Intrinsic value of Alexion Pharmaceuticals - ALXN

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$126.07

  Intrinsic Value

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  Value-price divergence*

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$126.07

 
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*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 28.1

 

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
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  3,084
  3,655
  4,281
  4,964
  5,700
  6,490
  7,332
  8,225
  9,167
  10,158
  11,197
  12,284
  13,419
  14,601
  15,832
  17,113
  18,444
  19,828
  21,266
  22,760
  24,313
  25,927
  27,607
  29,354
  31,173
  33,067
  35,041
  37,099
  39,245
  41,485
  43,823
Variable operating expenses, $m
 
  2,571
  2,926
  3,311
  3,728
  4,175
  4,651
  5,156
  5,689
  6,250
  6,838
  6,949
  7,591
  8,259
  8,956
  9,680
  10,433
  11,216
  12,029
  12,875
  13,753
  14,666
  15,616
  16,605
  17,634
  18,705
  19,822
  20,986
  22,200
  23,467
  24,789
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
  2,747
  3,107
  3,496
  3,918
  4,370
  4,850
  5,360
  5,899
  6,465
  7,058
  7,175
  7,822
  8,496
  9,199
  9,929
  10,688
  11,478
  12,297
  13,150
  14,035
  14,955
  15,912
  16,909
  17,945
  19,024
  20,149
  21,321
  22,543
  23,819
  25,150
Operating income, $m
  667
  907
  1,175
  1,467
  1,782
  2,121
  2,481
  2,864
  3,268
  3,693
  4,139
  5,110
  5,597
  6,105
  6,633
  7,183
  7,755
  8,350
  8,968
  9,610
  10,278
  10,972
  11,694
  12,446
  13,228
  14,043
  14,892
  15,778
  16,702
  17,666
  18,673
EBITDA, $m
  1,063
  1,645
  1,953
  2,289
  2,651
  3,040
  3,455
  3,895
  4,360
  4,849
  5,361
  5,897
  6,457
  7,041
  7,649
  8,281
  8,938
  9,622
  10,332
  11,070
  11,837
  12,635
  13,465
  14,328
  15,227
  16,164
  17,140
  18,157
  19,219
  20,326
  21,483
Interest expense (income), $m
  80
  101
  129
  161
  194
  231
  270
  312
  357
  404
  453
  505
  559
  615
  674
  736
  799
  866
  935
  1,006
  1,080
  1,158
  1,238
  1,322
  1,409
  1,499
  1,594
  1,692
  1,794
  1,901
  2,013
Earnings before tax, $m
  576
  806
  1,046
  1,306
  1,588
  1,889
  2,211
  2,552
  2,911
  3,290
  3,686
  4,605
  5,038
  5,489
  5,959
  6,448
  6,956
  7,484
  8,033
  8,604
  9,197
  9,814
  10,456
  11,124
  11,819
  12,544
  13,299
  14,086
  14,907
  15,765
  16,660
Tax expense, $m
  177
  218
  282
  353
  429
  510
  597
  689
  786
  888
  995
  1,243
  1,360
  1,482
  1,609
  1,741
  1,878
  2,021
  2,169
  2,323
  2,483
  2,650
  2,823
  3,003
  3,191
  3,387
  3,591
  3,803
  4,025
  4,256
  4,498
Net income, $m
  399
  589
  763
  954
  1,159
  1,379
  1,614
  1,863
  2,125
  2,401
  2,691
  3,361
  3,678
  4,007
  4,350
  4,707
  5,078
  5,464
  5,864
  6,281
  6,714
  7,164
  7,633
  8,120
  8,628
  9,157
  9,708
  10,283
  10,882
  11,508
  12,162

