Intrinsic value of AbbVie - ABBV

Previous Close

$96.04

  Intrinsic Value

$28.13

stock screener

  Rating & Target

str. sell

-71%

  Value-price divergence*

-42%

Previous close

$96.04

 
Intrinsic value

$28.13

 
Up/down potential

-71%

 
Rating

str. sell

 
Value-price divergence*

-42%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ABBV stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 153.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.16
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  25,638
  27,586
  29,611
  31,716
  33,902
  36,176
  38,540
  41,000
  43,559
  46,225
  49,002
  51,896
  54,914
  58,063
  61,350
  64,783
  68,369
  72,116
  76,035
  80,133
  84,421
  88,909
  93,608
  98,528
  103,681
  109,080
  114,738
  120,668
  126,884
  133,400
  140,234
Variable operating expenses, $m
 
  9,124
  9,681
  10,259
  10,860
  11,485
  12,135
  12,811
  13,515
  14,247
  15,011
  14,265
  15,094
  15,960
  16,863
  17,807
  18,793
  19,823
  20,900
  22,026
  23,205
  24,439
  25,730
  27,082
  28,499
  29,983
  31,538
  33,168
  34,877
  36,668
  38,546
Fixed operating expenses, $m
 
  8,043
  8,244
  8,450
  8,662
  8,878
  9,100
  9,328
  9,561
  9,800
  10,045
  10,296
  10,553
  10,817
  11,088
  11,365
  11,649
  11,940
  12,239
  12,545
  12,858
  13,180
  13,509
  13,847
  14,193
  14,548
  14,912
  15,284
  15,666
  16,058
  16,460
Total operating expenses, $m
  16,254
  17,167
  17,925
  18,709
  19,522
  20,363
  21,235
  22,139
  23,076
  24,047
  25,056
  24,561
  25,647
  26,777
  27,951
  29,172
  30,442
  31,763
  33,139
  34,571
  36,063
  37,619
  39,239
  40,929
  42,692
  44,531
  46,450
  48,452
  50,543
  52,726
  55,006
Operating income, $m
  9,384
  10,419
  11,686
  13,006
  14,380
  15,812
  17,305
  18,861
  20,484
  22,178
  23,946
  27,335
  29,267
  31,286
  33,399
  35,611
  37,927
  40,354
  42,897
  45,562
  48,358
  51,291
  54,369
  57,599
  60,989
  64,550
  68,288
  72,215
  76,340
  80,674
  85,228
EBITDA, $m
  10,573
  12,925
  14,263
  15,656
  17,107
  18,619
  20,194
  21,836
  23,549
  25,336
  27,201
  29,150
  31,187
  33,317
  35,544
  37,876
  40,318
  42,875
  45,555
  48,364
  51,310
  54,400
  57,642
  61,044
  64,615
  68,364
  72,300
  76,435
  80,777
  85,339
  90,132
Interest expense (income), $m
  986
  1,275
  1,159
  1,307
  1,462
  1,622
  1,788
  1,962
  2,142
  2,329
  2,525
  2,728
  2,940
  3,161
  3,392
  3,633
  3,884
  4,147
  4,421
  4,708
  5,009
  5,323
  5,651
  5,996
  6,356
  6,734
  7,129
  7,543
  7,978
  8,433
  8,911
Earnings before tax, $m
  7,884
  9,144
  10,527
  11,698
  12,919
  14,191
  15,516
  16,899
  18,342
  19,848
  21,422
  24,608
  26,327
  28,125
  30,008
  31,978
  34,043
  36,207
  38,475
  40,854
  43,350
  45,969
  48,717
  51,603
  54,633
  57,816
  61,159
  64,672
  68,363
  72,241
  76,317
Tax expense, $m
  1,931
  2,469
  2,842
  3,159
  3,488
  3,831
  4,189
  4,563
  4,952
  5,359
  5,784
  6,644
  7,108
  7,594
  8,102
  8,634
  9,192
  9,776
  10,388
  11,031
  11,704
  12,412
  13,154
  13,933
  14,751
  15,610
  16,513
  17,461
  18,458
  19,505
  20,606
Net income, $m
  5,953
  6,675
  7,685
  8,540
  9,431
  10,359
  11,327
  12,336
  13,390
  14,489
  15,638
  17,964
  19,219
  20,531
  21,905
  23,344
  24,852
  26,431
  28,087
  29,824
  31,645
  33,557
  35,564
  37,670
  39,882
  42,206
  44,646
  47,210
  49,905
  52,736
  55,712

