Verrica Pharmaceuticals Inc. (VRCA) Stock Analysis
Verrica Pharmaceuticals Inc.
▾ What's in the 57/100 risk score? (higher = riskier)
Contributions (weight × component score) sum to the total. This near-term score now includes fundamental health (leverage, FCF trend, DCF applicability). It excludes the Altman Z score, whose retained-earnings input this filer does not report separately. See the Financial Health section for the full balance-sheet read.
How to read VRCA (pre-profit growth)
This company is reinvesting instead of generating profit, so a standard DCF cannot price it. The useful question is whether the growth the market is paying for is achievable — and whether the company can fund itself until then.
-
1
Reverse-DCF — the growth the price demands ↓
It shows exactly how fast the business must grow to justify today's price. Compare that to what comparable companies have actually achieved.
-
2
Cash runway ↓
Can it reach profitability before it has to raise money and dilute shareholders?
-
3
Interactive calculator ↓
Set your own growth + margin assumptions and see what the business would be worth if you are right.
Is now a good time to buy VRCA?
Macro: Neutral / mid-cycleVRCA trades at $4.91 vs an estimated intrinsic value of $3.47 — a +41.6% premium to model IV.
Not investment advice. The model can be wrong. Verify the assumptions in the sections below and consider consulting a licensed advisor for significant decisions.
What return would VRCA pay as a bond?
Not measurable here. Pre-profit: the coupon is projected, not earned. An equity bond needs a coupon that exists today. See the cross-company ranking →
What growth must the market believe? Reverse DCF — Instead of asking "what is this stock worth?", asks "what growth rate is the current market price already assuming?"
Why it matters: It crystallizes the bull thesis as a single number you can argue with. If the market expects 40% growth for 10 years and you do not believe that, the stock is overvalued.
Reference: 10–15% = sustainable for strong companies · 20–25% = exceptional · 30%+ = historically very rare
Traditional DCF asks "what is this stock worth?" Reverse DCF flips it: it treats today's price as correct and solves for the growth rate that justifies it. In plain terms — if our model is right about everything else, the company's cash flow would have to grow (or shrink) by this much every year for the next 10 years for today's price to make sense. If that required growth looks unrealistic, the price is stretched; if it looks easy to beat, the price may be cheap.
Why it matters: A company can show big profits on paper while burning through cash. FCF is what actually fills the bank account.
Reference: Healthy mature businesses convert 8–15% of revenue into FCF · Growth companies often negative
Full explanation → must grow at:
▾ Exactly how this 10-year figure is computed
Forecast length: 10 years, single flat growth rate (no fade)
Terminal growth after year 10: 3.0%
Discount rate: 15.1% (the rate the model used)
Price used: $4.91 — the live price shown on this page (not frozen)
Method: solve for the constant annual growth rate that makes the discounted 10-year FCF stream + terminal value equal today's price.
Within range of what a quality mature business can sustainably deliver. Not demanding.
For reference: Reasonable — sustainable for a quality business over time.
▾ How we computed this · Reality check thresholds · Assumptions
- Starting FCF/share: $0.40 (projected from revenue × terminal margin)
- Discount RateDiscount Rate — The annual return you demand for taking single-stock risk instead of buying a safe Treasury or index fund.
Why it matters: Higher discount rate = stricter valuation (a stock has to produce more cash to be worth holding). Lower = more generous.
Reference: 8–12% is standard · 9–10% matches S&P 500 historical return · Below 7% is illogical for single-stock risk
Full explanation →: 15.1% — standard 8-12%; 9-10% matches S&P 500 historical return - Terminal Growth RateTerminal Growth Rate — The growth rate we assume the company holds forever, after the explicit 10-year forecast period ends.
Why it matters: It anchors the long-tail value. Cannot mathematically exceed long-term GDP growth or the company eventually becomes larger than the global economy.
