Intrinsic value of Anika Therapeutics - ANIK

Previous Close

$59.75

  Intrinsic Value

$73.48

stock screener

  Rating & Target

buy

+23%

  Value-price divergence*

+14%

Previous close

$59.75

 
Intrinsic value

$73.48

 
Up/down potential

+23%

 
Rating

buy

 
Value-price divergence*

+14%

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

We calculate the intrinsic value of ANIK 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 0.9

 

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, %
  10.75
  22.20
  20.48
  18.93
  17.54
  16.28
  15.16
  14.14
  13.23
  12.40
  11.66
  11.00
  10.40
  9.86
  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
  5.81
Revenue, $m
  103
  126
  152
  180
  212
  247
  284
  324
  367
  412
  460
  511
  564
  620
  678
  739
  802
  867
  935
  1,006
  1,080
  1,157
  1,236
  1,319
  1,405
  1,495
  1,588
  1,685
  1,786
  1,891
  2,001
Variable operating expenses, $m
 
  61
  73
  87
  102
  119
  136
  156
  176
  198
  221
  244
  270
  296
  324
  353
  383
  415
  447
  481
  517
  553
  591
  631
  672
  715
  759
  806
  854
  904
  957
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
  53
  61
  73
  87
  102
  119
  136
  156
  176
  198
  221
  244
  270
  296
  324
  353
  383
  415
  447
  481
  517
  553
  591
  631
  672
  715
  759
  806
  854
  904
  957
Operating income, $m
  51
  65
  78
  93
  110
  128
  147
  168
  191
  214
  240
  267
  294
  323
  354
  385
  418
  453
  488
  525
  564
  604
  645
  688
  733
  780
  829
  879
  932
  987
  1,044
EBITDA, $m
  55
  70
  84
  100
  118
  137
  158
  180
  204
  229
  256
  284
  314
  345
  377
  411
  446
  483
  520
  560
  601
  644
  688
  734
  782
  832
  883
  937
  994
  1,052
  1,113
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Earnings before tax, $m
  51
  65
  78
  93
  109
  127
  147
  167
  189
  213
  238
  265
  292
  321
  351
  382
  415
  448
  484
  520
  558
  598
  639
  682
  726
  772
  820
  871
  923
  977
  1,034
Tax expense, $m
  18
  18
  21
  25
  30
  34
  40
  45
  51
  57
  64
  71
  79
  87
  95
  103
  112
  121
  131
  140
  151
  161
  173
  184
  196
  209
  222
  235
  249
  264
  279
Net income, $m
  33
  47
  57
  68
  80
  93
  107
  122
  138
  155
  174
  193
  213
  234
  256
  279
  303
  327
  353
  380
  408
  436
  466
  498
  530
  564
  599
  636
  674
  713
  755

