Pharvaris (PHVS) stock is in focus after the U.S. Food and Drug Administration accepted its New Drug Application for deucrictibant immediate release capsules, which target on demand treatment of hereditary angioedema attacks.

The FDA filing appears to have kept interest in Pharvaris elevated, with the share price at $34.94 and a 90 day share price return of 19.86%. The 1 year total shareholder return of 46.56% and 3 year total shareholder return of 114.88% suggest momentum has been building over time.

If you are looking at Pharvaris because of progress in rare disease treatments, it could also be a useful moment to scan other health focused opportunities through 39 healthcare AI stocks

After the NDA catalyst and strong multi year share price gains, Pharvaris now sits at a very different starting point. The key question is whether the current price still offers an attractive trade off between clinical risk and potential upside on approval, or not.

Pharvaris valuation: what the current price is baking in

On Simply Wall St's numbers, Pharvaris trades at $34.94 compared with an estimated future cash flow value of $419.22 per share using the SWS DCF model, which implies a very large discount. That is a wide gap for any late stage biotech, so it is worth understanding what is driving such a result before treating it as a simple bargain signal.

The SWS DCF model estimates value by projecting a company’s future cash flows and then discounting them back to today using a required rate of return. For Pharvaris, this process uses assumptions about future revenue, margins and reinvestment needs that are consistent with a business currently reporting a loss of $168.56m and essentially no revenue, but with analyst forecasts for strong top line growth.

Pharvaris is described as unprofitable today and is forecast to remain unprofitable over the next 3 years, while revenue is forecast to grow 58.89% per year from a very low base. That type of profile means the DCF result is heavily influenced by what the model assumes happens well beyond the near term, once the company is expected to move from cash burn to cash generation.

Because of that, investors weighing Pharvaris at $34.94 against a model output of $419.22 may want to focus less on the headline discount and more on the underlying assumptions that would need to hold for that value to be realised over time. Look into how the SWS DCF model arrives at its fair value.

Result: DCF Fair value of $419.22 (UNDERVALUED)

However, Pharvaris still carries clear risks related to its ongoing losses of $168.56m and the execution required to commercialize deucrictibant in rare disease markets.

Another view on Pharvaris using P/B

While the SWS DCF model points to a large gap between Pharvaris' share price and its future cash flow value, the P/B ratio tells a more cautious story. Pharvaris trades at 9x book value compared with 2.4x for the US pharmaceuticals industry and a very large 513.1x peer average.

This mix of signals points to both potential upside and clear valuation risk. If the market places more emphasis on balance sheet-based measures instead of long-dated cash flow forecasts, how much weight should you give each view when assessing Pharvaris at $34.94?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Pharvaris 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 48 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 Pharvaris presenting both clear risks and appealing rewards, are you ready to look past the headlines and test the assumptions yourself? Take a closer look at the 2 key rewards and 4 important warning signs

Looking for more investment ideas beyond Pharvaris?

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• Target potential bargains by scanning companies that appear underpriced on quality and fundamentals using the 48 high quality undervalued stocks.
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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.