Reference: 2–3% (matches long-term US GDP growth) · Above 4% is mathematically problematic
Full explanation →: 3.0% — matches long-term GDP growth - Forecast horizon: 10 years explicit + terminal perpetuity
| ≤ 0% | Priced for decline — likely undervalued OR dying business |
| 5-12% | Reasonable; sustainable for quality businesses |
| 12-18% | Demanding — strong execution required |
| 18-25% | Exceptional — few companies sustain for a decade |
| 25-35% | Heroic — historically very rare |
| 35%+ | Borderline impossible at scale |
Sustaining 30%+ cash-flow growth for a full decade at scale is exceedingly rare — the bar is brutally high.
Use the interactive calculator below to change the discount rate, growth and terminal-growth assumptions and watch the value move.
Football field: where does the price sit?
Different valuation methods produce different fair-value ranges depending on assumptions. Plotting them together lets you see at a glance whether the current price is reasonable across approaches, or only one specific lens.
Industry multiples sourced from: industry: Pharmaceuticals. See the Peer Basket section below for the peer comparison and its limited-comparables caveat.
How does VRCA stack up against its closest peers?
We take the 8 same-industry companies most similar to VRCA (similar size) and check what investors are paying for each dollar of their revenue (or profits). If VRCA is much more expensive on the same yardstick, that's a red flag — unless you have a specific reason it deserves a premium. For a leveraged business, FCF yield (in the table) is usually more reliable than EV/Sales, because revenue multiples ignore differences in margins and debt.
▾ What's "EV / Sales" in plain English?
EV (Enterprise Value) = market cap + total debt − cash. It's "what you'd pay to buy the entire company outright" — you pay the market cap to shareholders and take over their debt, but you keep their cash. EV is fairer than market cap alone because it includes the debt the new owner inherits.
EV / Sales = EV ÷ annual revenue. So "2.5×" means investors pay $2.50 of enterprise value per $1 of yearly sales. Higher = market is paying more per dollar of sales (usually because they expect future growth or fat margins).
p25 / median / p75 are the 25th, 50th (middle), and 75th percentile of the peers' multiples. Half the peers fall between p25 and p75. The median (p50) is the typical peer — that's the benchmark we compare to.
Bold middle number = median peer. Half the peers trade above it, half below. Computed over 8 same-industry peers; implausible multiples excluded.
⚠️ Important caveat: peer multiples only work if the peers are genuinely comparable. Always check the peer list below — if the auto-picker grabbed micro-caps or unrelated businesses, the comparison is noise. A medical-device giant priced against tiny biotech startups won't produce a useful signal.
▾ View peer list (8)
| Ticker | Company | Industry | Mcap | EV/Sales | EV/GP | EV/EBIT | FCF Yield |
|---|---|---|---|---|---|---|---|
| XLO | Xilio Therapeutics, Inc. | Pharmaceuticals | $49M | 1.1x | — | — | 13.6% |
| PDSB | PDS Biotechnology Corp | Pharmaceuticals | $60M | — | — | — | — |
| TLPH | TALPHERA, INC. | Pharmaceuticals | $42M | 1,512.5x | — | — | — |
| ZYBT | Zhengye Biotechnology Holding Ltd | Pharmaceuticals | $40M | 2.5x | 12.2x | — | 4.4% |
| VERU | VERU INC. | Pharmaceuticals | $38M | — | — | — | — |
| XBIT | XBiotech Inc. | Pharmaceuticals | $74M | — | — | — | — |
| LIXT | LIXTE BIOTECHNOLOGY HOLDINGS, INC. | Pharmaceuticals | $77M | — | — | — | — |
| TVRD | Tvardi Therapeutics, Inc. | Pharmaceuticals | $32M | — | — | — | — |
Quality & solvency checks
Cheap stocks can be cheap for a reason. These screens warn when a low valuation comes paired with structural fragility.
Why it matters: Cheap-looking stocks (low P/E or P/B) often have low Z-scores because the market knows the company is dying. Z-score warns you before you fall into a value trap.
Reference: > 3.0 = safe zone · 1.81–3.0 = grey zone · < 1.81 = distress zone
Full explanation →
We can't produce a trustworthy Altman Z here: retained earnings weren't separately reported in our data, so a core input would have to be fabricated. Rather than show a categorical "distress" verdict from an invented number, we mark it unavailable. Judge financial health from the leverage, cash position, and the measurable Piotroski checks instead.