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,423
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  66,099
  64,155
  68,864
  73,757
  78,843
  84,130
  89,628
  95,348
  101,301
  107,500
  113,958
  120,689
  127,708
  135,031
  142,675
  150,657
  158,997
  167,713
  176,825
  186,357
  196,329
  206,766
  217,693
  229,135
  241,119
  253,675
  266,833
  280,623
  295,078
  310,233
  326,125
Adjusted assets (=assets-cash), $m
  59,676
  64,155
  68,864
  73,757
  78,843
  84,130
  89,628
  95,348
  101,301
  107,500
  113,958
  120,689
  127,708
  135,031
  142,675
  150,657
  158,997
  167,713
  176,825
  186,357
  196,329
  206,766
  217,693
  229,135
  241,119
  253,675
  266,833
  280,623
  295,078
  310,233
  326,125
Revenue / Adjusted assets
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
Average production assets, $m
  26,888
  28,938
  31,062
  33,270
  35,564
  37,948
  40,429
  43,009
  45,694
  48,490
  51,403
  54,439
  57,605
  60,908
  64,356
  67,957
  71,719
  75,650
  79,761
  84,060
  88,558
  93,266
  98,195
  103,356
  108,762
  114,425
  120,360
  126,580
  133,101
  139,937
  147,105
Working capital, $m
  6,406
  414
  444
  476
  509
  543
  578
  615
  653
  693
  735
  778
  824
  871
  920
  972
  1,026
  1,082
  1,141
  1,202
  1,266
  1,334
  1,404
  1,478
  1,555
  1,636
  1,721
  1,810
  1,903
  2,001
  2,104
Total debt, $m
  36,842
  33,118
  37,356
  41,760
  46,338
  51,096
  56,044
  61,192
  66,550
  72,129
  77,941
  83,999
  90,316
  96,907
  103,786
  110,971
  118,476
  126,320
  134,522
  143,100
  152,075
  161,468
  171,302
  181,600
  192,386
  203,687
  215,528
  227,939
  240,949
  254,589
  268,891
Total liabilities, $m
  61,463
  57,739
  61,977
  66,381
  70,959
  75,717
  80,665
  85,813
  91,171
  96,750
  102,562
  108,620
  114,937
  121,528
  128,407
  135,592
  143,097
  150,941
  159,143
  167,721
  176,696
  186,089
  195,923
  206,221
  217,007
  228,308
  240,149
  252,560
  265,570
  279,210
  293,512
Total equity, $m
  4,636
  6,415
  6,886
  7,376
  7,884
  8,413
  8,963
  9,535
  10,130
  10,750
  11,396
  12,069
  12,771
  13,503
  14,267
  15,066
  15,900
  16,771
  17,683
  18,636
  19,633
  20,677
  21,769
  22,913
  24,112
  25,368
  26,683
  28,062
  29,508
  31,023
  32,612
Total liabilities and equity, $m
  66,099
  64,154
  68,863
  73,757
  78,843
  84,130
  89,628
  95,348
  101,301
  107,500
  113,958
  120,689
  127,708
  135,031
  142,674
  150,658
  158,997
  167,712
  176,826
  186,357
  196,329
  206,766
  217,692
  229,134
  241,119
  253,676
  266,832
  280,622
  295,078
  310,233
  326,124
Debt-to-equity ratio
  7.947
  5.160
  5.420
  5.660
  5.880
  6.070
  6.250
  6.420
  6.570
  6.710
  6.840
  6.960
  7.070
  7.180
  7.270
  7.370
  7.450
  7.530
  7.610
  7.680
  7.750
  7.810
  7.870
  7.930
  7.980
  8.030
  8.080
  8.120
  8.170
  8.210
  8.250
Adjusted equity ratio
  -0.024
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,953
  6,675
  7,685
  8,540
  9,431
  10,359
  11,327
  12,336
  13,390
  14,489
  15,638
  17,964
  19,219
  20,531
  21,905
  23,344
  24,852
  26,431
  28,087
  29,824
  31,645
  33,557
  35,564
  37,670
  39,882
  42,206
  44,646
  47,210
  49,905
  52,736
  55,712
Depreciation, amort., depletion, $m
  1,189
  2,506
  2,577
  2,651
  2,727
  2,807
  2,889
