• Investors may be wondering whether Harmony Biosciences Holdings at around US$36.52 is offering fair value right now, or if the current price is out of line with its fundamentals.
• The stock has been under some pressure recently, with a 0.8% decline over the last 7 days, a 2.3% decline over the last 30 days and year to date, and a 5.8% decline over the past year. Over longer periods, the 3-year and 5-year returns sit at declines of 26.0% and 8.8% respectively.
• Recent coverage around Harmony Biosciences has focused on its position in the pharmaceuticals and biotech space and how the company is being assessed by investors as conditions in that sector evolve. This context helps explain why the share price has seen mixed sentiment over different time frames as the market reacts to changing expectations and risk perceptions.
• On Simply Wall St's valuation checks, Harmony Biosciences scores 5 out of 6 for potential undervaluation, giving it a valuation score of 5. Next, we will walk through the different valuation approaches behind that score before finishing with a more complete way to think about what the stock might be worth.

Approach 1: Harmony Biosciences Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash Harmony Biosciences Holdings is expected to generate in the future and discounts those projections back into today’s dollars to estimate what the business might be worth at present.

For Harmony Biosciences, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in $. The latest twelve month free cash flow is about $280.2 million. Analyst projections and subsequent extrapolations by Simply Wall St indicate free cash flow of $247.8 million in 2026 and $445.1 million in 2030, with values beyond the explicit analyst period inferred from those earlier estimates.

When these projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $189.50 per share. Compared with the current share price of around $36.52, this implies an intrinsic discount of 80.7%, indicating that the shares are priced well below this DCF estimate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Harmony Biosciences Holdings is undervalued by 80.7%. Track this in your watchlist or portfolio, or discover 875 more undervalued stocks based on cash flows.

Approach 2: Harmony Biosciences Holdings Price vs Earnings

For profitable companies, the P/E ratio is a useful way to think about value because it links what you pay today directly to the earnings the business is currently generating. Investors usually accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in the business and sector.

Harmony Biosciences currently trades on a P/E of 11.33x. That sits below the Pharmaceuticals industry average P/E of 20.43x and also below the peer average of 26.20x that Simply Wall St uses for comparison. On the face of it, the stock is priced at a discount to both its sector and direct peers.

Simply Wall St also provides a proprietary “Fair Ratio” for P/E, which is 18.58x for Harmony Biosciences. This Fair Ratio is designed to reflect the P/E you might expect given factors such as earnings growth, profit margins, industry, market cap and company specific risks. Because it blends all of these elements, it can often be more tailored than a simple comparison against broad industry or peer averages.

Putting this together, Harmony Biosciences’ current P/E of 11.33x sits below the Fair Ratio of 18.58x, which indicates that the shares may be trading at a discount on this earnings based measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Harmony Biosciences Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which simply means writing the story you believe about a company and linking that story to the numbers you think are reasonable for its future revenue, earnings and margins.

On Simply Wall St, a Narrative connects your view of Harmony Biosciences to a financial forecast. It then turns that forecast into a Fair Value that you can compare directly with the current share price to help decide whether you see it as an opportunity or something to be cautious about.

These Narratives sit inside the Community page on the platform. They are easy to create or follow, and are updated automatically when fresh information like company news or earnings is added.

For example, one Harmony Biosciences Narrative on the Community page might assume a much higher Fair Value than today’s US$36.52 share price, while another might assume a lower Fair Value. This shows how two investors can look at the same stock and reach very different conclusions based on their stories and assumptions.

Do you think there's more to the story for Harmony Biosciences Holdings? Head over to our Community to see what others are saying!

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.