ARWR

We rate ARROWHEAD PHARMACEUTICALS, INC. (ARWR) as a Buy with a composite score of 67.3/100 at a current price of $62.90. The stock scores above average across the majority of our six quantitative factors and ranks #186 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in momentum (92th percentile) and quality (89th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (27th percentile) and stability (45th percentile) tempers our overall conviction. We assign a No Moat rating (34/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress; sustainability of the current growth rate; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is widening, which provides additional comfort in the durability of the competitive position.

ARROWHEAD PHARMACEUTICALS, INC. holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 67.3/100 places it at rank #186 in our full 7,333-stock universe. At $4.8B in market capitalization, ARROWHEAD PHARMACEUTICALS, INC. is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 23258% and momentum in the 92th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 27th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 100% (+57.5pp vs sector) narrow to operating margins of -170% (-171.5pp vs sector) and net margins of -188.3%, yielding a gross-to-net conversion rate of -188%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $62.90, ARROWHEAD PHARMACEUTICALS, INC. appears undervalued relative to its fundamentals. Our value factor score of 77/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 204.8x (a 821% premium to the sector median of 22.3x), EV/EBITDA of 91.1x (at a premium), P/B of 15.8x, P/S of 10.7x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Very High uncertainty rating to ARROWHEAD PHARMACEUTICALS, INC.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.67), significant leverage (185% debt-to-equity), current negative profitability (net margin -188.3%). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.67); significant leverage (185% debt-to-equity); current negative profitability (net margin -188.3%); elevated valuation multiple (P/E 204.8x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 45th percentile and quality factor at the 89th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate ARROWHEAD PHARMACEUTICALS, INC.'s capital allocation as Poor. Key concerns include elevated leverage (185% D/E), negative profitability. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — ARROWHEAD PHARMACEUTICALS, INC. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, ARROWHEAD PHARMACEUTICALS, INC. receives a Buy rating with a composite score of 67.3/100 (rank #186 of 7,333). Our quantitative framework assigns a No Moat (34/100, trend: widening), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 66/100.

Our analysis supports a constructive view on ARROWHEAD PHARMACEUTICALS, INC.. The combination of the current valuation, very high uncertainty, and poor capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.