  2,975
  3,065
  3,158
  3,255
  1,815
  1,920
  2,030
  2,145
  2,265
  2,391
  2,522
  2,659
  2,802
  2,952
  3,109
  3,273
  3,445
  3,625
  3,814
  4,012
  4,219
  4,437
  4,665
  4,904
Funds from operations, $m
  5,352
  9,181
  10,262
  11,190
  12,158
  13,166
  14,216
  15,312
  16,454
  17,647
  18,893
  19,778
  21,139
  22,562
  24,051
  25,610
  27,242
  28,953
  30,746
  32,626
  34,597
  36,666
  38,837
  41,115
  43,508
  46,020
  48,658
  51,430
  54,341
  57,401
  60,615
Change in working capital, $m
  -1,689
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  103
Cash from operations, $m
  7,041
  9,152
  10,231
  11,159
  12,125
  13,132
  14,181
  15,275
  16,416
  17,607
  18,851
  19,735
  21,093
  22,514
  24,001
  25,558
  27,188
  28,897
  30,687
  32,564
  34,533
  36,599
  38,766
  41,042
  43,430
  45,939
  48,573
  51,341
  54,248
  57,303
  60,513
Maintenance CAPEX, $m
  0
  -896
  -965
  -1,035
  -1,109
  -1,185
  -1,265
  -1,348
  -1,434
  -1,523
  -1,616
  -1,713
  -1,815
  -1,920
  -2,030
  -2,145
  -2,265
  -2,391
  -2,522
  -2,659
  -2,802
  -2,952
  -3,109
  -3,273
  -3,445
  -3,625
  -3,814
  -4,012
  -4,219
  -4,437
  -4,665
New CAPEX, $m
  -479
  -2,051
  -2,124
  -2,207
  -2,294
  -2,385
  -2,480
  -2,580
  -2,685
  -2,796
  -2,913
  -3,036
  -3,166
  -3,303
  -3,448
  -3,601
  -3,762
  -3,931
  -4,111
  -4,299
  -4,498
  -4,708
  -4,929
  -5,161
  -5,406
  -5,664
  -5,935
  -6,220
  -6,520
  -6,836
  -7,168
Cash from investing activities, $m
  -6,074
  -2,947
  -3,089
  -3,242
  -3,403
  -3,570
  -3,745
  -3,928
  -4,119
  -4,319
  -4,529
  -4,749
  -4,981
  -5,223
  -5,478
  -5,746
  -6,027
  -6,322
  -6,633
  -6,958
  -7,300
  -7,660
  -8,038
  -8,434
  -8,851
  -9,289
  -9,749
  -10,232
  -10,739
  -11,273
  -11,833
Free cash flow, $m
  967
  6,205
  7,143
  7,916
  8,722
  9,561
  10,436
  11,347
  12,297
  13,288
  14,322
  14,985
  16,113
  17,291
  18,523
  19,812
  21,161
  22,574
  24,055
  25,606
  27,233
  28,939
  30,729
  32,607
  34,579
  36,650
  38,824
  41,109
  43,508
  46,030
  48,680
Issuance/(repayment) of debt, $m
  5,588
  -3,322
  4,238
  4,404
  4,577
  4,758
  4,948
  5,148
  5,358
  5,579
  5,812
  6,058
  6,317
  6,591
  6,880
  7,184
  7,505
  7,844
  8,202
  8,578
  8,975
  9,393
  9,834
  10,298
  10,786
  11,300
  11,842
  12,411
  13,010
  13,640
  14,302
Issuance/(repurchase) of shares, $m
  -5,765
  1,126
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -211
  -2,196
  4,238
  4,404
  4,577
  4,758
  4,948
  5,148
  5,358
  5,579
  5,812
  6,058
  6,317
  6,591
  6,880
  7,184
  7,505
  7,844
  8,202
  8,578
  8,975
  9,393
  9,834
  10,298
  10,786
  11,300
  11,842
  12,411
  13,010
  13,640
  14,302
Total cash flow (excl. dividends), $m
  418
  4,009
  11,381
  12,320
  13,299
  14,320
  15,384
  16,495
  17,655
  18,867
  20,134
  21,043
  22,430
  23,882
  25,403
  26,996
  28,667
  30,419
  32,256
  34,184
  36,208
  38,332
  40,563
  42,905
  45,366
  47,950
  50,666
  53,520
  56,518
  59,670
  62,982
Retained Cash Flow (-), $m
  -691
  -7,800
  -471
  -489
  -509
  -529
  -550
  -572
  -595
  -620
  -646
  -673
  -702
  -732
  -764
  -798
  -834
  -872
  -911
  -953
  -997
  -1,044
  -1,093
  -1,144
  -1,198
  -1,256
  -1,316
  -1,379
  -1,446
  -1,516
  -1,589
Prev. year cash balance distribution, $m
 
