RLYB

We rate Rallybio Corp (RLYB) as a Reduce with a composite score of 44.2/100 at a current price of $5.87. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (64th percentile) and value (36th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (8th percentile) and quality (29th percentile) tempers our overall conviction. We assign a No Moat rating (32/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Rallybio Corp 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 44.2/100 places it at rank #2935 in our full 7,333-stock universe. At $21M in market capitalization, Rallybio Corp is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

Despite positive momentum (64th percentile), revenue contraction of -29% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 100% (+57.5pp vs sector) narrow to operating margins of -4152% (-4153.1pp vs sector) and net margins of -1327.3%, yielding a gross-to-net conversion rate of -1327%. 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 $5.87, Rallybio Corp is trading at a premium to fundamental value. Our value factor score of 36/100 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 premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 15.3x (a 31% discount to the sector median of 22.3x), EV/EBITDA of 0.3x (discounted to peers), P/B of 0.4x, P/S of 28.6x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Very High uncertainty rating to Rallybio Corp. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 4.63), current negative profitability (net margin -1327.3%), below-average price stability (8th percentile). 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 4.63); current negative profitability (net margin -1327.3%); below-average price stability (8th percentile); weak quality scores (29th percentile). 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 8th percentile and quality factor at the 29th 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; conservative leverage (7% D/E) limits balance sheet risk. 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 Rallybio Corp's capital allocation as Poor. Key concerns include low returns on equity (-23.2%), negative profitability, weak asset returns (ROA -21.6%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Rallybio Corp 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, Rallybio Corp receives a Reduce rating with a composite score of 44.2/100 (rank #2935 of 7,333). Our quantitative framework assigns a No Moat (32/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 34/100.

Our analysis does not support a constructive view on Rallybio Corp at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.