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  125
  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
  240
  140
  169
  201
  237
  275
  317
  362
  409
  460
  514
  570
  630
  692
  757
  824
  895
  968
  1,044
  1,123
  1,205
  1,291
  1,380
  1,472
  1,568
  1,668
  1,772
  1,880
  1,993
  2,111
  2,234
Adjusted assets (=assets-cash), $m
  115
  140
  169
  201
  237
  275
  317
  362
  409
  460
  514
  570
  630
  692
  757
  824
  895
  968
  1,044
  1,123
  1,205
  1,291
  1,380
  1,472
  1,568
  1,668
  1,772
  1,880
  1,993
  2,111
  2,234
Revenue / Adjusted assets
  0.896
  0.900
  0.899
  0.896
  0.895
  0.898
  0.896
  0.895
  0.897
  0.896
  0.895
  0.896
  0.895
  0.896
  0.896
  0.897
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
  0.896
Average production assets, $m
  57
  70
  84
  100
  117
  136
  157
  179
  203
  228
  255
  283
  312
  343
  375
  408
  443
  480
  517
  557
  597
  640
  684
  729
  777
  827
  878
  932
  988
  1,046
  1,107
Working capital, $m
  161
  44
  53
  63
  74
  86
  99
  113
  128
  144
  161
  179
  197
  217
  237
  258
  281
  304
  327
  352
  378
  405
  433
  462
  492
  523
  556
  590
  625
  662
  700
Total debt, $m
  0
  4
  8
  13
  18
  24
  30
  37
  44
  51
  59
  67
  76
  85
  95
  105
  115
  126
  138
  149
  161
  174
  187
  201
  215
  230
  245
  261
  278
  295
  314
Total liabilities, $m
  17
  21
  25
  30
  35
  41
  47
  54
  61
  68
  76
  84
  93
  102
  112
  122
  132
  143
  155
  166
  178
  191
  204
  218
  232
  247
  262
  278
  295
  312
  331
Total equity, $m
  223
  120
  144
  171
  202
  234
  270
  308
  349
  392
  438
  486
  537
  589
  645
  702
  762
  825
  890
  957
  1,027
  1,100
  1,176
  1,254
  1,336
  1,421
  1,510
  1,602
  1,698
  1,798
  1,903
Total liabilities and equity, $m
  240
  141
  169
  201
  237
  275
  317
  362
  410
  460
  514
  570
  630
  691
  757
  824
  894
  968
  1,045
  1,123
  1,205
  1,291
  1,380
  1,472
  1,568
  1,668
  1,772
  1,880
  1,993
  2,110
  2,234
Debt-to-equity ratio
  0.000
  0.030
  0.060
  0.070
  0.090
  0.100
  0.110
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
Adjusted equity ratio
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  47
  57
  68
  80
  93
  107
  122
  138
  155
  174
  193
  213
  234
  256
  279
  303
  327
  353
  380
  408
  436
  466
  498
  530
  564
  599
  636
  674
  713
  755
Depreciation, amort., depletion, $m
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  17
  18
  20
  21
  23
  26
  28
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
Funds from operations, $m
  8
  52
  63
  75
  88
  102
  118
  134
  152
  170
  190
  211
  233
  256
  279
  304
  330
  357
  385
  415
  445
  476
  509
  543
  579
  616
  654
  694
  735
  779
  824
Change in working capital, $m
  -16
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
Cash from operations, $m
  24
  44
  54
  65
  77
  90
  104
  120
  137
  154
  173
  193
  214
  236
  259
  283
  308
  334
  362
  390
  419
  450
  481
  514
  549
  584
  621
  660
  700
  742
  785
Maintenance CAPEX, $m
  0
  -4
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
New CAPEX, $m
  -14
  -13
  -14
  -16
  -17
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
Cash from investing activities, $m
  -7
  -17
  -18
  -21
  -23
  -26
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -51
  -53
  -56
  -61
  -64
  -68
  -71
  -76
  -79
  -84
  -89
  -94
  -99
  -104
  -109
  -114
  -120
  -126
Free cash flow, $m
  17
  28
  35
  44
  53
  64
  75
  88
  102
  117
  133
  149
  167
  186
  206
  226
  248
  270
  294
  318
  344
  370
  397
  426
  455
  486
  518
  551
  586
  622
  659
Issuance/(repayment) of debt, $m
  -25
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
Issuance/(repurchase) of shares, $m
  1
  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  
  -23
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
Total cash flow (excl. dividends), $m
  -6
  32
  40
  48
  58
  69
  81
  95
  109
  124
  140
  158
  176
  195
  215
  236
  258
  281
  305
  330
  356
  383
  410
  439
  470
  501
  533
  567
  603
  639
  677
Retained Cash Flow (-), $m
  -12
  -22
  -25
  -27
  -30
  -33
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -104
Prev. year cash balance distribution, $m
 
  125
  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
 
  135
  15
  21
  28
  37
  46
  56
  68
  81
  95
  109
  125
  142
  160
  179
  198
  219
  240
  263
  286
  310
  335
  361
  388
  416
  445
  475
  506
  539
  573
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
 
