Is It Time To Reassess Arcutis Biotherapeutics (ARQT) After A 96% One Year Rally?

Simply Wall St.01-24

If you are wondering whether Arcutis Biotherapeutics at US$26.65 is pricing in too much optimism or still leaving room on the table, the starting point is understanding what the market might already ...

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The share price return sits at 1.1% over the last 7 days, with a 9.1% decline over 30 days, an 8.1% decline year to date, but a 96.0% return over 1 year and 65.5% over 3 years, which suggests sentiment around risk and potential has shifted over different time frames. Recent attention on Arcutis Biotherapeutics has been supported by company specific news and ongoing interest in its pipeline and products, which helps explain why the 1 year and 3 year returns look very different to the shorter term picture. This context matters because valuation methods are trying to translate those expectations and risks into a single price today. On our checklist of six valuation tests, Arcutis Biotherapeutics scores a 3 out of 6 valuation score, which points to some areas where the stock screens as potentially undervalued and others where it looks more fully priced. Next, we will compare the main valuation approaches before finishing with a way to frame all these numbers more clearly.  Arcutis Biotherapeutics delivered 96.0% returns over the last year. See how this stacks up to the rest of the Biotechs industry. AdvertisementApproach 1: Arcutis Biotherapeutics Discounted Cash Flow (DCF) Analysis A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting the cash it could generate in the future and then discounting those cash flows back to today in dollar terms. For Arcutis Biotherapeutics, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is a loss of $45.37 million, so the valuation leans heavily on what the business could produce if it reaches the levels analysts and extrapolated estimates suggest. Analysts provide free cash flow estimates out to 2030, with projections such as $93 million in 2026, $175 million in 2027, and $322 million in 2030, all before discounting. Simply Wall St then extends these estimates further by extrapolating growth to 2035. When all those projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $61.51 per share. Compared with the recent share price of $26.65, that implies the stock is about 56.7% undervalued on this DCF view. Result: UNDERVALUED Our Discounted Cash Flow (DCF) analysis suggests Arcutis Biotherapeutics is undervalued by 56.7%. Track this in your watchlist or portfolio, or discover 875 more undervalued stocks based on cash flows. ARQT Discounted Cash Flow as at Jan 2026 Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Arcutis Biotherapeutics. Approach 2: Arcutis Biotherapeutics Price vs Sales For companies where earnings are not yet positive or are still volatile, the P/S ratio is often a more practical yardstick than P/E because it compares what the market is paying for each dollar of revenue rather than each dollar of profit. What investors are willing to pay on a P/S multiple usually reflects how they see the balance between growth potential and risk. Higher expected growth or lower perceived risk can justify a higher P/S ratio, while slower expected progress or higher uncertainty typically aligns with a lower multiple. Arcutis Biotherapeutics currently trades on a P/S ratio of 10.27x. That sits below the Biotechs industry average of 11.97x and above the peer group average of 5.77x, which suggests the market is pricing it somewhere between a typical peer and the broader sector. Simply Wall St also calculates a “Fair Ratio” of 9.87x, which is the P/S multiple it estimates based on factors such as the company’s growth profile, profit margins, size, sector and specific risks. Because this Fair Ratio is tailored to Arcutis Biotherapeutics rather than being a broad-brush comparison, it can give a more company specific view than industry or peer averages alone. With the current 10.27x P/S ratio sitting modestly above the 9.87x Fair Ratio, the shares screen as slightly overvalued on this metric. Result: OVERVALUED NasdaqGS:ARQT P/S Ratio as at Jan 2026 P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1429 companies where insiders are betting big on explosive growth. Upgrade Your Decision Making: Choose your Arcutis Biotherapeutics Narrative Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your story about a company, written into numbers, where you set your view of its fair value along with your assumptions for future revenue, earnings and margins. This story then links directly to a financial forecast and from there to a fair value estimate, so you can see how your expectations translate into a number you can compare with the current share price. On Simply Wall St, Narratives sit inside the Community page, where millions of investors use them as an easy, accessible tool to frame when they might buy or sell by comparing a Narrative Fair Value to today’s market Price. Because Narratives update automatically when new information such as news or earnings is added, your story about Arcutis Biotherapeutics stays aligned with the latest data rather than becoming stale. For example, one Arcutis Biotherapeutics Narrative might assume very strong revenue growth and a higher fair value, while another might use more cautious revenue and margin assumptions that point to a lower fair value. This gives you a clear view of how different perspectives line up against the current price. Do you think there's more to the story for Arcutis Biotherapeutics? Head over to our Community to see what others are saying! NasdaqGS:ARQT 1-Year Stock Price Chart  This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    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\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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