Incyte Corporation (INCY)

Conclusion

Incyte Corporation is a US biopharmaceutical company that develops and sells treatments, led by JAKAFI for myelofibrosis and polycythemia vera. At a price of 121.89 USD on 9 November 2026, its market capitalisation is 24.8 billion USD and its enterprise value is 21.0 billion USD.

The verdict is fair. Against their own ten-year medians, the trailing P/E of 61.6x sits at a premium of 35.0% to its median of 45.6x, and the price to free cash flow of 36.3x is a premium of 28.9% to its median of 28.1x. EV/EBITDA of 24.1x is a discount of 8.0% to its median of 26.2x. The DCF gives 73.31 USD per share, while the fair value band runs from 81.68 to 122.53 USD with a midpoint of 102.11 USD, a margin of safety of -16.2% at the current price. The reverse DCF implies revenue growth of 22.1% a year, against a five-year revenue compound growth of 14.0% actually delivered.

What holds the case up is a net cash balance sheet, with net debt to EBITDA of -4.4x, interest coverage of 341.7x, and a return on invested capital of 33.8% against a WACC of 8.9%. What could break it is the direction of estimates, with next-year EPS estimates down 2.0% over 90 days and ten downward revisions in the last 30 days. The operating margin of 11.6% also sits below its ten-year median of 15.3%. Finally, the terminal value makes up 63.2% of the DCF value, so that figure rests heavily on long-term assumptions.

Financial health

Financial strength is green, held up by a net cash position, with net debt to EBITDA of -4.4x, interest coverage of 341.7x, a current ratio of 3.8x and a quick ratio of 3.5x. Debt to equity is only 0.0066. The Altman Z-score is 11.0, in the safe zone, although that model was designed for manufacturers and Incyte is a biopharmaceutical company. Insolvency risk: low, about 0.01% by the estimate of the Ohlson model over one to two years. Balance sheet risk is therefore very limited on the figures supplied.

Earnings quality

Earnings quality is green. Free cash flow conversion is 1.70x on a trailing twelve-month basis and 1.10x over five years. The accrual ratio is -0.0205, meaning reported earnings are backed by cash. Stock-based compensation is 5.5% of revenue, and free cash flow after it is 354.3 million USD. The share count fell at a compound rate of -1.7% a year over five years, reflecting buybacks. The Piotroski score is 7 of the 8 evaluable tests passed. The Beneish M-score reading is not available. Incyte beat estimates in 6 of the last 8 quarters, with an average surprise of 18.6%. Estimate revisions are negative, however, with the current-year estimate down 3.7% over 90 days and the next-year estimate down 2.0%.

Profitability

Profitability is yellow, held back by margins below their ten-year medians. Gross margin is 92.7% against a median of 94.7%, operating margin is 11.6% against 15.3%, and net margin is 6.7% against 9.7%. Operating margin stability is 1.35. Return on invested capital is 33.8% against a WACC of 8.9%, and the given ROIC minus WACC value is 0.2492, which is value creation. The five-year median ROIC is 35.1%. Return on equity is 7.2% on a trailing basis. The 2025 annual DuPont split shows an equity multiplier of only 1.35, so leverage does not inflate the return on equity. The returns come from the operating business rather than from borrowing.

Growth

Growth is green. Revenue compound growth is 14.8% over three years, 14.0% over five and 21.2% over ten. Earnings per share compounded at 61.5% over three years and 68.4% over ten, while free cash flow per share compounded at 19.2% over three years and 35.5% over ten. Revenue grew in all 10 of the 10 comparable years. The next-year EPS estimate implies growth of 151.3%, although that estimate has been revised down over the last 90 days.

Valuation

Valuation is yellow, with the verdict fair and a margin of safety of -16.2%. Trailing P/E of 61.6x is a premium of 35.0% to its ten-year median, and price to free cash flow of 36.3x is a premium of 28.9%. EV/EBITDA of 24.1x is a discount of 8.0%, price to sales of 4.1x is a discount of 34.7%, and price to book of 4.4x is a discount of 17.8%. The free cash flow yield is 2.8%. The DCF gives 73.31 USD per share at a discount rate of 8.9%, with 20.0% growth in the first stage and 2.5% terminal growth. The fair value from historical multiples is 130.90 USD. The fair value band runs from 81.68 to 122.53 USD with a midpoint of 102.11 USD. The fair value is an estimate built on fixed assumptions, not a price target. The company pays no forward dividend.

Risks

A falling operating margin, now 11.6% against a ten-year median of 15.3%, would reduce the cash that supports a high P/E. Continued downward estimate revisions would signal that analysts expect less earnings, which would make the current premium on P/E and free cash flow harder to justify. A fall in free cash flow conversion from 1.70x would also weaken the earnings case. The Beneish M-score reading is not available, so the risk of earnings manipulation cannot be checked here. The reverse DCF gives a comparison figure of 8.1% against revenue growth, which does not match the 14.0% five-year revenue compound growth shown in Growth, so read the reverse DCF with caution. This analysis has no debt maturity schedule and no revenue by segment.