Tango Therapeutics (TNGX) drew fresh attention after positive Phase 1/2 vopimetostat data in difficult pancreatic and lung cancer settings, coinciding with a completed US$600 million follow on equity offering.

The recent vopimetostat data and the US$600 million follow on offering have arrived alongside strong momentum in Tango Therapeutics’ stock, with a year to date share price return of 260.13% and a 1 year total shareholder return that is very large.

If you are looking beyond Tango Therapeutics for other potential ideas in healthcare, this could be a good time to review a curated set of 40 healthcare AI stocks

With Tango Therapeutics now funded with fresh capital and sitting on a very strong recent share price run, the key question for investors is simple: is the current valuation still attractive or is the market already pricing in future growth?

Preferred Price-to-Book of 11.9x: Is it justified?

Using a P/B ratio, Tango Therapeutics currently screens as expensive, with a price-to-book multiple of 11.9x compared with both peers and the wider US biotech industry.

The price-to-book ratio compares a company’s market value to its accounting book value. It can be a useful cross check for asset heavy or early stage businesses that are not yet profitable. For Tango Therapeutics, this high P/B sits alongside an SWS DCF model estimate of future cash flow value of $52.76 per share versus a last close of $32.16, so the multiple does not tell the full story on its own.

Against that backdrop, the key question is why the market is willing to pay a P/B of 11.9x when the US Biotechs industry average is 2.4x and the peer average is 5.3x. That gap suggests investors are pricing in much stronger prospects for Tango Therapeutics than for the typical biotech company, especially given analysts currently forecast the business to remain unprofitable over the next 3 years even as revenue is expected to grow 63.2% per year.

Result: Price-to-book of 11.9x (OVERVALUED)

However, Tango Therapeutics still faces clinical and regulatory risk around its early stage pipeline, and the business currently reports a loss of US$107.232 million on US$56.992 million in revenue.

Another View: What the SWS DCF Model Says About Tango Therapeutics

While the 11.9x P/B ratio makes Tango Therapeutics look expensive on asset value alone, the SWS DCF model presents a different picture, with an estimated future cash flow value of $52.76 per share versus the current $32.16 price, implying the stock trades below that fair value estimate.

That contrast between a rich P/B and a discount to the SWS DCF model leaves you with a simple judgement call: which signal feels more reliable for a loss making, high growth biotech like Tango Therapeutics?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Tango 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 44 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

Given this mix of enthusiasm and concern around Tango Therapeutics, it makes sense to move quickly and review the numbers for yourself. To weigh up both sides of the story, start by checking the 2 key rewards and 3 important warning signs.

Looking for more investment ideas beyond Tango Therapeutics?

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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.