  130
  14
  18
  23
  28
  33
  38
  43
  46
  50
  52
  53
  54
  54
  52
  50
  48
  44
  40
  36
  32
  28
  24
  20
  16
  13
  10
  8
  6
  4
Current shareholders' claim on cash, %
  100
  100.0
  100.0
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  100.0
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  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
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  100.0

Anika Therapeutics, Inc. is an orthopedic medicines company. The Company is engaged in developing, manufacturing and commercializing products based on its hyaluronic acid (HA) technology. The Company's orthopedic medicine portfolio includes ORTHOVISC, MONOVISC, and CINGAL, which alleviate pain and restore joint function by replenishing depleted HA, and HYALOFAST, a solid HA-based scaffold to aid cartilage repair and regeneration. The Company's therapeutic offerings consist of products in the areas, including Orthobiologics, which includes viscosupplementation and regenerative orthopedic products; Dermal, which includes wound care products; Surgical, which includes products used to prevent post-surgical adhesions, and Other, which includes the Company's ophthalmic and veterinary products. The Company also offers products made from HA based on two other technologies: HYAFF, which is a solid form of HA, and ACP gel, an autocross-linked polymer of HA.

FINANCIAL RATIOS  of  Anika Therapeutics (ANIK)

Valuation Ratios
P/E Ratio 26.5
Price to Sales 8.5
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 36.4
Price to Free Cash Flow 87.4
Growth Rates
Sales Growth Rate 10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 55.6%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.9%
Ret/ On Assets - 3 Yr. Avg. 16.7%
Return On Total Capital 15.2%
Ret/ On T. Cap. - 3 Yr. Avg. 18.4%
Return On Equity 15.2%
Return On Equity - 3 Yr. Avg. 18.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 76.7%
Gross Margin - 3 Yr. Avg. 78.1%
EBITDA Margin 53.4%
EBITDA Margin - 3 Yr. Avg. 57.5%
Operating Margin 48.5%
Oper. Margin - 3 Yr. Avg. 52.9%
Pre-Tax Margin 49.5%
Pre-Tax Margin - 3 Yr. Avg. 53.2%
Net Profit Margin 32%
Net Profit Margin - 3 Yr. Avg. 33.7%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 0%

ANIK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANIK stock intrinsic value calculation we used $103 million for the last fiscal year's total revenue generated by Anika Therapeutics. The default revenue input number comes from 2016 income statement of Anika Therapeutics. 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 ANIK stock valuation model: a) initial revenue growth rate of 22.2% 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 ANIK is calculated based on our internal credit rating of Anika Therapeutics, 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 Anika Therapeutics.
    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 ANIK stock the variable cost ratio is equal to 48.5%.

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 ANIK 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 Anika Therapeutics.

Corporate tax rate of 27% is the nominal tax rate for Anika Therapeutics. 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 ANIK 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 ANIK are equal to 55.3%.

Life of production assets of 16 years is the average useful life of capital assets used in Anika Therapeutics 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 ANIK is equal to 35%. 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 - $223 million for Anika Therapeutics - 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 14.675 million for Anika Therapeutics 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 Anika Therapeutics at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ Anika Announces Appointment of Joseph Darling as President   [Jul-27-17 08:05AM  Business Wire]
▶ Anika posts 2Q profit   [Jul-26-17 11:12PM  Associated Press]
▶ Anika pays former medical chief $350K to thwart possible lawsuit   [12:40PM  American City Business Journals]
▶ Here Comes a Big Breakout For Alibaba   [Jun-20-17 06:30AM  TheStreet.com]
▶ Biotech Movers: Anika Up on Strong Analyst Ratings   [May-12-17 09:50AM  TheStreet.com]
▶ 6 Stocks Young Warren Buffett Would Buy in 2017   [May-05-17 05:08PM  GuruFocus.com]
▶ Anika posts 1Q profit   [May-03-17 06:11PM  Associated Press]
▶ Anika posts 4Q profit   [Feb-15-17 04:56PM  Associated Press]
Financial statements of ANIK
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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