The latest move from COMPASS Pathways (NasdaqGS:CMPS) is its new partnership with the U.S. Department of Veterans Affairs on the PIVOT trial, a multi site study of COMP360 in veterans.

At a share price of US$13.54, COMPASS Pathways has a 7 day share price return of 19.3% and a 90 day share price return of 40.31%. The 1 year total shareholder return of 208.43% signals strong momentum despite a wider recent loss and a new shelf registration filing that may shape future funding.

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COMPASS Pathways now has a high-profile VA trial, a wider recent loss and a new shelf registration, all shaping sentiment. The business story is compelling. Is the current US$13.54 share price as attractive?

Most Popular Narrative: 44.7% Undervalued

On the most followed view, COMPASS Pathways has a fair value of $24.47 compared with the latest $13.54 close, which puts a lot of weight on future COMP360 milestones.

COMPASS Pathways currently has no revenue. Analysts are forecasting revenue to reach $284.9 million by July 2029.

In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 93.6x on those 2029 earnings, up from 9.8x today. This future PE is greater than the current PE for the US Biotechs industry at 17.6x.

Want to see what kind of revenue ramp and profit margin shift would need to sit behind COMPASS Pathways to support that fair value and multiple driven narrative?

Result: Fair Value of $24.47 (UNDERVALUED)

However, the COMPASS Pathways story still depends on successful Phase III outcomes and FDA decisions. At the same time, heavier upfront commercial spending could weigh on earnings longer than expected.

Next Steps

This narrative around COMPASS Pathways mixes meaningful upside potential with real concerns that investors are already debating. Act quickly to review both sides for yourself by checking the 2 key rewards and 4 important warning signs.

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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.