Intrinsic value of AMAG Pharmaceuticals - AMAG

Previous Close

$19.65

  Intrinsic Value

$65.47

stock screener

  Rating & Target

str. buy

+233%

Previous close

$19.65

 
Intrinsic value

$65.47

 
Up/down potential

+233%

 
Rating

str. buy

We calculate the intrinsic value of AMAG 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  27.27
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
Revenue, $m
  532
  569
  607
  647
  688
  731
  776
  822
  871
  921
  974
  1,029
  1,087
  1,147
  1,210
  1,276
  1,345
  1,417
  1,492
  1,571
  1,653
  1,740
  1,830
  1,925
  2,025
  2,129
  2,239
  2,353
  2,474
  2,600
  2,732
Variable operating expenses, $m
 
  428
  453
  478
  505
  532
  561
  591
  622
  654
  688
  660
  697
  735
  776
  818
  862
  908
  956
  1,007
  1,060
  1,115
  1,173
  1,234
  1,298
  1,365
  1,435
  1,508
  1,585
  1,666
  1,751
Fixed operating expenses, $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
Total operating expenses, $m
  453
  428
  453
  478
  505
  532
  561
  591
  622
  654
  688
  660
  697
  735
  776
  818
  862
  908
  956
  1,007
  1,060
  1,115
  1,173
  1,234
  1,298
  1,365
  1,435
  1,508
  1,585
  1,666
  1,751
Operating income, $m
  79
  140
  154
  168
  183
  199
  215
  231
  249
  267
  286
  370
  390
  412
  435
  458
  483
  509
  536
  564
  594
  625
  657
  691
  727
  765
  804
  845
  888
  934
  981
EBITDA, $m
  179
  273
  292
  311
  331
  351
  373
  395
  419
  443
  468
  495
  523
  552
  582
  613
  646
  681
  717
  755
  795
  836
  880
  926
  974
  1,024
  1,076
  1,131
  1,189
  1,250
  1,313
Interest expense (income), $m
  62
  61
  68
  74
  82
  89
  97
  105
  113
  122
  131
  141
  151
  161
  172
  183
  195
  208
  221
  234
  248
  263
  279
  295
  312
  330
  349
  369
  390
  411
  434
Earnings before tax, $m
  9
  79
  87
  94
  102
  110
  118
  126
  136
  145
  155
  229
  240
  251
  263
  275
  288
  301
  315
  330
  345
  362
  378
  396
  415
  434
  455
  476
  499
  522
  547
Tax expense, $m
  11
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
Net income, $m
  -2
  58
  63
  69
  74
  80
  86
  92
  99
  106
  113
  167
  175
  183
  192
  201
  210
  220
  230
  241
  252
  264
  276
  289
  303
  317
  332
  348
  364
  381
  399

