Septerna (SEPN) Rallies Following Weak Results But Still Looks Pricey

Septerna (SEPN) just posted third quarter results that turned last year’s profit into a loss, with weaker sales and a wider per share deficit becoming the main focus for traders.

Despite the weak quarter, traders have been bidding Septerna up. The latest close at $52.34 reflects a 1-day share price return of 3.15%, a 7-day share price return of 19.77%, and a year-to-date share price return of 87.06%. The 1-year total shareholder return of 172.04% indicates strong momentum that recent earnings have not yet derailed.

Scan how traders are treating similar biotech stories by comparing Septerna’s surge with the hand-picked 20 high quality undiscovered gems that also pair clinical pipelines with strong underlying fundamentals.

Septerna has surged after a weak quarter, yet the stock still trades below the US$59.22 average analyst target. Is this just catch-up to fair value, or already stretching that range?

Preferred Price-to-Sales Multiple of 25.9x: Is it justified?

Septerna’s rally now sits against a P/S multiple of 25.9x, which is being applied to $96.27m of revenue and a reported loss of $58.999m.

P/S compares the market value of a business to its sales, rather than its profit. For a clinical-stage biotechnology group like Septerna that is currently unprofitable, this ratio often becomes the primary shorthand investors use to weigh pipeline potential against current commercial scale.

The current figure implies that buyers are paying a high price for each dollar of sales. SEPN is described as expensive versus the US Pharmaceuticals industry average P/S of 4.4x, and it is also marked as expensive relative to a fair P/S estimate of 3x that is based on a regression-style fair ratio framework. That suggests the valuation is stretched both against peers and against a level the market could move towards if enthusiasm cools.

Against that backdrop, the stock is screening as expensive on multiple fronts. SEPN is highlighted as expensive based on its Price-To-Sales Ratio of 25.9x compared to the peer average of 3.1x. In addition, the fair P/S ratio of 3x points to an even lower benchmark that would represent a materially different market stance on Septerna’s prospects.

Explore the SWS fair ratio for Septerna.

Result: Price-to-Sales of 25.9x (OVERVALUED)

Still, revenue and net income are both declining year on year, and any disappointment around Septerna’s clinical programs or the Novo Nordisk collaboration could quickly pressure sentiment.

Find out about the key risks to this Septerna narrative.

Next Steps

Sentiment around Septerna is clearly split, with strong share price gains sitting beside falling earnings and flagged risks. Consider acting promptly by reviewing the underlying data and weighing the 2 important warning signs.

Looking for more investment ideas beyond Septerna?

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