Novavax (NVAX -0.72%) investors are no strangers to tragedy. On Feb. 9 in 2021, shares of the coronavirus vaccine developer hit their all-time high of $331.68. Now, the stock trades at around $50.

But for the first time, the biotech is both profitable and growing. Are longtime shareholders doomed to heavy losses forever, or will Novavax return to its glory days?

A nurse vaccinates a person in a clinic while wearing protective equipment.

Image source: Getty Images.

It's a (very) long shot

Compared to where it was early last year, Novavax stock is currently down by around 84%, and it'd need to grow by more than 563.3% to return to the same level. Without the burning global interest in rolling out new coronavirus vaccines for the first time, that amount of growth seems like quite a large gap for the company to cross. In early 2021, the coronavirus jab market was a bit of a gold rush, with global buyers scrambling to secure doses -- now, the opposite is true, and the market is inundated with spare supply. But now that the biotech is raking in sales of its jab in a handful of countries, and with more approvals likely on the way in the coming months, the market has a lot more information to work with to determine the stock's valuation. 

Let's do a few back-of-the-napkin calculations to see if eclipsing the $331 level is plausible. The consensus estimate among financial analysts is for the biotech to report near $23.17 in earnings per share (EPS) for all of 2022, and for its forward price-to-earnings (P/E) ratio to be near 1.4. For the sake of comparison, its forward P/E when the hype was at its apex, at the end of the first quarter in 2021, was close to 62.9. 

What this means is that with such a depressed valuation, Novavax will need an incredible amount of earnings growth to ever have a chance at challenging its highest price level. If we assume an aggressive 50% annual EPS growth rate starting from the end of 2022 and looking forward five years, its EPS would reach more than $175. And if we multiply that value by its forward P/E of 1.4, we get a price of (brace yourself) only around $246.

So even with an unrealistically high earnings growth rate sustained over a few years, it still looks next to impossible to reach the all-time high. After all, the company is only one of many competitors in the global market for coronavirus vaccines, and it has no other products at the moment. And the longer the time horizon, the less likely it'll be that the pandemic is intense enough to drive demand from government purchasers.

There's also another issue that makes the projection above even more fanciful. Analysts are expecting Novavax's earnings and revenue to contract in 2023, with the average estimate for revenue clocking in at just over $3.2 billion against 2022's estimated revenue of close to $4.1 billion. Unless there is a major change in the trajectory of the pandemic or the company's fortunes, investors can't rely on rising income to power the stock back to its heights. 

Never say never

As improbable as it is for Novavax to surpass its high-water mark given what we know today, if the pandemic worsens or continues to be a significant and enduring global public health problem, it is possible that its valuation could swell again as investors buy shares in anticipation of higher than currently anticipated future earnings. And regardless of how the next few years play out, Novavax is going to be around for a long time. 

Furthermore, its pipeline features a handful of different vaccine projects, and advancing them could eventually lead to new streams of revenue in addition to its coronavirus jab sales. Especially if management opts to use some of the cash generated by sales on share buybacks, it's easy to see how the stock could rise in value over time. Though it definitely isn't worth betting your life savings on, there's still a distant but undeniable chance of Novavax breaking its price record at some point in the future.