Intrinsic value of Alexion Pharmaceuticals - ALXN

Previous Close

$136.55

  Intrinsic Value

$24.65

stock screener

  Rating & Target

str. sell

-82%

  Value-price divergence*

-42%

Previous close

$136.55

 
Intrinsic value

$24.65

 
Up/down potential

-82%

 
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 ALXN 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 30.5

 

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, %
  18.43
  24.10
  22.19
  20.47
  18.92
  17.53
  16.28
  15.15
  14.14
  13.22
  12.40
  11.66
  10.99
  10.39
  9.85
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
Revenue, $m
  3,084
  3,827
  4,677
  5,634
  6,700
  7,875
  9,156
  10,544
  12,034
  13,625
  15,315
  17,100
  18,980
  20,953
  23,018
  25,175
  27,424
  29,765
  32,202
  34,735
  37,368
  40,104
  42,947
  45,903
  48,975
  52,170
  55,494
  58,953
  62,555
  66,309
  70,221
Variable operating expenses, $m
 
  2,669
  3,149
  3,691
  4,294
  4,958
  5,683
  6,468
  7,311
  8,211
  9,167
  9,673
  10,737
  11,853
  13,021
  14,241
  15,513
  16,837
  18,216
  19,649
  21,138
  22,686
  24,294
  25,966
  27,704
  29,511
  31,391
  33,348
  35,386
  37,509
  39,722
Fixed operating expenses, $m
 
  176
  181
  185
  190
  195
  199
  204
  210
  215
  220
  226
  231
  237
  243
  249
  255
  262
  268
  275
  282
  289
  296
  304
  311
  319
  327
  335
  343
  352
  361
Total operating expenses, $m
  2,417
  2,845
  3,330
  3,876
  4,484
  5,153
  5,882
  6,672
  7,521
  8,426
  9,387
  9,899
  10,968
  12,090
  13,264
  14,490
  15,768
  17,099
  18,484
  19,924
  21,420
  22,975
  24,590
  26,270
  28,015
  29,830
  31,718
  33,683
  35,729
  37,861
  40,083
Operating income, $m
  667
  982
  1,347
  1,758
  2,216
  2,722
  3,274
  3,871
  4,513
  5,199
  5,928
  7,201
  8,012
  8,863
  9,754
  10,685
  11,655
  12,666
  13,718
  14,811
  15,948
  17,129
  18,357
  19,633
  20,960
  22,340
  23,775
  25,270
  26,826
  28,448
  30,138
EBITDA, $m
  1,063
  1,731
  2,150
  2,623
  3,150
  3,731
  4,365
  5,051
  5,789
  6,577
  7,414
  8,298
  9,230
  10,207
  11,231
  12,300
  13,414
  14,575
  15,783
  17,039
  18,345
  19,701
  21,112
  22,577
  24,101
  25,686
  27,335
  29,051
  30,838
  32,700
  34,641
Interest expense (income), $m
  80
  101
  138
  180
  228
  281
  339
  403
  472
  546
  626
  710
  799
  892
  991
  1,093
  1,201
  1,313
  1,429
  1,551
  1,677
  1,808
  1,944
  2,086
  2,233
  2,386
  2,545
  2,710
  2,882
  3,062
  3,249
Earnings before tax, $m
  576
  881
  1,209
  1,578
  1,989
  2,441
  2,934
  3,468
  4,041
  4,653
  5,302
  6,492
  7,214
  7,971
  8,764
  9,592
  10,455
  11,353
  12,289
  13,261
  14,271
  15,322
  16,413
  17,548
  18,727
  19,954
  21,231
  22,560
  23,944
  25,386
  26,889
Tax expense, $m
  177
  238
  326
  426
  537
  659
  792
  936
  1,091
  1,256
  1,432
  1,753
  1,948
  2,152
  2,366
  2,590
  2,823
  3,065
  3,318
  3,580
  3,853
  4,137
  4,432
  4,738
  5,056
  5,388
  5,732
  6,091
  6,465
  6,854
  7,260
Net income, $m
  399
  643
  882
  1,152
  1,452
  1,782
  2,142
  2,532
  2,950
  3,397
  3,870
  4,739
  5,266
  5,819
  6,398
  7,002
  7,632
  8,288
  8,971
  9,680
  10,418
  11,185
  11,982
  12,810
  13,671
  14,567
  15,498
  16,469
  17,479
  18,532
  19,629