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  579
  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
  2,478
  2,031
  2,167
  2,309
  2,457
  2,610
  2,770
  2,936
  3,110
  3,291
  3,479
  3,676
  3,882
  4,097
  4,322
  4,557
  4,802
  5,059
  5,328
  5,610
  5,905
  6,214
  6,537
  6,876
  7,232
  7,604
  7,995
  8,404
  8,834
  9,284
  9,757
Adjusted assets (=assets-cash), $m
  1,899
  2,031
  2,167
  2,309
  2,457
  2,610
  2,770
  2,936
  3,110
  3,291
  3,479
  3,676
  3,882
  4,097
  4,322
  4,557
  4,802
  5,059
  5,328
  5,610
  5,905
  6,214
  6,537
  6,876
  7,232
  7,604
  7,995
  8,404
  8,834
  9,284
  9,757
Revenue / Adjusted assets
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Average production assets, $m
  1,172
  1,252
  1,336
  1,424
  1,515
  1,609
  1,708
  1,810
  1,917
  2,029
  2,145
  2,267
  2,394
  2,526
  2,665
  2,809
  2,961
  3,119
  3,285
  3,459
  3,641
  3,831
  4,031
  4,240
  4,459
  4,689
  4,929
  5,182
  5,447
  5,724
  6,016
Working capital, $m
  406
  -163
  -174
  -185
  -197
  -209
  -222
  -235
  -249
  -264
  -279
  -294
  -311
  -328
  -346
  -365
  -385
  -405
  -427
  -449
  -473
  -498
  -524
  -551
  -579
  -609
  -640
  -673
  -707
  -744
  -781
Total debt, $m
  987
  1,072
  1,181
  1,295
  1,413
  1,536
  1,664
  1,798
  1,937
  2,082
  2,233
  2,392
  2,557
  2,729
  2,909
  3,097
  3,294
  3,501
  3,716
  3,942
  4,179
  4,426
  4,686
  4,958
  5,243
  5,542
  5,855
  6,183
  6,528
  6,889
  7,268
Total liabilities, $m
  1,544
  1,629
  1,738
  1,852
  1,970
  2,093
  2,221
  2,355
  2,494
  2,639
  2,790
  2,949
  3,114
  3,286
  3,466
  3,654
  3,851
  4,058
  4,273
  4,499
  4,736
  4,983
  5,243
  5,515
  5,800
  6,099
  6,412
  6,740
  7,085
  7,446
  7,825
Total equity, $m
  934
  402
  429
  457
  486
  517
  548
  581
  616
  652
  689
  728
  769
  811
  856
  902
  951
  1,002
  1,055
  1,111
  1,169
  1,230
  1,294
  1,362
  1,432
  1,506
  1,583
  1,664
  1,749
  1,838
  1,932
Total liabilities and equity, $m
  2,478
  2,031
  2,167
  2,309
  2,456
  2,610
  2,769
  2,936
  3,110
  3,291
  3,479
  3,677
  3,883
  4,097
  4,322
  4,556
  4,802
  5,060
  5,328
  5,610
  5,905
  6,213
  6,537
  6,877
  7,232
  7,605
  7,995
  8,404
  8,834
  9,284
  9,757
Debt-to-equity ratio
  1.057
  2.670
  2.750
  2.830
  2.910
  2.970
  3.030
  3.090
  3.150
  3.200
  3.240
  3.290
  3.330
  3.360
  3.400
  3.430
  3.460
  3.490
  3.520
  3.550
  3.570
  3.600
  3.620
  3.640
  3.660
  3.680
  3.700
  3.720
  3.730
  3.750
  3.760
Adjusted equity ratio
  0.187
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  58
  63
  69
  74
  80
  86
  92
  99
  106
  113
  167
  175
  183
  192
  201
  210
  220
  230
  241
  252
  264
  276
  289
  303
  317
  332
  348
  364
  381
  399
Depreciation, amort., depletion, $m
  100
  133
  138
  143
  148
  153
  158
  164
  170
  176
  182
  125
  132
  140
  147
  155
  164
  172
  182
  191
  201
  212
  223
  234
  246
  259
  272
  286
  301
  316
  332
Funds from operations, $m
  312
  191
  201
  211
  222
  233
  244
  256
  269
  282
  295
  292
  307
  323
  339
  356
  374
  392
  412
  432
  453
  476
  499
  523
  549
  576
  604
  634
  665
  698
  732
Change in working capital, $m
  66
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
Cash from operations, $m
  246
  202
  212
  222
  234
  245
  257
  270
  283
  296
  311
  308
  324
  340
  357
  375
  393
  413
  433
  455
  477
  500
  525
  551
  578
  606
  636
  667
  699
  734
  770
Maintenance CAPEX, $m
  0
  -65
  -69
  -74
  -79
  -84
  -89
  -94
  -100
  -106
  -112
  -119
  -125
  -132
  -140
  -147
  -155
  -164
  -172
  -182
  -191
  -201
  -212
  -223
  -234
  -246
  -259
  -272
  -286
  -301
  -316
New CAPEX, $m
  -5
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -116
  -121
  -127
  -133
  -139
  -145
  -151
  -158
  -166
  -174
  -182
  -190
  -200
  -209
  -219
  -230
  -241
  -253
  -265
  -278
  -291
Cash from investing activities, $m
  -73
  -146
  -153
  -161
  -170
  -179
  -188
  -197
  -207
  -218
  -228
  -240
  -252
  -265
  -279
  -292
  -306
  -322
  -338
  -356
  -373
  -391
  -412
  -432
  -453
  -476
  -500
  -525
  -551
  -579
  -607
Free cash flow, $m
  173
  56
  59
  61
  64
  67
  70
  73
  76
  79
  82
  68
  72
  75
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  124
  130
  136
  142
  148
  155
  162
Issuance/(repayment) of debt, $m
  -18
  106
  109
  114
  118
  123
  128
  133
  139
  145
  151
  158
  165
  172
  180
  188
  197
  206
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
  379
Issuance/(repurchase) of shares, $m
  -16
  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 from financing (excl. dividends), $m  
  -128
  106
  109
  114
  118
  123
  128
  133
  139
  145
  151
  158
  165
  172
  180
  188
  197
  206
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
  379
Total cash flow (excl. dividends), $m
  46
  162
  168
  175
  182
  190
  198
  206
  215
  224
  233
  226
  237
  248
  259
  271
  284
  297
  311
  325
  340
  356
  373
  391
  409
  429
  449
  470
  493
  516
  541
Retained Cash Flow (-), $m
  -2
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
Prev. year cash balance distribution, $m
 
