Why Recursion Pharmaceuticals is on investors’ radar today

Recursion Pharmaceuticals (RXRX) has drawn attention after a period of mixed share performance, with gains over the past month contrasting with weaker returns over the past 3 months and year to date.

At a share price of US$3.30, Recursion’s recent 7.5% 1 month share price return sits against a weaker backdrop, with a 21.4% year to date share price decline and a 40% 1 year total shareholder return loss suggesting momentum has been fading.

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With Recursion trading at US$3.30, a value score of 2, an intrinsic discount of 62.22% and analyst targets implying a large gap, the key question is whether this reflects mispricing or if markets are already banking on future growth.

Most Popular Narrative: 67.5% Overvalued

Against the last close at $3.30, the narrative fair value of $1.97 implies a steep premium and sets up a very skeptical view of RXRX.

RXRX is a terrible biotech only because the INSIDERS themselves don’t believe in it! All they’re doing is milking the heck out of this doomed stock! Never seen a company where ALL they’re doing insiders are selling! Stock continues to go down every month! CEO said in 2014 that in 10 years there would be 100 new drugs! 12 years later they have ZERO 0️⃣!!! This stock went from over $40 to under $4! The hype is unbelievable! Worst biotech ever!!! Nuff said

The fair value call rests on bold assumptions about future margins, revenue compounding and what multiple RXRX could command if those goals are hit. Curious which levers matter most and how they connect to that $1.97 figure.

Result: Fair Value of $1.97 (OVERVALUED)

However, a sizeable intrinsic discount and analyst price target gap, along with leadership changes and multiple clinical programs, could quickly challenge such a bearish fair value view.

Another View: DCF Points the Other Way

That bearish $1.97 fair value contrasts sharply with our DCF model, which estimates Recursion’s future cash flow value at $8.74. At a share price of $3.30, that implies the stock trades well below this estimate and presents a very different picture for long term holders. Which perspective do you find more compelling?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Recursion 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 53 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

With sentiment clearly split between bearish narratives and a more optimistic cash flow view, it makes sense to look at the data yourself and move quickly before opinions settle; a helpful place to start is by weighing the 2 key rewards and 3 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.