  6,021
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,229
  10,910
  11,831
  12,791
  13,791
  14,834
  15,923
  17,060
  18,247
  19,488
  20,370
  21,728
  23,150
  24,638
  26,198
  27,833
  29,547
  31,345
  33,231
  35,211
  37,288
  39,470
  41,761
  44,167
  46,695
  49,350
  52,141
  55,073
  58,154
  61,393
Discount rate, %
 
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
 
  2,039
  9,055
  8,828
  8,497
  8,073
  7,568
  6,998
  6,378
  5,727
  5,064
  4,317
  3,696
  3,108
  2,566
  2,076
  1,646
  1,276
  968
  716
  517
  363
  248
  165
  106
  66
  40
  23
  13
  7
  4
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

AbbVie Inc. (AbbVie) is a research-based biopharmaceutical company. The Company is engaged in the discovery, development, manufacture and sale of a range of pharmaceutical products. Its products are focused on treating conditions, such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C virus (HCV) and human immunodeficiency virus (HIV); neurological disorders, such as Parkinson's disease and multiple sclerosis; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis, and other serious health conditions. It offers products in various categories, including HUMIRA (adalimumab), Oncology products, Virology Products, Additional Virology products, Metabolics/Hormones products, Endocrinology products and other products, which include Duopa and Duodopa (carbidopa and levodopa), Anesthesia products and ZINBRYTA (daclizumab).

FINANCIAL RATIOS  of  AbbVie (ABBV)

Valuation Ratios
P/E Ratio 25.7
Price to Sales 6
Price to Book 33
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 23.3
Growth Rates
Sales Growth Rate 12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10%
Cap. Spend. - 3 Yr. Gr. Rate -0.5%
Financial Strength
Quick Ratio 16
Current Ratio 0
LT Debt to Equity 786%
Total Debt to Equity 794.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 11.2%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 15%
Return On Equity 138.7%
Return On Equity - 3 Yr. Avg. 125.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 77.3%
Gross Margin - 3 Yr. Avg. 78.5%
EBITDA Margin 39.2%
EBITDA Margin - 3 Yr. Avg. 30.7%
Operating Margin 36.6%
Oper. Margin - 3 Yr. Avg. 28.9%
Pre-Tax Margin 30.8%
Pre-Tax Margin - 3 Yr. Avg. 23.9%
Net Profit Margin 23.2%
Net Profit Margin - 3 Yr. Avg. 18.2%
Effective Tax Rate 24.5%
Eff/ Tax Rate - 3 Yr. Avg. 24.1%
Payout Ratio 62.4%

ABBV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABBV stock intrinsic value calculation we used $25638 million for the last fiscal year's total revenue generated by AbbVie. The default revenue input number comes from 2016 income statement of AbbVie. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ABBV stock valuation model: a) initial revenue growth rate of 7.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.3%, whose default value for ABBV is calculated based on our internal credit rating of AbbVie, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of AbbVie.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ABBV stock the variable cost ratio is equal to 33.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7847 million in the base year in the intrinsic value calculation for ABBV stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for AbbVie.

Corporate tax rate of 27% is the nominal tax rate for AbbVie. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ABBV stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ABBV are equal to 104.9%.

Life of production assets of 34.6 years is the average useful life of capital assets used in AbbVie operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ABBV is equal to 1.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4636 million for AbbVie - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1602.23 million for AbbVie is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of AbbVie at the current share price and the inputted number of shares is $153.9 billion.

Management's discussion and analysis

AbbVie is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories (Abbott). AbbVie's mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world's most complex and serious diseases. AbbVie's products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C (HCV) and human immunodeficiency virus (HIV); neurological disorders, such as Parkinson's disease and multiple sclerosis; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; as well as other serious health conditions. AbbVie also has a pipeline of promising new medicines across such important medical specialties as immunology, virology, oncology and neurology, with additional targeted investment in cystic fibrosis and women's health.
AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses. In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to pharmacies and patients. Outside the United States, sales are made either directly to customers or through distributors, depending on the market served. Certain products are co-marketed or co-promoted with other companies. AbbVie has approximately 30,000 employees. AbbVie operates in one business segment—pharmaceutical products.

