Why Recursion’s conference update is back on investors’ radar

Recursion Pharmaceuticals (RXRX) is back in focus after its updated investor presentation at the J.P. Morgan Healthcare Conference highlighted early REC-4881 data in familial adenomatous polyposis and a cash runway the company expects to last through 2027.

While the updated J.P. Morgan Healthcare Conference presentation and upcoming conference appearances have put Recursion Pharmaceuticals back in the headlines, the share price has been mixed. There has been a 10.71% year to date share price return, contrasted with a 27.34% decline in the 1 year total shareholder return and a 45.10% decline in the 3 year total shareholder return. This suggests that recent momentum has improved, but longer term performance remains weak.

If this kind of AI driven drug discovery story has caught your eye, it could be worth widening your lens to other healthcare stocks that might fit a similar thesis.

On one hand, Recursion trades below its flagged intrinsic value and analyst target; on the other, it is still an early stage, loss making business. So is this a genuine mispricing, or is the market already baking in future growth?

Most Popular Narrative: 33.6% Undervalued

Recursion Pharmaceuticals last closed at US$4.65, while the most followed narrative places fair value at US$7.00, suggesting a sizeable valuation gap to unpack.

Automated, data-driven approaches to drug discovery and clinical development are addressing industry-wide needs to decrease development timelines and costs. This is positioning Recursion to capitalize on the pharma industry's widespread shift toward AI-based R&D, potentially leading to greater market share and improved long-term earnings power.

Want to see what kind of revenue runway and margin shift would need to line up with that higher valuation? The narrative leans on aggressive top line expansion, a sharp earnings swing, and a premium future earnings multiple rarely seen in this sector. Curious how those moving parts fit together and what assumptions sit under them?

Result: Fair Value of US$7.00 (UNDERVALUED)

However, this depends on early stage trials delivering and on partner revenues holding up, with cash runway projections and potential dilution also remaining in the background.

Build Your Own Recursion Pharmaceuticals Narrative

If you see the story differently or prefer to crunch the numbers yourself, you can build your own view in just a few minutes, starting with Do it your way.

A great starting point for your Recursion Pharmaceuticals research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Recursion has sparked your interest, do not stop here. Broaden your watchlist now so you do not miss other opportunities that could fit your approach.

• Spot potential high risk, high reward opportunities early by scanning these 3533 penny stocks with strong financials that match your preferred filters and return profile.
• Zero in on companies applying artificial intelligence in practical ways across healthcare by reviewing these 30 healthcare AI stocks that might complement a thesis like Recursion.
• Focus your time on value oriented opportunities by sorting through these 868 undervalued stocks based on cash flows that align with the kind of valuation gap you are assessing here.

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.