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
  14,165
  16,594
  19,238
  22,094
  25,155
  28,418
  31,878
  35,530
  39,372
  43,400
  47,612
  52,010
  56,594
  61,365
  66,329
  71,489
  76,852
  82,424
  88,216
  94,235
  100,494
  107,003
  113,776
  120,826
  128,168
  135,819
  143,794
  152,113
  160,793
  169,855
Adjusted assets (=assets-cash), $m
  11,960
  14,165
  16,594
  19,238
  22,094
  25,155
  28,418
  31,878
  35,530
  39,372
  43,400
  47,612
  52,010
  56,594
  61,365
  66,329
  71,489
  76,852
  82,424
  88,216
  94,235
  100,494
  107,003
  113,776
  120,826
  128,168
  135,819
  143,794
  152,113
  160,793
  169,855
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
  5,953
  6,974
  8,086
  9,286
  10,572
  11,944
  13,398
  14,933
  16,547
  18,240
  20,011
  21,859
  23,785
  25,791
  27,877
  30,045
  32,299
  34,642
  37,076
  39,605
  42,236
  44,971
  47,818
  50,781
  53,867
  57,082
  60,434
  63,930
  67,579
  71,387
Working capital, $m
  1,755
  746
  873
  1,013
  1,163
  1,324
  1,496
  1,678
  1,870
  2,072
  2,284
  2,506
  2,737
  2,979
  3,230
  3,491
  3,763
  4,045
  4,338
  4,643
  4,960
  5,289
  5,632
  5,988
  6,359
  6,746
  7,148
  7,568
  8,006
  8,463
  8,940
Total debt, $m
  3,055
  3,695
  4,586
  5,557
  6,604
  7,728
  8,926
  10,195
  11,536
  12,945
  14,424
  15,970
  17,584
  19,266
  21,017
  22,839
  24,732
  26,701
  28,746
  30,871
  33,080
  35,377
  37,766
  40,252
  42,839
  45,534
  48,341
  51,269
  54,321
  57,507
  60,833
Total liabilities, $m
  4,559
  5,199
  6,090
  7,061
  8,108
  9,232
  10,430
  11,699
  13,040
  14,449
  15,928
  17,474
  19,088
  20,770
  22,521
  24,343
  26,236
  28,205
  30,250
  32,375
  34,584
  36,881
  39,270
  41,756
  44,343
  47,038
  49,845
  52,773
  55,825
  59,011
  62,337
Total equity, $m
  8,694
  8,966
  10,504
  12,178
  13,985
  15,923
  17,989
  20,179
  22,491
  24,922
  27,472
  30,139
  32,922
  35,824
  38,844
  41,986
  45,252
  48,647
  52,175
  55,841
  59,651
  63,613
  67,733
  72,020
  76,483
  81,130
  85,973
  91,022
  96,287
  101,782
  107,518
Total liabilities and equity, $m
  13,253
  14,165
  16,594
  19,239
  22,093
  25,155
  28,419
  31,878
  35,531
  39,371
  43,400
  47,613
  52,010
  56,594
  61,365
  66,329
  71,488
  76,852
  82,425
  88,216
  94,235
  100,494
  107,003
  113,776
  120,826
  128,168
  135,818
  143,795
  152,112
  160,793
  169,855
Debt-to-equity ratio
  0.351
  0.410
  0.440
  0.460
  0.470
  0.490
  0.500
  0.510
  0.510
  0.520
  0.530
  0.530
  0.530
  0.540
  0.540
  0.540
  0.550
  0.550
  0.550
  0.550
  0.550
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  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
  589
  763
  954
  1,159
  1,379
  1,614
  1,863
  2,125
  2,401
  2,691
  3,361
  3,678
  4,007
  4,350
  4,707
  5,078
  5,464
  5,864
  6,281
  6,714
  7,164
  7,633
  8,120
  8,628
  9,157
  9,708
  10,283
  10,882
  11,508
  12,162
Depreciation, amort., depletion, $m
  396
  738
  778
  822
  869
  920
  974
  1,031
  1,092
  1,155
  1,222
  788
  861
  936
  1,015
  1,098
  1,183
  1,272
  1,364
  1,460
  1,559
  1,663
  1,771
  1,883
  1,999
  2,121
  2,247
  2,379
  2,517
  2,661
  2,811
Funds from operations, $m
  950
  1,327
  1,542
  1,776
  2,028
  2,299
  2,588
  2,894
  3,217
  3,557
  3,913
  4,149
  4,538
  4,944
  5,365
  5,804
  6,261
  6,735
  7,228
  7,741
  8,273
  8,827
  9,403
  10,003
  10,627
  11,278
  11,955
  12,662
  13,399
  14,169
  14,972
Change in working capital, $m
  -136
  116
  128
  139
  150
  161
  172
  182
  192
  202
  212
  222
  231
  241
  251
  261
  272
  282
  293
  305
  317
  329
  343
  356
  371
  386
  403
  420
  438
  457
  477
Cash from operations, $m
  1,086
  1,526
  1,414
  1,636
  1,878
  2,138
  2,416
  2,712
  3,025
  3,354
  3,701
  3,928
  4,307
  4,702
  5,114
  5,543
  5,989
  6,453
  6,935
  7,436
  7,957
  8,498
  9,061
  9,647
  10,256
  10,891
  11,553
  12,242
  12,962
  13,712
  14,495
Maintenance CAPEX, $m
  0
  -198
  -234
  -275
  -318
  -366
  -416
  -470
  -527
  -588
  -651
  -718
  -788
  -861
  -936
  -1,015
  -1,098
  -1,183
  -1,272
  -1,364
  -1,460
  -1,559
  -1,663
  -1,771
  -1,883
  -1,999
  -2,121
  -2,247
  -2,379
  -2,517
  -2,661
New CAPEX, $m
  -333
  -930
  -1,021
  -1,111
  -1,200
  -1,287
  -1,371
  -1,454
  -1,535
  -1,614
  -1,693
  -1,771
  -1,848
  -1,926
  -2,005
  -2,086
  -2,169
  -2,254
  -2,342
  -2,434
  -2,530
  -2,630
  -2,736
  -2,846
  -2,963
  -3,086
  -3,215
  -3,352
  -3,496
  -3,648
  -3,809
Cash from investing activities, $m
  -287
  -1,128
  -1,255
  -1,386
  -1,518
  -1,653
  -1,787
  -1,924
  -2,062
  -2,202
  -2,344
  -2,489
  -2,636
  -2,787
  -2,941
  -3,101
  -3,267
  -3,437
  -3,614
  -3,798
  -3,990
  -4,189
  -4,399
  -4,617
  -4,846
  -5,085
  -5,336
  -5,599
  -5,875
  -6,165
  -6,470
Free cash flow, $m
  799
  398
  158
  251
  360
  486
  628
  787
  962
  1,152
  1,356
  1,439
  1,671
  1,915
  2,172
  2,442
  2,723
  3,016
  3,321
  3,638
  3,967
  4,308
  4,662
  5,030
  5,411
  5,806
  6,217
  6,643
  7,086
  7,547
  8,026
Issuance/(repayment) of debt, $m
  -375
  807
  892
  970
  1,048
  1,124
  1,198
  1,270
  1,340
  1,410
  1,478
  1,546
  1,614
  1,682
  1,751
  1,822
  1,894
  1,968
  2,045
  2,125
  2,209
  2,297
  2,389
  2,486
  2,587
  2,695
  2,808
  2,927
  3,053
  3,186
  3,326
Issuance/(repurchase) of shares, $m
  -393
  0
  488
  453
  400
  329
  240
  133
  9
  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  
  -836
  807
  1,380
  1,423
  1,448
  1,453
  1,438
  1,403
  1,349
  1,410
  1,478
  1,546
  1,614
  1,682
  1,751
  1,822
  1,894
  1,968
  2,045
  2,125
  2,209
  2,297
  2,389
  2,486
  2,587
  2,695
  2,808
  2,927
  3,053
  3,186
  3,326
Total cash flow (excl. dividends), $m
  -44
  1,205
  1,050
  1,221
  1,408
  1,609
  1,826
  2,057
  2,303
  2,562
  2,835
  2,985
  3,285
  3,597
  3,924
  4,263
  4,617
  4,984
  5,366
  5,763
  6,176
  6,605
  7,051
  7,515
  7,998
  8,501
  9,024
  9,570
  10,139
  10,732
  11,352
Retained Cash Flow (-), $m
  -435
  -1,398
  -1,538
  -1,674
  -1,807
  -1,938
  -2,066
  -2,190
  -2,312
  -2,432
  -2,550
  -2,667
  -2,784
  -2,901
  -3,020
  -3,142
  -3,266
  -3,395
  -3,528
  -3,666
  -3,810
  -3,962
  -4,120
  -4,287
  -4,463
  -4,648
  -4,843
  -5,049
  -5,266
  -5,495
  -5,736
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
 
