industry.

Approach 1: Incyte Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth by projecting its future cash flows and then discounting those back to today using a required rate of return. It is essentially asking what those future dollars are worth in today’s terms.

For Incyte, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $1.16b, and Simply Wall St projects future free cash flows using analyst estimates where available, then extrapolates further out. For example, the ten year projections range from $1.59b in 2026 to $4.18b in 2035, all in $ and already discounted back to present values within the model.

Putting those cash flows together, the DCF model arrives at an estimated intrinsic value of about $400.96 per share. Compared with the recent share price of $110.57, this implies the stock is 72.4% below that DCF estimate. This points to a wide valuation gap based purely on these cash flow assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Incyte is undervalued by 72.4%. Track this in your watchlist or portfolio, or discover 885 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 Incyte.

Approach 2: Incyte Price vs Earnings

For profitable companies like Incyte, the P/E ratio is often a useful way to think about value because it links what you pay directly to the earnings the business is currently generating. In general, higher growth expectations and lower perceived risk can justify a higher P/E, while slower expected growth or higher risk tend to support a lower, more conservative multiple.

Incyte currently trades on a P/E of 18.26x. That sits below the Biotechs industry average P/E of about 21.51x and also below the peer group average of 22.70x. This indicates that the market is pricing Incyte at a discount to many similar companies on an earnings basis.

Simply Wall St also calculates a proprietary “Fair Ratio” for Incyte of 18.16x. This is the P/E level that would be expected given factors such as its earnings growth profile, industry, profit margins, market cap and risk characteristics. Because this Fair Ratio adjusts for those company specific drivers, it can be more informative than a simple comparison with peers or the broad industry, which may have very different growth or risk profiles. Incyte’s actual P/E of 18.26x is very close to the Fair Ratio of 18.16x, suggesting the shares are priced roughly in line with those fundamentals.

Result: ABOUT RIGHT

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1450 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Incyte Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you and other investors turn your view of Incyte’s story into specific assumptions for revenue, earnings, margins and fair value. You can then compare that Fair Value to the current price, see how different views range from about US$60 to US$110, and watch those Narratives update automatically as new news, earnings and guidance arrive so you always have a clear, story driven framework for deciding whether the stock still fits your thesis.

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