Is There Opportunity in Avadel After FDA Approval and Strong 71% 2025 Price Jump?

• Wondering if Avadel Pharmaceuticals could be a hidden value in today's market? You're not alone, as the stock's standing has many investors asking the same question.
• After climbing 23.3% over the past month and delivering a strong 71.2% return year-to-date, Avadel has captured attention for its impressive price momentum.
• Recent headlines have focused on the company's expanded FDA approval for its lead drug, which is seen as a major catalyst behind its surge. These developments have attracted both bullish sentiment and fresh eyes on long-term potential.
• Avadel currently scores a 3 out of 6 on our valuation checks, suggesting there's room for debate about how fairly the market is pricing it. Next, we'll dig into different valuation approaches and reveal a smarter way to think about value at the end of the article.

Avadel Pharmaceuticals delivered 21.7% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

Approach 1: Avadel Pharmaceuticals Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model is a tool used by investors to estimate a company's intrinsic value by forecasting its future cash flows and then discounting them to today’s values. In essence, it helps answer the core question: what are Avadel Pharmaceuticals’ future cash flows worth in today’s dollars?

For Avadel Pharmaceuticals, the most recent reported Free Cash Flow (FCF) stands at about $4.8 million. Analysts provide cash flow forecasts through 2029, with projections estimating FCF reaching $144 million by the end of that year. Beyond this point, cash flows are extrapolated using reasonable assumptions to model longer-term growth. These future estimates are then discounted back to present value using the 2 Stage Free Cash Flow to Equity approach, ensuring all values are expressed in US dollars ($).

Based on these projections, the model calculates an estimated intrinsic value of $32.68 per share. With the DCF implying the stock is currently trading at a 42.4% discount to its intrinsic value, this suggests Avadel is significantly undervalued at present share prices.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Avadel Pharmaceuticals is undervalued by 42.4%. Track this in your watchlist or portfolio, or discover 848 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Avadel Pharmaceuticals.

Approach 2: Avadel Pharmaceuticals Price vs Sales

For companies like Avadel Pharmaceuticals, which may not consistently report positive earnings, the Price-to-Sales (P/S) ratio is often a suitable measure of value. The P/S ratio focuses on revenue instead of profits, making it helpful for investors assessing younger or growing firms where income may be volatile but sales are ramping up.

Growth expectations and risk play a big role in determining what a “normal” or fair P/S ratio should be. Companies with faster projected sales growth or lower risk profiles are typically justified in trading at higher multiples, while slower-growing or riskier firms warrant a discount.

Currently, Avadel trades at a P/S ratio of 8.30x, compared to the pharmaceuticals industry average of 4.28x, and a peer average of 9.88x. This suggests Avadel commands a premium to its broader sector but is in line with similarly profiled companies.

Here is where Simply Wall St’s proprietary “Fair Ratio” comes in. This metric is built to capture more than just surface-level comparisons. The Fair Ratio for Avadel is 7.31x, harmonizing the company’s unique growth outlook, profit margins, industry classification, and market cap alongside risk factors. This approach offers a more balanced benchmark than traditional industry or peer comparisons.

Comparing Avadel’s P/S ratio of 8.30x with its Fair Ratio of 7.31x, the stock trades at a modest premium to its fair value, although not by a wide margin.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1405 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Avadel Pharmaceuticals Narrative

Earlier, we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives, a powerful, easy-to-use tool that lets you attach your own story and expectations to a company’s future. This connects your interpretation of Avadel Pharmaceuticals’ business outlook directly to financial forecasts and fair value calculations.

With Narratives, you craft a perspective that blends your beliefs about the company’s growth drivers, risks, and future profit margins with concrete financial estimates. This makes your investment reasoning transparent and personalized, not just a number. This feature, available on Simply Wall St’s Community page and used by millions, makes it simple to test investment ideas, share them, and see how others are thinking about the same stock.

By comparing your Narrative-based Fair Value with Avadel’s current share price, you can plainly see whether your viewpoint suggests the stock is a buy, hold, or sell, based on the story you believe. Narratives update in real time when Avadel’s news or earnings releases change the facts or outlook.

For example, some investors have built narratives for Avadel ranging from price targets of $16, focusing on risks around competition and reliance on a single product, to as high as $24, confident in LUMRYZ’s growth potential and new indications. This demonstrates how different stories fuel different decisions.

Do you think there's more to the story for Avadel Pharmaceuticals? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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