ORIC Pharmaceuticals (ORIC) drew fresh attention after scheduling a March 31 conference call to share Phase 1b combination dose optimization data for rinzimetostat in metastatic castration resistant prostate cancer, highlighting progress in its oncology pipeline.

The upcoming rinzimetostat data call sits against a backdrop of strong share price momentum, with a 46.18% 90 day share price return and a 96.42% 1 year total shareholder return, although the 5 year total shareholder return is still negative.

If this kind of oncology catalyst has your attention, it may be worth widening your watchlist to other potential growth names through a focused list of 34 healthcare AI stocks

With the shares up sharply over the past year yet still trading at a discount to analyst targets and some valuation models, the key question now is whether ORIC is still mispriced or if the market is already factoring in potential future growth.

DCF valuation indicates a large gap to fair value

ORIC closed at $12.06 while the SWS DCF model estimates a future cash flow value of $43.66 per share, implying a wide valuation gap on this measure.

The DCF model works by estimating all the cash the business could generate in the future and discounting those cash flows back to today using a required return. That produces a single present value figure, which in this case is $43.66.

For a clinical stage biotech such as ORIC, with reported revenue of $0 and a net loss of $129.468 million, a DCF framework leans heavily on assumptions about future trial outcomes, eventual product launches and later stage margins rather than current earnings.

Investors weighing the current $12.06 share price against the $43.66 model value are essentially comparing what the market is pricing in today with what the DCF calculation implies for future cash generation.

Result: DCF fair value of $43.66 (UNDERVALUED)

However, this relies on successful trial readouts and eventual commercialization, while ORIC is still loss making with reported revenue of $0 and a net income loss of $129.468 million.

Another way to look at the valuation

While the SWS DCF model suggests a wide discount to fair value, the P/B ratio paints a more cautious picture. ORIC trades at 3.1x book value, which is below the peer average of 22.1x yet above the wider US Biotechs industry at 2.4x. This raises the question of whether the recent price move already builds in a lot of hope.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out ORIC Pharmaceuticals 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 61 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

The mix of optimism and concern around ORIC is clear, so move quickly, review the full data, and weigh the 1 key reward and 5 important warning signs

Looking for more investment ideas?

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• Hunt for quality on sale by scanning companies highlighted in the 61 high quality undervalued stocks.
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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.