  558
  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
 
  694
  141
  147
  153
  159
  166
  173
  180
  188
  196
  187
  196
  205
  215
  225
  235
  246
  257
  269
  282
  295
  309
  324
  339
  355
  372
  389
  408
  427
  447
Discount rate, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
 
  662
  128
  126
  123
  120
  116
  112
  107
  102
  96
  82
  76
  70
  64
  58
  51
  45
  39
  34
  29
  24
  20
  16
  12
  10
  7
  6
  4
  3
  2
Current shareholders' claim on cash, %
  100
  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
  100.0

AMAG Pharmaceuticals, Inc. is a pharmaceutical company. The Company's segment is the manufacture, development and commercialization of products and services for use in treating various conditions, with a focus on maternal health, anemia management and cancer supportive care. Its offerings focus on maternal health, anemia management and cancer supportive care, including its product, Makena (hydroxyprogesterone caproate injection); services related to the collection, processing and storage of umbilical cord blood stem cell and cord tissue units operated through Cord Blood Registry (CBR); its product, Feraheme (ferumoxytol), for intravenous (IV) use, and MuGard Mucoadhesive Oral Wound Rinse. It is engaged in the development of Digoxin immune fab, a polyclonal antibody for the treatment of severe preeclampsia in pregnant women. Makena is a drug indicated to reduce the risk of preterm birth in women pregnant with a single baby having a history of singleton spontaneous preterm birth.

FINANCIAL RATIOS  of  AMAG Pharmaceuticals (AMAG)

Valuation Ratios
P/E Ratio -337.4
Price to Sales 1.3
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow 2.8
Growth Rates
Sales Growth Rate 27.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 400%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio 28
Current Ratio 0
LT Debt to Equity 103.4%
Total Debt to Equity 105.7%
Interest Coverage 1
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity -0.2%
Return On Equity - 3 Yr. Avg. 15.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 78%
Gross Margin - 3 Yr. Avg. 80.3%
EBITDA Margin 32.1%
EBITDA Margin - 3 Yr. Avg. 19.8%
Operating Margin 14.8%
Oper. Margin - 3 Yr. Avg. 11.8%
Pre-Tax Margin 1.7%
Pre-Tax Margin - 3 Yr. Avg. -0.8%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. 39.1%
Effective Tax Rate 122.2%
Eff/ Tax Rate - 3 Yr. Avg. 346.6%
Payout Ratio 0%

AMAG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMAG stock intrinsic value calculation we used $532 million for the last fiscal year's total revenue generated by AMAG Pharmaceuticals. The default revenue input number comes from 2016 income statement of AMAG 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 AMAG stock valuation model: a) initial revenue growth rate of 6.9% 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 4.8%, whose default value for AMAG is calculated based on our internal credit rating of AMAG 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 AMAG 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 AMAG stock the variable cost ratio is equal to 76.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AMAG 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 6.3% for AMAG Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for AMAG 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 AMAG 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 AMAG are equal to 220.2%.

Life of production assets of 18.1 years is the average useful life of capital assets used in AMAG 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 AMAG is equal to -28.6%. 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 - $934 million for AMAG 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 35.821 million for AMAG 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 AMAG Pharmaceuticals at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

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▶ AMAG Pharmaceuticals reports 3Q loss   [10:37AM  Associated Press]
▶ Should You Buy AMAG Pharmaceuticals Inc (AMAG)?   [Sep-22-17 03:51PM  Simply Wall St.]
▶ AMAG Pharmaceuticals reports 2Q loss   [01:27AM  Associated Press]
▶ Could An FDA Delay Snag This Biotech's Pre-Term Birth Drug?   [Jun-26-17 04:17PM  Investor's Business Daily]
▶ Biotech Movers: Luminex, Exelixis, AMAG Pharmaceuticals   [May-02-17 09:19AM  TheStreet.com]
▶ AMAG Pharmaceuticals reports 1Q loss   [07:55AM  Associated Press]
Financial statements of AMAG
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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