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,293
  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
  13,253
  14,834
  18,126
  21,837
  25,969
  30,522
  35,490
  40,867
  46,644
  52,811
  59,359
  66,281
  73,567
  81,214
  89,218
  97,577
  106,293
  115,370
  124,813
  134,632
  144,837
  155,442
  166,463
  177,917
  189,825
  202,208
  215,091
  228,500
  242,463
  257,010
  272,173
Adjusted assets (=assets-cash), $m
  11,960
  14,834
  18,126
  21,837
  25,969
  30,522
  35,490
  40,867
  46,644
  52,811
  59,359
  66,281
  73,567
  81,214
  89,218
  97,577
  106,293
  115,370
  124,813
  134,632
  144,837
  155,442
  166,463
  177,917
  189,825
  202,208
  215,091
  228,500
  242,463
  257,010
  272,173
Revenue / Adjusted assets
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
Average production assets, $m
  5,024
  6,235
  7,618
  9,178
  10,914
  12,828
  14,916
  17,176
  19,604
  22,195
  24,948
  27,857
  30,919
  34,133
  37,497
  41,010
  44,673
  48,488
  52,457
  56,583
  60,872
  65,330
  69,961
  74,775
  79,780
  84,984
  90,399
  96,035
  101,903
  108,017
  114,389
Working capital, $m
  1,755
  781
  954
  1,149
  1,367
  1,606
  1,868
  2,151
  2,455
  2,780
  3,124
  3,488
  3,872
  4,274
  4,696
  5,136
  5,594
  6,072
  6,569
  7,086
  7,623
  8,181
  8,761
  9,364
  9,991
  10,643
  11,321
  12,026
  12,761
  13,527
  14,325
Total debt, $m
  3,055
  3,940
  5,148
  6,510
  8,027
  9,697
  11,521
  13,494
  15,614
  17,878
  20,281
  22,821
  25,495
  28,302
  31,239
  34,307
  37,506
  40,837
  44,302
  47,906
  51,651
  55,543
  59,588
  63,792
  68,162
  72,706
  77,435
  82,356
  87,480
  92,819
  98,383
Total liabilities, $m
  4,559
  5,444
  6,652
  8,014
  9,531
  11,201
  13,025
  14,998
  17,118
  19,382
  21,785
  24,325
  26,999
  29,806
  32,743
  35,811
  39,010
  42,341
  45,806
  49,410
  53,155
  57,047
  61,092
  65,296
  69,666
  74,210
  78,939
  83,860
  88,984
  94,323
  99,887
Total equity, $m
  8,694
  9,390
  11,474
  13,823
  16,438
  19,320
  22,465
  25,869
  29,525
  33,429
  37,574
  41,956
  46,568
  51,409
  56,475
  61,766
  67,284
  73,029
  79,007
  85,222
  91,682
  98,395
  105,371
  112,622
  120,159
  127,998
  136,153
  144,641
  153,479
  162,687
  172,285
Total liabilities and equity, $m
  13,253
  14,834
  18,126
  21,837
  25,969
  30,521
  35,490
  40,867
  46,643
  52,811
  59,359
  66,281
  73,567
  81,215
  89,218
  97,577
  106,294
  115,370
  124,813
  134,632
  144,837
  155,442
  166,463
  177,918
  189,825
  202,208
  215,092
  228,501
  242,463
  257,010
  272,172
Debt-to-equity ratio
  0.351
  0.420
  0.450
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
  0.550
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
Adjusted equity ratio
  0.619
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  399
  643
  882
  1,152
  1,452
  1,782
  2,142
  2,532
  2,950
  3,397
  3,870
  4,739
  5,266
  5,819
  6,398
  7,002
  7,632
  8,288
  8,971
  9,680
  10,418
  11,185
  11,982
  12,810
  13,671
  14,567
  15,498
  16,469
  17,479
  18,532
  19,629
Depreciation, amort., depletion, $m
  396
  749
  804
  865
  933
  1,009
  1,091
  1,180
  1,275
  1,378
  1,486
  1,097
  1,217
  1,344
  1,476
  1,615
  1,759
  1,909
  2,065
  2,228
  2,397
  2,572
  2,754
  2,944
