• Investors may be wondering if Madrigal Pharmaceuticals at around US$519.75 a share is still offering value, or if the easy gains are already behind it.
• The stock has been volatile recently, with a 1.9% decline over the last week, a 20.0% return over 30 days, a 12.5% decline year to date, and a 65.6% return over the past year, alongside very large gains over 5 years.
• Recent headlines around Madrigal have focused on its position in the biotech space and the market's shifting expectations for its drug pipeline and regulatory progress. That changing backdrop helps explain why the share price has moved so sharply over different time frames.
• On Simply Wall St's valuation checklist, Madrigal earns a 4 out of 6 value score. The next sections will break down what different valuation methods say about the stock and then conclude with a more complete way to think about its value.

Approach 1: Madrigal Pharmaceuticals Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes estimates of a company’s future cash flows, then discounts them back to today using a required rate of return to arrive at an estimate of what the business could be worth right now.

For Madrigal Pharmaceuticals, the model used is a 2 Stage Free Cash Flow to Equity approach. On a last twelve month basis, the company reported free cash flow of about $192.4 million in outflows. Analyst and extrapolated projections then move to positive free cash flow, with forecast figures such as $151.4 million in 2026 (discounted value $141.3 million) and up to $2.3 billion in 2035 (discounted value $1.2 billion). The 2030 free cash flow projection is $1.7 billion, discounted to $1.2 billion, all expressed in $.

Aggregating these discounted cash flows produces an estimated intrinsic value of about $1,809.70 per share for Madrigal Pharmaceuticals. Compared with the current share price of around $519.75, the DCF output suggests the stock is roughly 71.3% undervalued on these assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Madrigal Pharmaceuticals is undervalued by 71.3%. Track this in your watchlist or portfolio, or discover 64 more high quality undervalued stocks.

Approach 2: Madrigal Pharmaceuticals Price vs Sales

For companies where earnings are negative or still developing, the P/S ratio is often more useful than P/E because it focuses on revenue rather than profit. Revenue can be more stable early in a commercial rollout. Investors generally accept a higher or lower P/S depending on what they expect for future growth and how risky they see the business to be.

Madrigal currently trades on a P/S of 12.44x. That sits above the broader Biotechs industry average of 11.38x, but below the peer group average of 19.56x. Simply comparing to peers can be helpful, but it does not fully reflect Madrigal’s specific profile.

Simply Wall St’s Fair Ratio framework aims to fill that gap. This framework estimates what P/S multiple might be reasonable for Madrigal given factors such as its growth outlook, profit margins, market cap, risk profile and industry. For Madrigal, the Fair Ratio is 15.37x, which is higher than the current 12.44x. This indicates that the shares are trading below this model’s indication of value.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Madrigal Pharmaceuticals Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives tie your view of Madrigal Pharmaceuticals to the numbers by turning your story about its future revenue, earnings and margins into a forecast and a Fair Value that can be compared to today’s price. This all happens within Simply Wall St’s Community page, where Narratives update automatically when fresh news or earnings arrive. One investor might, for example, align with a cautious Fair Value around US$529.0, while another leans toward a more optimistic view closer to about US$904.36. This gives you a clear, side by side sense of how different assumptions on growth, profitability and risk translate into very different signals on whether the current share price looks high or low for your own decision making.

Do you think there's more to the story for Madrigal Pharmaceuticals? 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.