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• Curious whether Arcutis Biotherapeutics is actually a hidden gem or just riding the hype? You are not alone; many investors wonder if now is the time to buy or wait on the sidelines.

• Arcutis shares have been on a tear, jumping 11.0% in the last week, a massive 57.6% over the past month, and an impressive 112.6% so far this year. This results in a 164.4% return over the last twelve months.

• Recent headlines reflect this momentum, with news around regulatory milestones, fresh clinical trial updates, and new product launches putting Arcutis firmly in the spotlight. These stories have driven both optimism about the company’s growth prospects and big swings in risk sentiment among market watchers.

• So how does the stock stack up on valuation? Arcutis scores a 3 out of 6 on our undervaluation checks. In the next section, I will break down what this means using different valuation methods, and there will be a discussion at the end on a smarter way to interpret valuation.

Arcutis Biotherapeutics delivered 164.4% returns over the last year. See how this stacks up to the rest of the Biotechs industry.

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and then discounting those values back to today. This approach helps investors understand what a company’s shares might truly be worth, separate from daily market fluctuations.

For Arcutis Biotherapeutics, the DCF uses the 2 Stage Free Cash Flow to Equity method. Currently, the company is generating Free Cash Flow (FCF) of -$45.4 million, which means it is still burning cash as it invests in growth. Analyst estimates point to rapid improvements, with FCF projected to reach $93 million in 2026 and $295.5 million by 2029. Beyond that, further growth assumptions are made to extend the picture over the next ten years, with FCF expected to rise steadily each year through 2035.

Based on these cash flow projections, the DCF assessment arrives at an intrinsic value of $69.61 per share. This suggests the stock is roughly 55.5% undervalued relative to its current market price, leaving considerable upside potential if management can deliver on future growth.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Arcutis Biotherapeutics is undervalued by 55.5%. Track this in your watchlist or portfolio, or discover 926 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 Arcutis Biotherapeutics.

For high-growth companies like Arcutis Biotherapeutics that are not yet profitable, the Price-to-Sales (P/S) ratio is often the preferred valuation metric. This is because sales figures are more stable and less susceptible to the large swings seen in earnings during the early stages of commercial development. This stability makes it easier to benchmark the company against peers and the broader market.

Generally, a “normal” or fair P/S ratio for a company is influenced by its growth prospects and the risks it faces. Faster expected growth or lower risks can justify a higher multiple, while slower growth or elevated risks should mean a lower multiple. For context, Arcutis currently trades at an 11.93x P/S ratio. This is just below the biotech industry average of 12.33x, and modestly above the 9.17x average of its closest peers.

Simply Wall St’s proprietary Fair Ratio for Arcutis is 10.66x. Unlike simple comparisons to the industry or peer averages, the Fair Ratio is designed to account for a company’s real growth potential, profitability outlook, margins, market cap, and risk profile. This results in a more tailored and accurate benchmark for valuation.

Comparing the Fair Ratio to Arcutis’s actual P/S multiple suggests the stock is valued a little above what fundamentals and outlook imply, but not by a large margin.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1435 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there’s an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is your story, the rationale and expectations you have for a company, translated into numbers like forecast revenue, profit margins, and ultimately a fair value estimate.

Unlike traditional valuation models that just crunch numbers in isolation, Narratives tie the business’s journey and unique context directly to financial forecasts and a price target. This makes it much easier for investors to see how their beliefs about the company (such as product launches, market size, or competitive advantages) map onto real-world valuations and actionable decisions.

You do not need to be a financial expert. Narratives are quick to create and update, and you can easily find and interact with them on Simply Wall St’s Community page, used by millions of investors around the world.

Crucially, Narratives dynamically update when new news, earnings, or clinical trial results come in. This helps you continually compare your Fair Value to the current market Price to spot attractive entry or exit opportunities that fit your unique perspective.

For instance, one bullish user expects accelerating adoption of ZORYVE and predicts a price target of $40 per share, while a more cautious Narrative sets fair value closer to $19. This demonstrates how different perspectives can drive very different investment decisions on Arcutis Biotherapeutics.

Do you think there’s more to the story for Arcutis Biotherapeutics? 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.

Companies discussed in this article include ARQT.

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