▾ The checks — what passed, what didn't (and what we couldn't measure)
-
✗ Positive net incomeNet income -$17.9M in FY2025.Why this matters: Does the company actually earn a profit? Sustained losses eventually force it to raise money — diluting you — or take on debt.
-
✗ Positive operating cash flowOperating cash flow -$17.6M (was -$60.9M the prior year).Why this matters: Profit can be an accounting figure; cash from running the business is harder to fake. Negative operating cash flow means the core business consumes cash and must be funded externally.
-
✓ Cash flow backs up reported profitOperating cash flow -$17.6M vs net income -$17.9M.
-
✓ Return on assets improvingReturn on assets -37.9% vs -141.5% a year ago.
-
✓ Debt load (vs assets)Total debt is 0.0% of assets vs 57.2% a year ago ($0.0M of $47.1M assets).
-
✓ Short-term liquidity (current ratio)Current ratio 2.59x vs 1.76x a year ago.
-
✗ Share count (dilution)Share count rose 105.6% (5.2M → 10.7M year-over-year).Why this matters: Issuing lots of new shares splits the pie into more pieces, shrinking your slice. Stable or falling share count protects existing owners.
-
· Pricing power (gross margin) (n/a — data not reported; not scored)
-
✓ Sales per asset (asset turnover)Asset turnover 0.75x vs 0.14x a year ago.
Missing data is never counted as a pass or a fail — it's shown as n/a and excluded from the denominator. Each check compares the company against its own prior year.
Plain English: the company holds about $30M in cash and is burning roughly $18M/year in operations. At that pace, the cash lasts 21 mo before it must raise capital (diluting shareholders), take on debt, or cut spending.
Assumes constant burn and ignores financing/asset sales. For pre-profit biotech and growth companies, this matters more than a DCF — a great drug pipeline is worthless if they run out of money before approval.
What if you assume different inputs?
Here's where we land — and what happens if you change the assumptions. Drag the sliders to set your own Discount RateDiscount Rate — The annual return you demand for taking single-stock risk instead of buying a safe Treasury or index fund.
Why it matters: Higher discount rate = stricter valuation (a stock has to produce more cash to be worth holding). Lower = more generous.
Reference: 8–12% is standard · 9–10% matches S&P 500 historical return · Below 7% is illogical for single-stock risk
Full explanation → (the annual return you demand for single-stock risk) and terminal growth; the value updates live so you can see whether the stock looks cheaper or richer. The discount rate starts at 15.1%, the figure our model used for VRCA. Open Advanced to also change beta, growth and the rate path.
Note: the calculator opens at our published value of $3.47 — it is initialised to the same scenario-weighted result, so the two match exactly on load. The moment you move a slider, the value below becomes a single-path what-if at your assumptions (not the three-scenario weighting), which is why it can differ from the headline once you've touched it.
15.1% — beta-based (CAPM), from this stock's BetaBeta — How much the stock moves when the overall market moves. 1.0 = moves with the market; 1.5 = moves 50% more than the market.
Why it matters: Higher beta = more volatile = should demand higher discount rate. Low beta stocks (utilities, consumer staples) move less.
Reference: Most stocks 0.5–1.5 · Defensives ~0.3 · High-vol tech ~1.5–2.0
Full explanation → of 1.92. The safe Treasury rate plus a premium scaled by how much more (or less) volatile the stock is than the market.
11.5% — sector/quality tier. A simpler hurdle set by industry and business durability: lower for stable, wide-moat companies; higher for speculative or micro-caps.
The headline value and this calculator start at 15.1% — the beta-based rate. Drag the slider to the other rate to see the full range.
+41.6%
At the default assumptions the flat path lands near our published value of $3.47. Move any slider to recompute it with your own.
Move any slider above to recompute this against your own assumptions.
