We recently compiled a list of the 10 Cash-Rich Small Cap Stocks To Invest In According To Analysts. In this article, we are going to take a look at where Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) stands against the other cash-rich small cap stocks.
Small-cap stocks in the US have been under pressure, with the Russell small cap index falling 10% from its November highs as of January 2025. In contrast, the S&P index, which tracks large-cap stocks, declined by less than 3% during the same period. President Trump’s focus on domestic economic growth could make small-cap stocks more attractive. However, the prospect of higher interest rates has become a major hurdle. Rising borrowing costs tend to impact smaller companies more than larger ones. Keith Lerner, co-chief investment officer at Truist Advisory Services, described this as a “tug of war” – where strong economic growth could benefit small caps, but higher rates work against them.
Market sentiment toward small caps has weakened due to expectations of fewer interest rate cuts, especially after the Federal Reserve raised its inflation forecast for 2025. Despite this, some experts believe small businesses could benefit from Trump’s policies, particularly reduced regulations and support for domestic industries. Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, pointed out that small companies are more US-focused than multinational corporations. However, Trump’s approach to tariffs could create challenges by disrupting supply chains, which may hurt smaller businesses too.
After years of trailing behind large-cap stocks, small caps finally seem ready for a comeback, according to RBC Wealth Management. Over the past five years, major economic and global events, such as pandemic-led lockdowns, economic rebounds, government stimulus, inflation, rising interest rates, and the rapid rise of AI, have widened the gap between small and large-cap stock performance. Large-cap stocks have delivered solid returns in four of the last five years, leaving small caps struggling to keep up. Historically, factors such as mergers and acquisitions and initial public offerings have played a key role in small-cap growth, but IPO activity in the small-cap space has been weak.
Although 2024 saw some improvement, with an average of 31 IPOs per quarter and $7 billion in total value, these numbers are still below pre-pandemic levels. That said, signs of a recovery started to emerge toward the end of 2024. Looking ahead, 2025 may be a turning point for small caps, as per RBC’s report. The Federal Reserve’s move toward lower interest rates could encourage businesses to take more risks, boosting M&A and IPO activity. As conditions improve, small caps could start closing the gap with large caps. Lower rates, increased corporate expansion, stronger market activity, and a more supportive regulatory environment could fuel small-cap growth. In addition, with large caps becoming expensive and investor expectations rising, more investors may look toward undervalued small-cap stocks for better opportunities.
Our Methodology
For this article, we used the Finviz stock screener to find small-cap stocks with strong cash reserves. We filtered for companies with market caps between $300 million and $2 billion and a current ratio (CR) above 2, which indicates they have more assets than liabilities, due to high cash reserves, receivables, or inventory. After that, we manually looked for companies with a trailing twelve-month (TTM) operating cash flow of over $50 million as of December 31, 2024. From there, we picked 10 stocks with the highest cash reserves. These stocks also had an average upside potential of more than 20% based on Wall Street analyst estimates as of March 4. We included hedge fund sentiment as of Q4 2024 as well. Below, we have ranked the list in ascending order of upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A lab technician analyzing a sample in a laboratory, showing the rigorous research conducted by the biopharmaceutical company.
Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN)
TTM Operating Cash Flow as of December 31, 2024: $171,951,000
Number of Hedge Fund Holders: 27
Average Upside Potential: 23.17%
Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) is a biopharmaceutical firm that develops and sells treatments for central nervous system disorders in the United States. The company is currently under investigation by Levi & Korsinsky for potential violations of federal securities laws, as announced on March 3, 2025. However, Wall Street analysts remain optimistic, as the stock still holds an average upside potential of 23.17% as of March 4.
Even after losing exclusivity on Trokendi XR and Oxtellar XR, Supernus saw a 25% increase in total revenue for 2024, excluding these two products. This growth was driven by Qelbree’s strong performance, with annual prescriptions rising by 25% and net sales increasing by 72%. In the fourth quarter alone, prescriptions hit a record high of 214,600. Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) reported adjusted operating earnings of $183.7 million, a 47% increase from the previous year’s $125.1 million. By the end of 2024, the company held approximately $454 million in cash, cash equivalents, and marketable securities, up from $271 million in 2023, mainly fueled by robust cash flow from operations. Supernus is one of the best cash rich stocks to invest in.
As per Insider Monkey’s fourth quarter database, 27 hedge funds were bullish on Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN), an increase from 20 funds in the preceding quarter. Steven Boyd’s Armistice Capital was the largest position holder in the company, with 4.8 million shares worth $174.8 million.
Overall SUPN ranks 10th on our list of the best cash-rich small cap stocks to buy. While we acknowledge the potential of SUPN as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SUPN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.