2016 Financial Results

AbbVie's strategy has focused on delivering strong financial results, advancing and investing in its pipeline and returning value to shareholders while ensuring a strong, sustainable growth business over the long term. In 2016, AbbVie's worldwide net revenues grew by 12% to $25.6 billion, driven primarily by the continued strength of HUMIRA, post-acquisition revenue growth related to IMBRUVICA and revenue growth in other key products including Creon and Duodopa. These increases were partially offset by a decline in net revenues of Kaletra and VIEKIRA.
The company's financial performance in 2016 included delivering diluted earnings per share of $3.63. 2016 results included the following after-tax costs: (i) $615 million related to the amortization of intangible assets; (ii) a $298 million currency devaluation loss related to Venezuela; (iii) $273 million related to the acquisition of Stemcentrx and Boehringer Ingelheim (BI) compounds; (iv) $228 million for changes in contingent consideration; (v) $200 million for acquired in-process research and development (IPR&D); (vi) $187 million associated with a tax law change for regulations issued in the fourth quarter of 2016 that revised the treatment of foreign currency translation gains and losses for certain operations; and (vii) milestone payments of $80 million. Additionally, 2016 financial results reflected added funding to support AbbVie’s emerging mid- and late-stage pipeline assets and continued investment in AbbVie’s growth brands.
In 2016, the company generated cash flows from operations of $7.0 billion, which AbbVie utilized to continue to enhance its pipeline through licensing and collaboration activities, pay cash dividends to stockholders of $3.7 billion and repurchase approximately 34 million shares for $2.1 billion in the open market (excluding the shares repurchased under an accelerated repurchase agreement). In October 2016, AbbVie's board of directors declared a quarterly cash dividend of $0.64 per share of common stock payable in February 2017. This reflects an increase of approximately 12% over the previous quarterly rate of $0.57 per share of common stock.
In April 2016, AbbVie acquired all rights to risankizumab (BI 655066), an anti-IL-23 monoclonal biologic antibody, from BI pursuant to a global collaboration agreement. In June 2016, AbbVie acquired Stemcentrx, a privately held biotechnology company. The transaction expands AbbVie’s oncology pipeline by adding the late-stage asset rovalpituzumab tesirine (Rova-T), four additional early-stage clinical compounds in solid tumor indications and a significant portfolio of pre-clinical assets. Rova-T is currently in registrational trials for small cell lung cancer and in early-stage clinical development for other solid tumors. In connection with the Stemcentrx acquisition, AbbVie’s board of directors authorized a $4.0 billion increase to 
AbbVie’s existing share repurchase program. Promptly following the closing of the Stemcentrx transaction, AbbVie entered into and executed a $3.8 billion accelerated share repurchase agreement (ASR) with a third party financial institution to reacquire nearly all of the newly-issued equity. In May 2016, AbbVie issued $7.8 billion aggregate principal amount of unsecured senior notes. Of the $7.7 billion net proceeds, $2.0 billion was used to repay the company’s outstanding term loan that was due to mature in November 2016, approximately $1.9 billion was used to finance the acquisition of Stemcentrx and approximately $3.8 billion was used to finance the ASR. In November 2016, the company issued €3.6 billion aggregate principal amount of unsecured senior Euro notes and repaid the company’s outstanding 1.75% senior notes that were due to mature in November 2017. See Note 5 to the Consolidated Financial Statements for additional information related to the acquisition of Stemcentrx and BI compounds, Note 9 for additional information related to the senior Euro notes and Note 12 for additional information related to the ASR.
2017 Strategic Objectives
AbbVie's mission is to be an innovation-driven, patient-focused specialty biopharmaceutical company capable of achieving top-tier financial performance through outstanding execution and a consistent stream of innovative new medicines. AbbVie intends to continue to advance its mission in a number of ways, including: (i) growing revenues through continued strong performance from its existing portfolio of on-market products, including its flagship brands, HUMIRA and IMBRUVICA as well as growth from pipeline products; (ii) expanding operating margins; (iii) continued investment in its pipeline in support of opportunities in immunology, oncology, virology and neurology as well as continued investment in key on-market products; (iv) augmentation of its pipeline through concerted focus on strategic licensing, acquisition and partnering activity with a focus on identifying compelling programs that fit AbbVie's strategic criteria; and (v) returning cash to shareholders via dividends and share repurchases. In addition, AbbVie anticipates several regulatory submissions and key data readouts from key clinical trials in the next twelve months.
AbbVie expects to achieve its strategic objectives as follows:
   
HUMIRA sales growth by driving biologic penetration across disease categories, increasing market leadership and strong commercial execution.
   