⚙ Advanced — tinker with every input (beta, growth, rate path, margin → full intrinsic value)
Verrica Pharmaceuticals Inc. is well above the model value by 66.1%, with the model valuing it at $3.468 against a market price of $5.76. The market appears to be paying a premium for its revenue growth of 31.2%/yr, despite negative net income and operating cash flow. The market may be assigning value to potential drug pipeline catalysts, which is not in the model. The number one quantifiable risk is its consistently negative operating cash flow, indicating ongoing cash burn.
As of 3 months ago
Anatomy of a share
What you're buying per share. Bars are at the same scale so you can see the relative size of revenue, costs, cash flow, and debt — not just read them in a table.
What's free cash flow / what do these mean?
Revenue per share — how much the business earns from customers, divided by the number of shares outstanding. Top of the income statement.
Earnings per share — profit left after operating costs, interest, and taxes, per share. Two versions appear on this page and are not interchangeable: GAAP diluted EPS uses the company's weighted-average diluted share count during the reporting period (this is the "earnings" in "price-to-earnings"); net income per current share divides annual net income by today's share count. They differ whenever the share count has changed.
Owner-earnings free cash flow per share — the cash the business produces for shareholders. Savng's owner-earnings FCF subtracts capital expenditures and stock-based compensation from operating cash flow (SBC is a real dilution cost even though it's non-cash). This is deliberately more conservative than "standard" FCF, which subtracts only capital expenditures — so our figure is lower than the headline FCF you'll see elsewhere. FCF funds dividends, buybacks, debt repayment, and acquisitions; a company can report positive earnings yet negative FCF.
Debt per share — total interest-bearing borrowings divided by shares. High debt-per-share next to thin FCF-per-share is a fragility signal.
What you actually need to decide
Every stock price is a disagreement. Here's the single thing that must go right for the bulls, the single thing that breaks the thesis, and the concrete signposts to watch so you can update your view as real results arrive.
- Announcement of new product approvals
- Quarterly revenue growth acceleration
- Improvement in operating cash flow
The trend, in plain numbers (FY2024 → FY2025, latest reported)
Straight from the financial statements — no model, no opinion. For a small or unprofitable company, the direction of these numbers usually tells you more than any single valuation.
- Revenue grew +370% to $35.6M.
- Free cash flow is negative at -$20.9M — the cash burn narrowed vs last year.
- Still unprofitable at -$17.9M — loss narrowing.
Nothing was clearly worsening year-over-year.
Management & Leadership
Paul Brodsky serves as the CEO of Verrica Pharmaceuticals, a role he has held since 2020, guiding the company's strategic direction in the pharmaceutical sector. He previously served as President and General Manager of the dermatology division at Allergan.
What They Make
Verrica Pharmaceuticals develops and commercializes dermatological treatments for viral skin diseases. Their products target medical dermatology conditions, primarily serving healthcare providers and patients.
End Markets
Revenue Drivers
Why Is It Priced Like This?
Why Customers Pay
The market prices VRCA at a premium of +66.1% over the model's valuation, likely due to its revenue growing at 31.2%/yr over four years. This optimism persists despite the company's net income and operating cash flow being consistently negative, suggesting the market may be assigning value to future drug pipeline successes not yet reflected in current financials.
Three Scenarios, Weighted
| Scenario | IV | Upside from today's price | Weight |
|---|---|---|---|
| Conservative | $1.34 | -72.6% | 40% |
| Base | $3.41 | -30.6% | 35% |
| Optimistic | $6.96 | 41.8% | 25% |
| Weighted | $3.47 | -29.4% | 100% |
Reading the last column: it is the move from today's price to each value (IV ÷ price − 1). The headline "premium/discount to model IV" measures the same gap from the value's side (price ÷ IV − 1), so the two percentages differ in size and sign by construction — e.g. a price 8% above value is a value 7.4% below price.
Business Model & Valuation
How They Make Money
The company funds itself primarily through equity raises, as indicated by its negative operating cash flow and lack of dividend or buyback programs.
Growth / Revenue DCF Medium
Negative free cash flow: revenue/margin growth model used - standard FCF DCF is unreliable for companies still scaling.
