Arcutis Biotherapeutics (ARQT) shares have caught the attention of investors after a steady run of positive earnings surprises and recent upward earnings estimate revisions. The stock’s rally is largely a response to strengthening analyst sentiment, which is rooted in financial consistency and not a specific company event.

After a breakout run that saw Arcutis Biotherapeutics reach a fresh 52-week high, momentum is clearly building, with the company delivering a 1-year total shareholder return just under 1%. While recent events like the upcoming Investor Day and a streak of positive quarterly results continue to strengthen long-term optimism, the short-term uptick in share price reflects renewed confidence in Arcutis’ earnings power and future pipeline potential.

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The question now is whether Arcutis Biotherapeutics’ recent momentum and revised earnings outlook signal an undervalued opportunity for investors, or if the market has already accounted for its future growth prospects.

Most Popular Narrative: 12.4% Undervalued

With the last close at $19.92 and a narrative fair value set at $22.75, the market seems to be lagging behind bullish growth assumptions and major product catalysts.

Progressive conversion of topical steroid prescriptions (currently 69% of the addressable market) to ZORYVE and efficient penetration into new channels (for example, primary care and pediatrics via partnerships) set up a durable, multi-year growth runway and diversification, supporting both top-line growth and improving net margins due to operating leverage.

Ever wondered what bold growth expectations analysts are embedding here? The narrative’s projected financial leap hinges on ambitious sales and margin expansion forecasts. Will these aggressive projections hold up? Only the full narrative unveils the numbers that drive this valuation.

Result: Fair Value of $22.75 (UNDERVALUED)

However, heavy reliance on ZORYVE and shifting insurance dynamics could significantly alter Arcutis’ growth outlook if uptake or reimbursement fall short of expectations.

Build Your Own Arcutis Biotherapeutics Narrative

If the consensus view does not quite match your perspective or you like to deep dive into the numbers yourself, you can easily shape your own analysis and narrative in just a few minutes. Do it your way

A great starting point for your Arcutis Biotherapeutics research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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.