  932
  0
  0
  0
  0
  0
  0
  0
  130
  285
  318
  501
  696
  903
  1,121
  1,350
  1,590
  1,839
  2,097
  2,366
  2,644
  2,931
  3,228
  3,535
  3,853
  4,182
  4,522
  4,873
  5,238
  5,616
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
 
  894
  0
  0
  0
  0
  0
  0
  0
  75
  149
  151
  214
  265
  303
  329
  343
  346
  339
  323
  301
  273
  243
  212
  180
  150
  122
  97
  75
  57
  42
Current shareholders' claim on cash, %
  100
  100.0
  98.3
  97.1
  96.1
  95.4
  94.9
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7

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 70.8
Price to Sales 9.2
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 26
Price to Free Cash Flow 37.5
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 18.5% 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 $28.1 billion.


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COMPANY NEWS

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▶ [$$] Alexions Housecleaning Should Continue to Pay Off   [12:20AM  The Wall Street Journal]
▶ The Hot Stock: Alexion Pharmaceuticals Jumps 9.3%   [Jun-14-17 05:46PM  Barrons.com]
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▶ Biogen CFO Bolts to Alexion   [Jun-13-17 06:05PM  TheStreet.com]
▶ Biogen exodus continues as CFO set to join Alexion   [05:05PM  American City Business Journals]
▶ [$$] Alexion: A High Risk but Very High Reward Stock   [Jun-07-17 05:52AM  Barrons.com]
▶ Alexion stock rises 1.4% after naming new executives   [Jun-02-17 10:33AM  MarketWatch]
▶ Alexion Announces Additions to Executive Leadership Team   [Jun-01-17 04:10PM  Business Wire]
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▶ Alexion Pharmaceuticals: Time to Buy?   [09:52AM  Barrons.com]
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▶ Alexion Shares Drop Amid Executive Changes   [May-23-17 05:50PM  TheStreet.com]
▶ Biotech And Pharma Industry And Stock News   [05:11PM  Investor's Business Daily]
▶ Alexion At Nearly 4-Year Low After Announcing Exits Of 4 Execs   [04:24PM  Investor's Business Daily]
▶ [$$] Alexion's Shakeup Continues as Four Executives Exit   [01:43PM  The Wall Street Journal]
▶ What To Make Of the Alexion Shake-up   [01:17PM  Investopedia]
▶ Alexion: Look Out Below!   [11:53AM  Barrons.com]
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Stock chart of ALXN Financial statements of ALXN Annual reports 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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