Assessing CRISPR Therapeutics after recent price swings

CRISPR Therapeutics (CRSP) has seen sharp short term moves, with the stock down about 11% over the past day and 16% over the past week, while remaining positive over the past year.

For context, the company is valued at about US$4.7b, with the share price last closing near US$48.79. Reported annual revenue stands at US$3.51 million, alongside a net loss of roughly US$581.6 million.

These figures, plus a value score of 3, provide a snapshot of a gene editing business that is still in the investment phase, with commercial outcomes yet to fully feed through to its financials.

Despite the sharp recent pullback in the share price, which includes a 1-week share price return of about a 16% decline, the 1-year total shareholder return of 27.48% points to a still positive longer term experience for holders. Recent volatility likely reflects shifting market expectations around CRISPR Therapeutics' pipeline progress and risk profile, against a backdrop of continued losses and early stage revenues.

If you are comparing CRISPR Therapeutics to other gene editing and biotech names, it can help to see what else is moving in healthcare related AI, including 33 healthcare AI stocks

With CRISPR Therapeutics valued around US$4.7b, reporting US$3.51 million in revenue and a net loss of about US$581.6 million, along with an analyst price target well above the current share price, is this a genuine opening or is the market already pricing in future growth?

Preferred Price to Book of 2.4x: Is it justified?

On a P/B basis, CRISPR Therapeutics trades at about 2.4x, which is slightly above the US Biotechs industry average of 2.3x and well below the 23.3x average for its peer group. At a last close of $48.79 and with the company still loss making, this book value comparison is one of the few relatively clean valuation anchors available.

P/B compares the market value of the equity to the accounting value of net assets. It is often used when earnings are negative or highly volatile. For a gene editing company that is still unprofitable and does not yet have meaningful revenue of about $4m, investors are effectively paying a premium over industry book value for its platform, pipeline and partnerships rather than for current earnings power.

Against the broader peer set where the average P/B sits near 23.3x, the current 2.4x looks restrained. This may indicate the market is more cautious about CRISPR Therapeutics relative to some higher multiple names. Compared with the US Biotechs industry average of 2.3x, the stock is only slightly more expensive, so the market is pricing it roughly in line with the sector while still attaching a modest premium. Result: Price to Book of 2.4x (ABOUT RIGHT)

However, you still need to weigh the continued net loss of about US$581.6 million and the risk that key programs or partnerships may not progress as expected.

Another angle: DCF points to a very different story

While the 2.4x P/B suggests CRISPR Therapeutics is roughly in line with the biotech sector, the SWS DCF model paints a contrasting picture. At a share price of about $48.79 versus an estimated future cash flow value of $184.63, the model implies the stock is trading at a steep discount. For you as an investor, the key question is whether those long term cash flow assumptions feel realistic or too generous.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CRISPR Therapeutics 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 54 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

If you are uncertain about how to balance the risks and rewards highlighted here, use the full set of data to stress test your own view and review the 2 key rewards and 2 important warning signs.

Looking for more investment ideas?

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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.