Relay Therapeutics (RLAY) is back in focus after presenting new Phase 1/2 ReDiscover data for zovegalisib plus fulvestrant, where a 400 mg twice-daily fed dose showed efficacy and safety in line with earlier higher-dose findings.

The updated zovegalisib data arrives after a powerful swing in sentiment, with Relay Therapeutics’ 1 year total shareholder return of 223.86% contrasting with a 5 year total shareholder return loss of 71.07%. Its 30 day and 90 day share price returns of 8.90% and 17.98% suggest momentum has been building recently despite short term pullbacks.

If this kind of clinical catalyst has your attention, it could be a good time to see what else is moving in healthcare focused AI, starting with 35 healthcare AI stocks.

With the stock up very strongly over the past year yet still trading at a steep discount to the average analyst price target, you have to ask: is Relay Therapeutics undervalued here, or is the market already banking on future growth?

Preferred Price to Book Multiple of 3.1x: Is it justified?

Relay Therapeutics currently trades on a P/B of 3.1x, which screens as expensive relative to the broader US biotech industry but inexpensive against its closer peer group.

P/B compares a company’s market value with its net assets on the balance sheet. It is often used for asset heavy or early stage businesses where earnings are not yet positive. For a clinical stage biotech like Relay Therapeutics, a higher P/B can reflect how the market values its drug pipeline, partnerships and cash position relative to its book equity.

The conflicting signals stand out. On one side, the stock looks expensive versus the US Biotechs industry average P/B of 2.5x. On the other side, it appears good value compared to a much higher 13.3x peer average. This suggests investors in similar names are paying far more for each dollar of book value, while the market has yet to assign Relay Therapeutics a similar premium.

Result: Price-to-book of 3.1x (ABOUT RIGHT)

However, you still have to weigh clinical and regulatory uncertainty around zovegalisib and other candidates, as well as ongoing losses with net income at a US$276.479 million deficit.

Next Steps

With sentiment clearly mixed, with both risks and rewards in play, it helps to review the underlying data quickly and decide where you stand. To frame that view with a balanced snapshot of potential upside and downside, take a close look at the 2 key rewards and 2 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.