Assessing Innoviva (INVA) Valuation After Recent Share Price Cooling

Why Innoviva (INVA) is drawing fresh attention

Innoviva (INVA) is back on investors’ radar after recent share price moves, with the stock last closing at US$19.52. That has many shareholders reassessing how its current valuation lines up with fundamentals.

See our latest analysis for Innoviva.

The recent pullback, including a 1-day share price return of 0.20% decline and a modest 30-day share price return of 1.41% decline, comes after a stronger 90-day share price return of 10.34% and multi year total shareholder returns above 50%. This suggests momentum has cooled in the short term even as longer term holders remain ahead.

If Innoviva has you reassessing your watchlist, this could be a good moment to widen the lens and look at pharma stocks with solid dividends as potential alternatives in the sector.

With Innoviva trading at US$19.52 against an analyst price target of US$32.50 and a flagged intrinsic discount of about 65%, you have to ask: is this a genuine mispricing, or is the market already baking in future growth?

Price-to-Earnings of 11.5x: Is it justified?

On a P/E of 11.5x, Innoviva trades at a level that looks inexpensive compared with many US pharmaceutical peers, even after the recent share price pullback.

The P/E ratio compares the current share price to earnings per share, so a lower figure can indicate the market is placing a more conservative value on each dollar of profit. For a company with established products and positive earnings, it is a quick way to see how the market is pricing its profit stream relative to similar businesses.

Here, Innoviva screens as “good value” in several ways, with its 11.5x P/E below the peer average of 16.3x and the broader US Pharmaceuticals industry average of 19.8x. It also sits below an estimated fair P/E of 15.3x, which may indicate there is room for the valuation multiple to move closer to that level if earnings and sentiment remain similar.

Explore the SWS fair ratio for Innoviva

Result: Price-to-Earnings of 11.5x (UNDERVALUED)

However, you also have to weigh risks, including reliance on a concentrated respiratory portfolio and execution on newer hospital and antibiotic products that are still scaling.

Find out about the key risks to this Innoviva narrative.

Another view using our DCF model

While the 11.5x P/E suggests Innoviva is cheap, our DCF model points to something stronger, with an estimated future cash flow value of about US$55.04 per share versus the current US$19.52 price. That implies a very wide gap, so is the risk in the forecast or in the market’s expectations?

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 Innoviva 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 888 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 Innoviva Narrative

If this view does not fully align with your own thinking, or you prefer to rely on your own data work, you can build a custom thesis for Innoviva in just a few minutes by starting with Do it your way.

A great starting point for your Innoviva research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If you stop with Innoviva, you could miss other opportunities that fit your style, so take a few minutes to test fresh ideas with the screener.

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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