Intrinsic value of Anika Therapeutics - ANIK

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$49.68

  Intrinsic Value

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  Value-price divergence*

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*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 0.7

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  103
  105
  107
  110
  113
  117
  121
  125
  129
  134
  139
  145
  150
  157
  163
  170
  178
  186
  194
  203
  212
  222
  232
  243
  255
  267
  280
  293
  307
  322
  338
Variable operating expenses, $m
 
  51
  52
  53
  55
  57
  58
  60
  62
  65
  67
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
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
  51
  52
  53
  55
  57
  58
  60
  62
  65
  67
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
Operating income, $m
  51
  54
  55
  57
  58
  60
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
EBITDA, $m
  55
  58
  60
  61
  63
  65
  67
  69
  72
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
  113
  118
  124
  129
  135
  142
  149
  156
  163
  171
  179
  188
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Earnings before tax, $m
  51
  54
  55
  57
  58
  60
  62
  64
  67
  69
  72
  75
  78
  81
  85
  89
  92
  96
  101
  105
  110
  115
  121
  126
  132
  138
  145
  152
  159
  167
  175
Tax expense, $m
  18
  15
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
Net income, $m
  33
  40
  40
  41
  43
  44
  45
  47
  49
  50
  52
  55
  57
  59
  62
  65
  67
  70
  74
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128

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
  117
  120
  123
  126
  130
  135
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  207
  217
  226
  237
  248
  259
  272
  284
  298
  312
  327
  343
  360
  377
Adjusted assets (=assets-cash), $m
  115
  117
  120
  123
  126
  130
  135
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  207
  217
  226
  237
  248
  259
  272
  284
  298
  312
  327
  343
  360
  377
Revenue / Adjusted assets
  0.896
  0.897
  0.892
  0.894
  0.897
  0.900
  0.896
  0.899
  0.896
  0.899
  0.897
  0.901
  0.893
  0.897
  0.896
  0.895
  0.899
  0.899
  0.894
  0.898
  0.895
  0.895
  0.896
  0.893
  0.898
  0.896
  0.897
  0.896
  0.895
  0.894
  0.897
Average production assets, $m
  57
  58
  59
  61
  63
  65
  67
  69
  71
  74
  77
  80
  83
  87
  90
  94
  98
  103
  107
  112
  117
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
Working capital, $m
  161
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  103
  108
  113
  118
Total debt, $m
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
Total liabilities, $m
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Total equity, $m
  223
  100
  102
  105
  108
  111
  115
  119
  123
  127
  132
  137
  143
  149
  155
  162
  169
  177
  184
  193
  202
  211
  221
  231
  242
  254
  266
  279
  292
  306
  321
Total liabilities and equity, $m
  240
  117
  120
  123
  127
  130
  135
  140
  144
  149
  155
  161
  168
  175
  182
  190
  198
  208
  216
  227
  237
  248
  259
  271
  284
  298
  312
  327
  343
  359
  377
Debt-to-equity ratio
  0.000
  0.000
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.040
  0.040
  0.050
  0.050
  0.050
  0.060
  0.060
  0.070
  0.070
  0.080
  0.080
  0.090
  0.090
  0.090
  0.100
  0.100
  0.100
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
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
  40
  40
  41
  43
  44
  45
  47
  49
  50
  52
  55
  57
  59
  62
  65
  67
  70
  74
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
Depreciation, amort., depletion, $m
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  6
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Funds from operations, $m
  8
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  139
Change in working capital, $m
  -16
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
Cash from operations, $m
  24
  48
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
New CAPEX, $m
  -14
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from investing activities, $m
  -7
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -14
  -14
  -14
  -16
  -16
  -17
  -18
  -19
  -20
Free cash flow, $m
  17
  43
  39
  40
  41
  42
  43
  44
  45
  47
  49
  50
  52
  54
  56
  59
  61
  64
  66
  69
  72
  76
  79
  83
  86
  91
  95
  99
  104
  109
  114
Issuance/(repayment) of debt, $m
  -25
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
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
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Total cash flow (excl. dividends), $m
  -6
  44
  39
  40
  41
  42
  43
  45
  46
  48
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
  93
  97
  101
  106
  111
  117
Retained Cash Flow (-), $m
  -12
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
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
 
  167
  37
  38
  38
  39
  40
  41
  42
  43
  45
  46
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
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
 
  160
  34
  33
  31
  30
  29
  28
  26
  25
  23
  22
  20
  19
  17
  16
  14
  12
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
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
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Anika Therapeutics, Inc., together with its subsidiaries, provides therapeutic pain management solutions for patients with degenerative orthopedic diseases and traumatic conditions in the United States, Canada, Europe, and internationally. The company develops, manufactures, and commercializes therapeutic products based on its proprietary hyaluronic acid (HA) technology. Its orthobiologics products comprise ORTHOVISC, ORTHOVISC mini, MONOVISC, and CINGAL for the treatment of osteoarthritis of the knee; Hyalofast, a biodegradable support for human bone marrow mesenchymal stem cells used for cartilage regeneration and as an adjunct for microfracture surgery; Hyalonect, a woven gauze used as a graft wrap; Hyaloss used to mix blood/bone grafts to form a paste for bone regeneration; and Hyaloglide, an ACP gel used in tenolysis treatment. The company’s dermal products include wound care products that comprise Hyalomatrix and Hyalofill for treatment of complex wounds, such as burns and ulcers, and for use in connection with the regeneration of skin; and ELEVESS, an aesthetic dermatology product. Its surgical products comprise Hyalobarrier, a post-operative adhesion barrier for use in the abdomino-pelvic area; INCERT, a HA product for the prevention of spinal post-surgical adhesions; Merogel, a woven fleece nasal packing; and Merogel Injectable, a viscous hydrogel. The company’s ophthalmic products include STAARVISC-II, Optivisc, AnikaVisc, and NUVISC that are injectable HA products used as viscoelastic agents in ophthalmic surgical procedures, including cataract extraction and intraocular lens implantation. Its veterinary product comprise HYVISC, an injectable HA product used for the treatment of joint dysfunction in horses. Anika Therapeutics, Inc. was founded in 1983 and is headquartered in Bedford, Massachusetts.

FINANCIAL RATIOS  of  Anika Therapeutics (ANIK)

Valuation Ratios
P/E Ratio 22
Price to Sales 7.1
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 30.3
Price to Free Cash Flow 72.7
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 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 14.111 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 $0.7 billion.


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COMPANY NEWS

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▶ Biotech Movers: Anika Up on Strong Analyst Ratings   [May-12-17 09:50AM  TheStreet.com]
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▶ Anika posts 1Q profit   [May-03-17 06:11PM  Associated Press]
▶ Anika posts 4Q profit   [Feb-15-17 04:56PM  Associated Press]
▶ Anika Therapeutics, Inc. (ANIK) Hedge Funds Are Snapping Up   [Dec-09-16 08:56AM  at Insider Monkey]
▶ 3 Biotech Stocks to Buy in December   [Dec-02-16 09:21AM  at Motley Fool]
Stock chart of ANIK Financial statements of ANIK Annual reports of ANIK
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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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