Does the Recent 14.3% Drop Create an Opportunity in Supernus Pharmaceuticals?

• Wondering whether Supernus Pharmaceuticals is a hidden gem or overhyped? You're not alone. A closer look at its value might surprise you.
• Despite a sharp 14.3% drop over the last week, the stock remains up 29.7% year-to-date and has delivered a 105.4% return over five years.
• Recent headlines have focused on Supernus’s advancing pipeline of central nervous system therapies and new regulatory milestones, which have sparked debate about future revenue prospects. Changes in the drug development landscape and updates on product launches are shaping both investor optimism and concerns.
• On valuation, Supernus earns a 5 out of 6 on our value checklist, indicating it is considered undervalued in almost every key area. Here is a breakdown of how this score is calculated, along with an introduction to a more insightful approach to company valuation at the end of this article.

Supernus Pharmaceuticals delivered 29.1% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

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

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's value. This approach helps investors gauge whether a stock's price aligns with its underlying financial fundamentals.

For Supernus Pharmaceuticals, the most recent Free Cash Flow (FCF) stands at $186.3 million. Analyst consensus outlines robust FCF growth, with forecasts rising to $403.7 million by 2029. Beyond year five, projections are extended using industry-informed estimates to provide a full ten-year picture. All cash flows are reported in US dollars.

Applying the DCF model, the intrinsic value of Supernus Pharmaceuticals shares is calculated at $218.47. Compared to the current market price, this suggests the stock trades at a 78.4% discount to its fair value, which may indicate significant undervaluation based on cash flow fundamentals.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Supernus Pharmaceuticals is undervalued by 78.4%. Track this in your watchlist or portfolio, or discover 862 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 Supernus Pharmaceuticals.

Approach 2: Supernus Pharmaceuticals Price vs Sales

The price-to-sales (P/S) multiple is a popular and meaningful metric, especially for profitable growth companies like Supernus Pharmaceuticals. It gives investors a way to compare the market's valuation of the company against its actual revenue performance, which can be clearer than earnings when profits are uneven or reinvestment is high.

Valuing a company by its P/S ratio also reflects how investors view its growth prospects and risk profile. Generally, higher expected growth and lower risk justify higher multiples. However, if revenues are volatile or risks are elevated, a lower multiple is often appropriate.

Supernus Pharmaceuticals currently trades at a P/S ratio of 3.96x. This aligns precisely with the average for the pharmaceuticals industry and sits well below the peer average of 11.01x. Beyond these simple comparisons, Simply Wall St’s proprietary Fair Ratio takes analysis a step further. This figure, at 6.96x for Supernus, represents the multiple investors might reasonably pay, given factors like growth potential, profit margins, company size, and industry risk.

The Fair Ratio provides a more tailored benchmark than using broad industry or peer averages, since it incorporates company-specific fundamentals and growth outlook as well as market conditions. Comparing Supernus Pharmaceuticals’ actual P/S ratio of 3.96x to its Fair Ratio of 6.96x, the stock appears undervalued based on sales and risk-adjusted expectations.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1408 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Supernus Pharmaceuticals Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personal story about a company. It captures your perspective about where Supernus Pharmaceuticals is headed and connects your assumptions about its future revenue, earnings, and margins directly to a Fair Value. Narratives tie the "why" behind the numbers to specific business forecasts, turning complex data into an easy-to-follow investment thesis you can create and update anytime on Simply Wall St's Community page, a hub used by millions of investors.

With Narratives, you can see at a glance if Supernus Pharmaceuticals looks undervalued or overvalued by comparing its real Price to your calculated Fair Value, all based on your unique outlook. Narratives are updated dynamically whenever new events or earnings come in, so your view always stays relevant. For example, one investor might set a bullish Narrative with a Fair Value of $59.33 given high revenue forecasts and pipeline optimism. Another might apply a more cautious outlook, arriving at a Fair Value as low as $36.00 due to concerns about execution risk or future competition. Narratives make it simple to align your buy or sell decisions with your actual beliefs, backed by the latest information.

Do you think there's more to the story for Supernus 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com