What is AVIR's Intrinsic value?

Atea Pharmaceuticals Inc (AVIR) Intrinsic Value Analysis

Executive Summary

As of June 4, 2025, Atea Pharmaceuticals Inc's estimated intrinsic value ranges from $17.40 to $132.53 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $132.53 +4016.0%
Discounted Cash Flow (5Y) $123.28 +3728.7%
Earnings Power Value $17.40 +440.3%

Is Atea Pharmaceuticals Inc (AVIR) undervalued or overvalued?

With the current market price at $3.22, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Atea Pharmaceuticals Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.3 1.54
Cost of equity 9.8% 13.5%
Cost of debt 5.0% 5.0%
Tax rate 0.5% 1.7%
Debt/Equity ratio 1 1
After-tax WACC 7.4% 9.2%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $351 (FY12-2021) to $3,228 (FY12-2031)
  • Net profit margin expansion from 34% to 29%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $123 $10,098M 72.5%
10-Year Growth $133 $10,869M 50.7%
5-Year EBITDA $127 $10,445M 73.4%
10-Year EBITDA $136 $11,193M 52.1%

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $104M
Discount Rate (WACC) 9.5% - 7.2%
Enterprise Value $1,097M - $1,450M
Net Debt $(176)M
Equity Value $1,274M - $1,626M
Outstanding Shares 83M
Fair Value $15 - $20
Selected Fair Value $17.40

Key Financial Metrics

Metric Value
Market Capitalization $276M
Enterprise Value $156M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 9.85
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.85

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 46% $39.76
Discounted Cash Flow (5Y) 38% $30.82
Earnings Power Value 15% $1.74
Weighted Average 100% $111.26

Investment Conclusion

Based on our comprehensive valuation analysis, Atea Pharmaceuticals Inc's weighted average intrinsic value is $111.26, which is approximately 3355.4% above the current market price of $3.22.

Key investment considerations:

  • Strong projected earnings growth (34% to 29% margin)
  • Consistent cash flow generation

Given these factors, we believe Atea Pharmaceuticals Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.