Show advanced inputs
| Revenue Growth | 31.2% |
What this model does NOT do: this is a consolidated owner-earnings FCF model. Standalone segment assumptions: none. It does not project its revenue segments independently; their combined effect is embedded in the historical revenue and cash-flow trend the model extrapolates. The calculator above can only approximate a segment's impact through the single consolidated growth rate — it cannot model any one line separately. For a true segment-level view, build a separate model from the company's segment disclosures.
Maturity & Competitive Position
Moat Signals
Revenue has been growing at 31.2%/yr over four years, from $12M to $36M, while net income and operating cash flow have been consistently negative.
Geography & Markets
Verrica Pharmaceuticals Inc. is headquartered in the US and primarily focuses its commercial efforts within the North American market, though exact geographic revenue splits are not available from current data sources.
Geographic Risks
Market Signals
These are timing signals, not value signals — they describe the stock's recent price behavior, not what the business is worth. Use them for the "the thesis looks good, but is now the moment?" question. Each tile below explains what it's saying.
Why it matters: Short-term contrarian indicator. Extreme readings often precede mean reversion, though not always.
Reference: 30–70 normal · >70 overbought · <30 oversold
Full explanation → (14)97.9OverboughtBought up hard recently — stretched; pullbacks are common from here.
Why it matters: When the fast line crosses above the slow line, short-term momentum is turning up; below, turning down. A timing cue, not a value signal.
Reference: Line above signal = bullish momentum · below = bearish
Full explanation →BullishLine above signalThe fast trend is above the slow trend — short-term momentum is currently upward.
Technicals describe price, not the business. A great company can have a "bearish" tape (a buying chance) and a weak one a "bullish" tape (a trap). Pair these with the valuation and health sections above.
QUALITY
Data Quality & Risk Flags (2 notes — click to expand/collapse)
Guardrail Notes (2)
- FCF negative: revenue/margin growth model projects future cash flows from revenue trajectory.
- Illiquidity discount 15% applied (small/micro-cap — harder to exit, demand a margin).
FINANCIALS
Financial Statements (5-year tables — click to expand)
From Verrica Pharmaceuticals Inc.'s SEC filings (EDGAR).
Income (5yr)
| Year | Revenue | Net Income | EPS |
|---|---|---|---|
| 2025 | 35.6M | -17.9M | $-1.68 |
| 2024 | 7.6M | -76.6M | $-14.78 |
| 2023 | 5.1M | -67.0M | $-1.48 |
| 2022 | 9.0M | -24.5M | $-0.72 |
| 2021 | 12.0M | -35.1M | $-1.30 |
Cash Flow (5yr)
Capital expenditure isn't tagged in this filer's machine-readable data (the CapEx column shows "—"). The free-cash-flow column is therefore operating cash flow less stock-based compensation only — an upper bound on true owner earnings, not the real figure. Companies that report capex under a custom label (some large IFRS filers do) look better here than they are.
| Year | Operating CF | CapEx | − SBC & adj. | Free Cash Flow |
|---|---|---|---|---|
| 2025 | -17.6M | — | 3.3M | -20.9M |
| 2024 | -60.9M | 27,000 | 7.2M | -68.1M |
| 2023 | -38.6M | 362,000 | 14.4M | -53.3M |
| 2022 | -18.7M | 302,000 | 5.0M | -23.9M |
| 2021 | -27.6M | 883,000 | 6.1M | -34.5M |
How we define FCF: operating cash flow − capital expenditure − stock-based compensation (owner-earnings basis — SBC is a real cost to shareholders even though it's non-cash). Latest year: -17.6M − — − 3.3M (SBC & adj.) = -20.9M. This is the same owner-earnings FCF definition the valuation model uses, though the DCF's starting value is a projected from revenue × terminal margin, not this single year.
Balance Sheet
| Total Assets | 47.1M |
| Total Liabilities | 22.4M |
| Equity | 24.7M |
Similar companies worth a look
Same sector and industry, similar fundamentals shape. Verify everything yourself — this list is computed mechanically and does not reflect our judgment about whether any of these are a good investment.