A Valuation Check on Protagonist Therapeutics (PTGX) After Sharply Widened Quarterly Losses

Protagonist Therapeutics (PTGX) posted its third-quarter earnings, showing a shift to a higher net loss compared to last year. The company also moved from net income to net loss for the nine months ended September 30.

See our latest analysis for Protagonist Therapeutics.

Despite shifting to a deeper net loss in the latest earnings, Protagonist Therapeutics' share price has surged 117% year to date, with a strong one year total shareholder return of 109%. This impressive momentum hints at renewed optimism around its long-term growth story, even amid short-term setbacks.

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With strong share price gains despite deeper losses, the question now is whether Protagonist Therapeutics is trading below its true value or if the market has already factored in expectations for its future growth.

Price-to-Earnings of 115.2x: Is it justified?

Protagonist Therapeutics is trading at a price-to-earnings (P/E) ratio of 115.2x, significantly higher than both its industry and peer averages and out of line with typical biotech sector valuations.

The price-to-earnings ratio reveals how much investors are willing to pay for one dollar of earnings. In biotech, high P/E ratios often reflect expectations for breakthroughs or transformative growth, but also carry heightened risk if projected earnings do not materialize.

With the US Biotechs industry average P/E at 17.4x and peers at 23.3x, the current 115.2x multiple stands out as extremely expensive. Compared to an estimated fair value P/E of 36.9x, the stock appears priced for very rapid future gains far beyond the norm. This suggests the market expects something significant, or could be running ahead of fundamentals. These are levels the market could move toward if enthusiasm subsides or if earnings do not keep pace with expectations.

Explore the SWS fair ratio for Protagonist Therapeutics

Result: Price-to-Earnings of 115.2x (OVERVALUED)

However, a slowdown in revenue growth or lower than expected earnings could quickly cool enthusiasm and prompt a market reassessment.

Find out about the key risks to this Protagonist Therapeutics narrative.

Another View: SWS DCF Model Points to Undervaluation

While the price-to-earnings approach paints Protagonist Therapeutics as very expensive, our SWS DCF model draws a starkly different picture. According to this method, the stock is actually trading well below its estimated fair value. Could the market be underestimating its upside, or is this a signal to tread carefully?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Protagonist 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 897 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Protagonist Therapeutics Narrative

If you have a different perspective or want to see what the numbers reveal for yourself, you can dive in and construct your own view of the story in just a few minutes. Do it your way

A great starting point for your Protagonist Therapeutics research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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.