Is Xenon Pharmaceuticals, Inc. overvalued or undervalued?

As of 12 May 2025, the valuation grade for Xenon Pharmaceuticals, Inc. has moved from does not qualify to risky, indicating a significant shift in its financial outlook. The company appears to be overvalued given its current metrics, particularly with a Price to Book Value of 3.45 and a negative EV to EBITDA of -6.47. Additionally, the Return on Capital Employed (ROCE) stands at a concerning -188.17%, which highlights the inefficiency in generating returns from capital investments.
In comparison to its peers, Xenon Pharmaceuticals shows a stark contrast; for instance, Corcept Therapeutics, Inc. has a P/E ratio of 60.68, while Madrigal Pharmaceuticals, Inc. is also classified as risky with a P/E of -15.85. This suggests that while Xenon is struggling, some peers are significantly more valued, indicating that Xenon’s current valuation may not be justified. Furthermore, the stock has underperformed against the S&P 500 year-to-date, down 19.67% compared to the index's 2.44% gain, reinforcing the notion that the company is overvalued in its current state.