IMBRUVICA revenue growth driven by increasing market share within its five currently approved indications.
   
The favorable impact of pipeline products approved in 2016 or currently under regulatory review where approval is expected in 2017. These products are described in greater detail in the section labeled "Research and Development" included as part of this Item 7.
AbbVie remains committed to driving continued expansion of operating margins and expects to achieve this objective through productivity initiatives in supply chain, ongoing efficiency programs to optimize manufacturing, commercial infrastructure, administrative costs and general corporate expenses and continued leverage from revenue growth. AbbVie also remains committed to returning cash to shareholders via dividends and share repurchases.

[Source: Form 10-K dated 2017-02-17]

RELATED COMPANIES Price Int.Val. Rating
BMY Bristol-Myers 63.70 19.90  str.sell
MRK Merck&Co 63.51 30.30  str.sell
PFE Pfizer 35.83 28.30  hold
INFI Infinity Pharm 2.10 0.42  str.sell
AMGN Amgen 186.28 97.73  sell
NVS Novartis ADR 86.04 35.84  str.sell
AZN AstraZeneca AD 34.65 18.10  sell

COMPANY NEWS

▶ 3 Top Stocks Billionaires Love   [07:47AM  Motley Fool]
▶ 2 Great Stocks For Retirees   [06:11AM  Motley Fool]
▶ Micron, Abbvie, Sherwin-Williams, Wynn Resorts & Exxon   [Oct-18-17 02:20PM  CNBC Videos]
▶ Where to Find Value in Healthcare Stocks   [Oct-17-17 07:33PM  Zacks]
▶ Better Buy: AbbVie Inc. vs. Merck   [Oct-14-17 10:33AM  Motley Fool]
▶ Trump to scrap a crucial part of Obamacare   [10:38AM  Yahoo Finance Video]
▶ 3 Stocks for Baby Boomers to Reach Their Goals   [Oct-12-17 09:45PM  Motley Fool]
▶ Top 5 Biotech Stocks for 2017   [02:35PM  Investopedia]
▶ New Law May Pressure Drug Prices   [11:24AM  Barrons.com]
▶ How Safe Is AbbVie's Dividend?   [Oct-11-17 07:36PM  Motley Fool]
▶ AbbVie: You're Upgrading ItNow?   [03:41PM  Barrons.com]
▶ 3 Top Stocks Wall Street Insiders Love   [Oct-06-17 07:00PM  Motley Fool]
▶ Top 4 Marijuana Stocks to Watch   [09:50AM  Investopedia]
▶ 3 Big Pharma Stocks Set to Succeed   [06:03AM  Motley Fool]
▶ Why Shares in AbbVie Soared 18% in September   [Oct-03-17 09:00PM  Motley Fool]
▶ Analysts Act on Health Care Stocks   [12:20PM  GuruFocus.com]
▶ AbbVie Patent Deal Staves Off Amgen Competition, But Others Lurk   [Oct-02-17 04:02PM  Investor's Business Daily]
▶ AbbVie: Better Late Than Never   [10:03AM  Barrons.com]
▶ [$$] Merck Abandons New Hepatitis C Drugs Amid Crowded Market   [Sep-30-17 12:33AM  The Wall Street Journal]
▶ AbbVie, Amgen Resolve Humira Patent Dispute   [Sep-29-17 03:09PM  GuruFocus.com]
▶ [$$] Merck Abandons New Hepatitis C Drugs   [01:23PM  The Wall Street Journal]
▶ AbbVie's Humira Is an Ageless Wonder   [11:55AM  Bloomberg]
▶ AbbVie, Amgen Reach Settlement in Humira Patent Dispute   [12:07AM  The Wall Street Journal]
▶ AbbVie, Amgen Reach Humira Settlement   [Sep-28-17 05:44PM  The Wall Street Journal]
▶ Why Amgen's Drug Win Sent AbbVie Stock Into The Stratosphere   [04:52PM  Investor's Business Daily]
▶ AbbVie: Has the Humira Cloud Lifted?   [12:46PM  Barrons.com]
▶ Bristol-Myers Squibbs Important Recent Developments   [Sep-27-17 03:48PM  Market Realist]
▶ Analysts Take Action on Health Care Stocks   [Sep-26-17 01:43PM  GuruFocus.com]
▶ AbbVie's Unfazed by the Risk of Generic Humira   [Sep-24-17 07:00AM  Motley Fool]
▶ 3 Big Biotech Stocks to Buy This Fall   [07:43AM  Motley Fool]
Financial statements of ABBV
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.