  3,141
  3,346
  3,559
  3,781
  4,012
  4,253
  4,504
Funds from operations, $m
  950
  1,392
  1,686
  2,017
  2,385
  2,791
  3,233
  3,712
  4,226
  4,774
  5,356
  5,836
  6,483
  7,163
  7,874
  8,616
  9,391
  10,197
  11,036
  11,908
  12,815
  13,757
  14,736
  15,754
  16,812
  17,912
  19,057
  20,249
  21,491
  22,784
  24,133
Change in working capital, $m
  -136
  152
  173
  195
  217
  240
  261
  283
  304
  325
  345
  364
  384
  402
  421
  440
  459
  478
  497
  517
  537
  558
  580
  603
  627
  652
  678
  706
  735
  766
  798
Cash from operations, $m
  1,086
  1,241
  1,513
  1,822
  2,168
  2,551
  2,971
  3,429
  3,922
  4,449
  5,012
  5,471
  6,100
  6,760
  7,453
  8,177
  8,932
  9,719
  10,539
  11,391
  12,278
  13,199
  14,156
  15,151
  16,185
  17,261
  18,379
  19,544
  20,756
  22,019
  23,335
Maintenance CAPEX, $m
  0
  -198
  -245
  -300
  -361
  -430
  -505
  -587
  -676
  -772
  -874
  -982
  -1,097
  -1,217
  -1,344
  -1,476
  -1,615
  -1,759
  -1,909
  -2,065
  -2,228
  -2,397
  -2,572
  -2,754
  -2,944
  -3,141
  -3,346
  -3,559
  -3,781
  -4,012
  -4,253
New CAPEX, $m
  -333
  -1,211
  -1,383
  -1,559
  -1,737
  -1,913
  -2,088
  -2,260
  -2,428
  -2,592
  -2,752
  -2,909
  -3,062
  -3,214
  -3,364
  -3,513
  -3,663
  -3,815
  -3,969
  -4,127
  -4,289
  -4,457
  -4,632
  -4,814
  -5,005
  -5,204
  -5,415
  -5,636
  -5,868
  -6,114
  -6,373
Cash from investing activities, $m
  -287
  -1,409
  -1,628
  -1,859
  -2,098
  -2,343
  -2,593
  -2,847
  -3,104
  -3,364
  -3,626
  -3,891
  -4,159
  -4,431
  -4,708
  -4,989
  -5,278
  -5,574
  -5,878
  -6,192
  -6,517
  -6,854
  -7,204
  -7,568
  -7,949
  -8,345
  -8,761
  -9,195
  -9,649
  -10,126
  -10,626
Free cash flow, $m
  799
  -168
  -116
  -38
  69
  208
  378
  581
  817
  1,086
  1,386
  1,580
  1,941
  2,329
  2,745
  3,187
  3,654
  4,146
  4,661
  5,199
  5,761
  6,345
  6,952
  7,582
  8,237
  8,915
  9,619
  10,349
  11,107
  11,893
  12,709
Issuance/(repayment) of debt, $m
  -375
  1,052
  1,208
  1,362
  1,517
  1,671
  1,823
  1,973
  2,120
  2,263
  2,403
  2,540
  2,674
  2,806
  2,937
  3,068
  3,199
  3,331
  3,466
  3,604
  3,745
  3,892
  4,045
  4,204
  4,370
  4,545
  4,728
  4,921
  5,124
  5,339
  5,565
Issuance/(repurchase) of shares, $m
  -393
  1,179
  1,201
  1,197
  1,164
  1,100
  1,003
  872
  707
  507
  275
  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  
  -836
  2,231
  2,409
  2,559
  2,681
  2,771
  2,826
  2,845
  2,827
  2,770
  2,678
  2,540
  2,674
  2,806
  2,937
  3,068
  3,199
  3,331
  3,466
  3,604
  3,745
  3,892
  4,045
  4,204
  4,370
  4,545
  4,728
  4,921
  5,124
  5,339
  5,565
Total cash flow (excl. dividends), $m
  -44
  2,063
  2,293
  2,521
  2,750
  2,979
  3,205
  3,427
  3,644
  3,856
  4,064
  4,120
  4,615
  5,136
  5,682
  6,255
  6,853
  7,477
  8,127
  8,803
  9,506
  10,237
  10,997
  11,786
  12,607
  13,460
  14,347
  15,270
  16,231
  17,232
  18,274
Retained Cash Flow (-), $m
  -435
  -1,822
  -2,084
  -2,349
  -2,616
  -2,882
  -3,145
  -3,404
  -3,657
  -3,904
  -4,145
  -4,381
  -4,613
  -4,840
  -5,066
  -5,291
  -5,517
  -5,746
  -5,978
  -6,215
  -6,460
  -6,713
  -6,976
  -7,250
  -7,538
  -7,839
  -8,155
  -8,488
  -8,838
  -9,208
  -9,598
Prev. year cash balance distribution, $m
 
