Supernus Pharmaceuticals Inc (SUPN, Financial) has recently shown a notable daily gain of 11.14%, yet it has experienced a 3-month decline of -14.48%. With an Earnings Per Share (EPS) of $0.73, investors may wonder if the stock is modestly undervalued. In this article, we delve into a valuation analysis to explore this question and provide insights into Supernus Pharmaceuticals' financial health and intrinsic value.
Company Introduction
Supernus Pharmaceuticals Inc (SUPN, Financial) is a specialty pharmaceutical company focused on developing and commercializing treatments for central nervous system diseases, including neurological and psychiatric disorders. With a diverse neuroscience portfolio and products like Trokendi XR, Oxtellar XR, and Qelbree, the company stands out in its field. When considering its current stock price of $26.14 against the GF Value of $33.37, an estimation of fair value, it's imperative to assess whether the market has priced Supernus Pharmaceuticals' shares appropriately.
Summarize GF Value
The GF Value is a unique measure that reflects the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor for past performance, and future business performance estimates. It serves as a benchmark for what the stock's fair trading value should be. If a stock's price significantly exceeds the GF Value Line, it may be overvalued with potentially poor future returns. Conversely, if the stock price is well below this line, it could indicate undervaluation and the potential for higher returns.
Based on GuruFocus' proprietary valuation method, Supernus Pharmaceuticals (SUPN, Financial) appears to be modestly undervalued. With the stock trading at $26.14 per share, there is a suggestion that its market price does not fully reflect its estimated fair value, hinting at a potential for higher long-term returns relative to the company's business growth.
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Financial Strength
Assessing a company's financial strength is crucial to avoid permanent capital loss. Supernus Pharmaceuticals boasts a cash-to-debt ratio of 4.73, ranking it better than 66.99% of companies in the Drug Manufacturers industry. With this strong indicator, GuruFocus ranks its financial strength as 8 out of 10, suggesting a robust balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, generally poses less risk. Supernus Pharmaceuticals has maintained profitability for 8 out of the past 10 years. With a revenue of $634 million and an Earnings Per Share (EPS) of $0.73, its operating margin of 4.32% is less competitive, ranking below 59.07% of its industry peers. Nonetheless, its profitability score remains strong at 8 out of 10.
Growth is also a vital aspect of a company's valuation. Supernus Pharmaceuticals' average annual revenue growth of 14% is commendable, ranking above 74.05% of companies in the Drug Manufacturers industry. However, its 3-year average EBITDA growth rate of -8.9% is less impressive, ranking below 76.48% of its industry counterparts.
ROIC vs WACC
The profitability of a company can be further understood by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). When ROIC exceeds WACC, it indicates that the company is creating value for shareholders. Over the past year, Supernus Pharmaceuticals' ROIC was 1.47, while its WACC was 7.18, suggesting challenges in generating cash flow relative to the capital invested.
Conclusion
In conclusion, Supernus Pharmaceuticals (SUPN, Financial) is currently trading at a price that suggests modest undervaluation. The company showcases a strong financial condition and profitability, yet its growth and value creation, as indicated by the ROIC vs WACC comparison, could be areas for improvement. For a more detailed understanding of Supernus Pharmaceuticals' financials, investors can view its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
