CRISPR Therapeutics (CRSP) is drawing fresh attention after being added to multiple Russell growth benchmarks, including the Russell 2000, 2500, 3000, Small Cap Comp Growth and 3000E Growth indexes.

The index additions come after a period of steady momentum for CRISPR Therapeutics, with a 90-day share price return of 12.34% and a 1-year total shareholder return of 7.64%. However, the 5-year total shareholder return is down 60.91%.

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With CRISPR Therapeutics now sitting in several Russell growth indexes, trading off a recent 12.34% 90 day gain but a 60.91% decline over 5 years, the key question is whether current levels reflect an undervalued stock or a market that is already pricing in future growth.

CRISPR Therapeutics valuation: what the DCF is signaling

CRISPR Therapeutics is currently trading at $55.62, while the SWS DCF model estimates a future cash flow value of $208.13. This points to a large implied discount at the current share price.

The SWS DCF model works by projecting a stream of future cash flows for CRISPR Therapeutics and then discounting those cash flows back to today using a required rate of return. That produces a single estimate of what the stock might be worth based on those projected cash flows rather than on short term market sentiment.

For a company like CRISPR Therapeutics, which is still unprofitable and focused on developing gene based therapies, a DCF approach places most of the weight on what its cash generation could look like if its pipeline progresses, rather than on near term earnings. This can lead to a wide gap between current trading levels and model value, especially when revenues are still limited at about $4.1m and the company is reporting a loss of $568.5m.

Result: DCF fair value of $208.13 (UNDERVALUED)

However, CRISPR Therapeutics still faces key risks, including reliance on a single lead therapy and ongoing heavy losses of $568.5m on revenue of $4.1m.

Another view on CRISPR Therapeutics valuation

While the SWS DCF model suggests CRISPR Therapeutics is trading well below an estimated cash flow value, the price target from analysts tells a different story, sitting at $83.52 versus the current $55.62. That still implies upside, but it is far less dramatic than the DCF gap. Which signal do you give more weight to in your own process?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CRISPR Therapeutics 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 41 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

Seeing mixed signals on CRISPR Therapeutics and not sure which way sentiment leans overall? Take a moment to review the data, weigh the long term potential against the concerns, and then check the full picture of 2 key rewards and 2 important warning signs.

Looking for more investment ideas beyond CRISPR Therapeutics?

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• Capture potential value in companies that combine quality fundamentals with attractive pricing by reviewing our hand picked list of 41 high quality undervalued stocks.
• Strengthen your income stream by focusing on companies that pair robust balance sheets with higher yields using our carefully selected 8 dividend fortresses.
• Get ahead of the crowd by zeroing in on lesser known companies with solid fundamentals through our focused screener containing 19 high quality undiscovered gems.

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.