  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 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
 
  1,367
  210
  172
  134
  97
  60
  23
  -13
  -47
  -82
  -261
  2
  295
  616
  963
  1,336
  1,731
  2,149
  2,588
  3,046
  3,524
  4,021
  4,536
  5,069
  5,621
  6,192
  6,782
  7,393
  8,024
  8,676
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,311
  192
  150
  111
  75
  43
  16
  -8
  -27
  -43
  -124
  1
  112
  207
  283
  339
  377
  396
  398
  387
  364
  334
  297
  258
  219
  181
  146
  114
  88
  65
Current shareholders' claim on cash, %
  100
  95.7
  92.4
  89.7
  87.6
  85.9
  84.7
  83.8
  83.1
  82.7
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5
  82.5

Alexion Pharmaceuticals, Inc., a biopharmaceutical company, develops and commercializes life-transforming therapeutic products. The company offers Soliris (eculizumab), a monoclonal antibody for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a genetic blood disorder; and atypical hemolytic uremic syndrome (aHUS), a genetic disease. It also provides Strensiq (asfotase alfa), a targeted enzyme replacement therapy for patients with hypophosphatasia (HPP); and Kanuma (sebelipase alfa) for the treatment of patients with lysosomal acid lipase deficiency. In addition, the company conducts Phase III clinical trials for Soliris (eculizumab) for the treatment of myasthenia gravis and neuromyelitis optica spectrum disorder; and Phase II clinical trials for antibody mediated rejection in presensitized renal transplant patients. Further, it develops cPMP (ALXN 1101) that is in Phase II/III trial for treating metabolic disorders; SBC-103, which is in Phase I/II clinical trials for the treatment of metabolic disorders; ALXN 1210 (IV) that is in Phase III clinical trials for the treatment of PNH and aHUS; and ALXN 1210, which is in Phase I clinical trials to evaluate subcutaneous delivery. The company serves distributors, pharmacies, hospitals, hospital buying groups, and other health care providers, as well as governments and government agencies in the United States, Europe, the Asia Pacific, and internationally. Alexion Pharmaceuticals, Inc. has agreements with X-Chem Pharmaceuticals (X-Chem) to identify novel drug candidates from X-Chem's proprietary drug discovery engine; and Moderna Therapeutics, Inc. (Moderna) that provides the option to purchase drug products for development and commercialization of Moderna's messenger RNA therapeutics to treat rare diseases. The company was founded in 1992 and is headquartered in New Haven, Connecticut.

FINANCIAL RATIOS  of  Alexion Pharmaceuticals (ALXN)

Valuation Ratios
P/E Ratio 76.7
Price to Sales 9.9
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 28.2
Price to Free Cash Flow 40.6
Growth Rates
Sales Growth Rate 18.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.4%
Cap. Spend. - 3 Yr. Gr. Rate 62.9%
Financial Strength
Quick Ratio 8
Current Ratio 0.1
LT Debt to Equity 33.2%
Total Debt to Equity 35.1%
Interest Coverage 8
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 3.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.3%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 91.6%
Gross Margin - 3 Yr. Avg. 91.6%
EBITDA Margin 34.1%
EBITDA Margin - 3 Yr. Avg. 34.2%
Operating Margin 21.6%
Oper. Margin - 3 Yr. Avg. 27%
Pre-Tax Margin 18.7%
Pre-Tax Margin - 3 Yr. Avg. 25.6%
Net Profit Margin 12.9%
Net Profit Margin - 3 Yr. Avg. 16%
Effective Tax Rate 30.7%
Eff/ Tax Rate - 3 Yr. Avg. 42.2%
Payout Ratio 0%

ALXN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALXN stock intrinsic value calculation we used $3084 million for the last fiscal year's total revenue generated by Alexion Pharmaceuticals. The default revenue input number comes from 2016 income statement of Alexion Pharmaceuticals. 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 ALXN stock valuation model: a) initial revenue growth rate of 24.1% 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 4.3%, whose default value for ALXN is calculated based on our internal credit rating of Alexion Pharmaceuticals, 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 Alexion Pharmaceuticals.
    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 ALXN stock the variable cost ratio is equal to 72.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $172 million in the base year in the intrinsic value calculation for ALXN 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 Alexion Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Alexion Pharmaceuticals. 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 ALXN 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 ALXN are equal to 162.9%.

