Wondering if Ocular Therapeutix at around US$7.78 is offering fair value right now, or if the recent volatility is masking a better entry point for long term investors.
The stock has seen a 12.4% decline over the last 7 days and a 24.2% decline over 30 days, yet it still sits on an 11.1% return over 1 year and 31.4% over 3 years, with a 57.6% decline over 5 years adding extra context to the risk profile.
These mixed returns mean recent news and company updates have taken on extra importance for investors trying to understand what is driving sentiment and volatility. In the sections ahead we will link those developments to how the market is currently treating the stock.
On our framework Ocular Therapeutix scores 2 out of 6 on the undervaluation checks, giving it a value score of 2. Next we will walk through the standard valuation tools before finishing with a way to look at value that goes beyond any single model.
Ocular Therapeutix scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow model takes estimates of a company’s future cash flows and discounts them back to today’s dollars. It aims to show what the whole business could be worth in the present.
For Ocular Therapeutix, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections in $. The latest twelve month free cash flow is a loss of $210.7 million. Analyst and extrapolated estimates in the model indicate free cash flow of $238.9 million in 2030, with a path that runs through projected figures between 2026 and 2035 supplied by analysts and Simply Wall St’s extrapolations.
Combining all of those projected cash flows and discounting them back to today results in an estimated intrinsic value of about $86.45 per share. Compared to a current share price of around $7.78, this DCF output implies the stock trades at roughly a 91.0% discount to that estimate. This indicates that, on this model’s assumptions, the shares appear meaningfully undervalued on this basis.
For companies where earnings are not yet positive, P/S is often more useful than P/E because it focuses on revenue rather than profit, which can be heavily affected by research and development spending or one off items. Investors still look at growth expectations and risk to judge what a “normal” P/S multiple should be, since faster, less risky growth can justify a higher multiple than slower or more uncertain growth.
Ocular Therapeutix currently trades on a P/S ratio of 32.60x. That sits well above the Pharmaceuticals industry average of 4.40x and above the peer group average of 8.82x. Simply Wall St’s Fair Ratio framework goes a step further by estimating what a P/S multiple might look like after factoring in elements such as earnings growth expectations, profit margins, industry, market cap and company specific risks.
Because it pulls these variables together into a single figure, the Fair Ratio of 0.23x can give a more tailored benchmark than a simple comparison with peers or the broad industry. Set against the actual 32.60x P/S, Ocular Therapeutix screens as trading materially above this Fair Ratio estimate.
Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you turn your view of Ocular Therapeutix into a clear story that links assumptions about future revenue, earnings and margins to a forecast and a fair value. They then compare that fair value with the current share price to help you consider whether the stock looks appealing or not. The Narrative also keeps that view current as new news or earnings arrive. This is why one investor on the Community page might build a more cautious Ocular Therapeutix Narrative around a fair value of US$14.00, while another leans into a more optimistic Narrative at US$31.00, both using the same company data but telling very different stories about what they think comes next.
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.
