Is Novavax (NVAX) A Potential Opportunity After Recent Vaccine Market Volatility?

• If you are wondering whether Novavax at US$7.44 is a bargain or a value trap, this article will help you size up what the current price might be implying about the stock.
• Over the short term, the stock has seen returns of 10.7% over the last week and 9.7% over the last month. Year to date it is at 4.3%. The 1 year return sits at a 22.5% decline, with a 37.3% decline over 3 years and a 94.1% decline over 5 years.
• Recent news around Novavax has focused on its position in the vaccine market and how investors view its ability to compete with larger players. This context helps explain why the share price has been volatile and why sentiment can shift quickly.
• Right now, Novavax scores 5 out of 6 on our valuation checks, giving it a value score of 5. Next we will walk through the key valuation methods behind that number, before finishing with a way to think about value that goes beyond the usual models.

Find out why Novavax's -22.5% return over the last year is lagging behind its peers.

Approach 1: Novavax Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of a company’s future cash flows and discounts them back into today’s dollars to arrive at an estimate of what the business might be worth now.

For Novavax, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is a loss of about US$413.7 million. Analysts provide free cash flow estimates out to 2026, and Simply Wall St then extrapolates further, with projected free cash flow of US$304 million in 2026 and US$126.5 million in 2030, eventually extending out to 2035 using estimated growth rates.

When all of these projected cash flows are combined and discounted back to today, the result is an estimated intrinsic value of about US$41.27 per share. Compared with the current share price of US$7.44, the model indicates the stock is trading at an 82.0% discount using this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Novavax is undervalued by 82.0%. Track this in your watchlist or portfolio, or discover 878 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Novavax.

Approach 2: Novavax Price vs Earnings

The P/E ratio is a common way to look at valuation for companies that are generating earnings, because it links what you pay per share to what the business earns per share each year. In general, higher growth expectations and lower perceived risk can justify a higher P/E, while slower growth and higher risk usually line up with a lower P/E.

Novavax currently trades on a P/E of 3.54x. That sits well below the Biotechs industry average P/E of 21.51x and the peer group average of 35.65x. On the surface, this points to a much lower earnings multiple than many similar companies.

Simply Wall St’s Fair Ratio for Novavax is 9.21x. This is a proprietary estimate of what the P/E might be, given factors such as the company’s earnings profile, its industry, profit margins, market cap and key risks. Because it adjusts for these elements, the Fair Ratio can be more tailored than a simple comparison to industry or peer averages, which treat all companies in the group as if they were identical.

Comparing the Fair Ratio of 9.21x with the current P/E of 3.54x suggests the shares are trading below that Fair Ratio estimate.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1447 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Novavax Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you connect your view of Novavax’s story with your own revenue, earnings and margin assumptions, turn that into a forecast and fair value, then compare it with the current price. Because Narratives on the Community page are updated when new news or earnings arrive, you can see, for example, one investor building a Narrative around a higher fair value closer to US$25 based on confidence in licensing and partnerships, while another anchors closer to US$6 with more focus on execution and revenue risks. You can then use that range to decide what you think the stock is worth and whether the current US$7.44 price sits above or below your own fair value line.

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

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