Life of production assets of 25.4 years is the average useful life of capital assets used in Alexion Pharmaceuticals 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 ALXN is equal to 20.4%. 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 - $8694 million for Alexion Pharmaceuticals - 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 223.009 million for Alexion Pharmaceuticals 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 Alexion Pharmaceuticals at the current share price and the inputted number of shares is $30.5 billion.

RELATED COMPANIES Price Int.Val. Rating
AGIO Agios Pharmace 56.22 2.21  str.sell
ALNY Alnylam Pharma 81.35 2.66  str.sell

COMPANY NEWS

▶ Call of the week: Best stocks for a dollar bear market   [Aug-11-17 01:25PM  Yahoo Finance]
▶ New Patients and Alexion Pharmaceuticals Metabolic Franchise   [Aug-10-17 09:06AM  Market Realist]
▶ Alexion Pharmaceuticals: Modest Growth Projections   [Aug-09-17 10:37AM  Market Realist]
▶ New Strong Buy Stocks for August 2nd   [Aug-02-17 09:23AM  Zacks]
▶ Alexion tops Street 2Q forecasts   [Jul-28-17 01:24AM  Associated Press]
▶ Alexion: Thank You For Your Patience?   [Jul-27-17 12:22PM  Barrons.com]
▶ Alexion cuts ties with two Cambridge biotechs in reorganization   [11:20AM  American City Business Journals]
▶ Alexion Reports Second Quarter 2017 Results   [06:30AM  Business Wire]
▶ Amgen Topples After Increased Forecast Still Lags Some Views   [Jul-25-17 05:02PM  Investor's Business Daily]
▶ Biogen Earnings Preview: Analysis   [Jul-24-17 12:07PM  Investopedia]
▶ Biotechs On A Hot Streak, And Could Be 'Cooking With Gas'   [Jul-21-17 04:14PM  Investor's Business Daily]
▶ [$$] Biotechs in Focus Ahead of Earnings   [11:15AM  Barrons.com]
▶ Biotech 2Q17: It's Mostly all Gravy   [Jul-13-17 09:46AM  Barrons.com]
▶ What Analysts Recommend for BioMarin Pharmaceuticals   [Jul-10-17 09:07AM  Market Realist]
▶ 3 Stocks With Huge Business Advantages   [Jul-09-17 08:34AM  Motley Fool]
▶ Alexion Investigation Believed to Have 'Minimal Impact'   [Jul-07-17 04:35PM  TheStreet.com]
▶ Biotech Movers: Alexion, Arena, Novavax   [09:40AM  TheStreet.com]
▶ The Market In 5 Minutes   [09:05AM  Benzinga]
▶ Alexion Pharma Stock Dives On Report It's Under Federal Scrutiny   [Jul-06-17 05:51PM  Investor's Business Daily]
▶ 3 Best-Performing Stocks in June   [Jul-03-17 09:02AM  Motley Fool]
▶ Biogen: Insiders Are Buying. Should You Be Too?   [Jun-30-17 02:30PM  Barrons.com]
▶ 2 Fastest Growing Biotech Stocks   [Jun-28-17 03:44PM  Motley Fool]
▶ 3 Top Stocks on Sale This Summer   [Jun-26-17 07:26AM  Motley Fool]
▶ Biotech Insider Just Loaded Up $234 Million Worth the Stock   [Jun-21-17 02:18PM  TheStreet.com]
▶ Amgen: In Defense of A Pipeline   [10:35AM  Barrons.com]
▶ Food & pharma in the trader blitz   [07:57AM  CNBC Videos]
▶ UPDATE: Alexion Pharma: Its CEO Really Likes Its Stock!   [Jun-20-17 01:03PM  Barrons.com]
▶ Story Stocks from Briefing.com   [11:36AM  Briefing.com]
▶ Biogen: "The Underperformance Stops Here"   [Jun-19-17 11:11AM  Barrons.com]
▶ Alexion Has a Savior Complex   [Jun-15-17 02:00PM  Bloomberg]
▶ Company News for June 15, 2017   [10:07AM  Zacks]
▶ [$$] Alexions Housecleaning Should Continue to Pay Off   [12:20AM  The Wall Street Journal]
▶ The Hot Stock: Alexion Pharmaceuticals Jumps 9.3%   [Jun-14-17 05:46PM  Barrons.com]
▶ What Happened in the Stock Market Today   [05:02PM  Motley Fool]
Stock chart of ALXN Financial statements of ALXN
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.

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