Intrinsic value of AstraZeneca ADR - AZN

Previous Close

$34.34

  Intrinsic Value

$19.03

stock screener

  Rating & Target

sell

-45%

  Value-price divergence*

0%

Previous close

$34.34

 
Intrinsic value

$19.03

 
Up/down potential

-45%

 
Rating

sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of AZN 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 85.4

 

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, %
  -6.90
  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
  23,002
  23,462
  24,002
  24,619
  25,311
  26,078
  26,920
  27,837
  28,830
  29,899
  31,046
  32,274
  33,584
  34,978
  36,460
  38,033
  39,700
  41,464
  43,330
  45,301
  47,383
  49,579
  51,895
  54,337
  56,909
  59,619
  62,471
  65,473
  68,633
  71,957
  75,453
Variable operating expenses, $m
 
  19,521
  19,943
  20,425
  20,967
  21,567
  22,226
  22,943
  23,720
  24,556
  25,454
  25,248
  26,273
  27,364
  28,524
  29,754
  31,058
  32,438
  33,898
  35,440
  37,068
  38,787
  40,599
  42,509
  44,521
  46,641
  48,872
  51,221
  53,693
  56,293
  59,028
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
  18,100
  19,521
  19,943
  20,425
  20,967
  21,567
  22,226
  22,943
  23,720
  24,556
  25,454
  25,248
  26,273
  27,364
  28,524
  29,754
  31,058
  32,438
  33,898
  35,440
  37,068
  38,787
  40,599
  42,509
  44,521
  46,641
  48,872
  51,221
  53,693
  56,293
  59,028
Operating income, $m
  4,902
  3,941
  4,059
  4,193
  4,344
  4,511
  4,694
  4,894
  5,110
  5,343
  5,592
  7,025
  7,311
  7,614
  7,937
  8,279
  8,642
  9,026
  9,432
  9,861
  10,314
  10,793
  11,297
  11,828
  12,388
  12,978
  13,599
  14,252
  14,940
  15,664
  16,425
EBITDA, $m
  7,259
  6,867
  7,025
  7,205
  7,408
  7,633
  7,879
  8,147
  8,438
  8,751
  9,087
  9,446
  9,829
  10,238
  10,671
  11,132
  11,619
  12,136
  12,682
  13,259
  13,868
  14,511
  15,189
  15,903
  16,656
  17,449
  18,284
  19,163
  20,088
  21,061
  22,084
Interest expense (income), $m
  677
  609
  648
  693
  744
  801
  865
  934
  1,010
  1,093
  1,181
  1,276
  1,378
  1,487
  1,602
  1,725
  1,855
  1,993
  2,140
  2,294
  2,457
  2,630
  2,812
  3,004
  3,206
  3,419
  3,644
  3,880
  4,129
  4,391
  4,666
Earnings before tax, $m
  3,552
  3,332
  3,411
  3,501
  3,600
  3,710
  3,830
  3,959
  4,100
  4,250
  4,411
  5,749
  5,933
  6,128
  6,335
  6,554
  6,787
  7,033
  7,293
  7,567
  7,857
  8,163
  8,485
  8,824
  9,182
  9,559
  9,955
  10,372
  10,811
  11,273
  11,759
Tax expense, $m
  146
  900
  921
  945
  972
  1,002
  1,034
  1,069
  1,107
  1,148
  1,191
  1,552
  1,602
  1,654
  1,710
  1,770
  1,832
  1,899
  1,969
  2,043
  2,121
  2,204
  2,291
  2,383
  2,479
  2,581
  2,688
  2,801
  2,919
  3,044
  3,175
Net income, $m
  3,499
  2,433
  2,490
  2,555
  2,628
  2,708
  2,796
  2,890
  2,993
  3,103
  3,220
  4,197
  4,331
  4,473
  4,624
  4,785
  4,954
  5,134
  5,324
  5,524
  5,736
  5,959
  6,194
  6,442
  6,703
  6,978
  7,267
  7,572
  7,892
  8,229
  8,584

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,902
  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
  62,526
  57,788
  59,117
  60,637
  62,342
  64,232
  66,306
  68,564
  71,009
  73,642
  76,468
  79,492
  82,718
  86,153
  89,804
  93,678
  97,783
  102,129
  106,724
  111,580
  116,707
  122,116
  127,821
  133,835
  140,171
  146,844
  153,870
  161,265
  169,047
  177,234
  185,845
Adjusted assets (=assets-cash), $m
  56,624
  57,788
  59,117
  60,637
  62,342
  64,232
  66,306
  68,564
  71,009
  73,642
  76,468
  79,492
  82,718
  86,153
  89,804
  93,678
  97,783
  102,129
  106,724
  111,580
  116,707
  122,116
  127,821
  133,835
  140,171
  146,844
  153,870
  161,265
  169,047
  177,234
  185,845
Revenue / Adjusted assets
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
Average production assets, $m
  31,747
  32,378
  33,122
  33,974
  34,929
  35,988
  37,150
  38,415
  39,785
  41,260
  42,844
  44,538
  46,345
  48,270
  50,315
  52,486
  54,786
  57,221
  59,795
  62,516
  65,388
  68,419
  71,616
  74,985
  78,535
  82,274
  86,210
  90,353
  94,713
  99,300
  104,125
Working capital, $m
  -1,994
  -5,701
  -5,832
  -5,982
  -6,151
  -6,337
  -6,542
  -6,764
  -7,006
  -7,265
  -7,544
  -7,843
  -8,161
  -8,500
  -8,860
  -9,242
  -9,647
  -10,076
  -10,529
  -11,008
  -11,514
  -12,048
  -12,611
  -13,204
  -13,829
  -14,487
  -15,180
  -15,910
  -16,678
  -17,486
  -18,335
Total debt, $m
  16,808
  15,424
  16,489
  17,706
  19,072
  20,586
  22,247
  24,056
  26,014
  28,123
  30,387
  32,809
  35,393
  38,145
  41,069
  44,172
  47,460
  50,941
  54,622
  58,511
  62,618
  66,951
  71,521
  76,338
  81,413
  86,758
  92,385
  98,309
  104,542
  111,100
  117,998
Total liabilities, $m
  47,672
  46,288
  47,353
  48,570
  49,936
  51,450
  53,111
  54,920
  56,878
  58,987
  61,251
  63,673
  66,257
  69,009
  71,933
  75,036
  78,324
  81,805
  85,486
  89,375
  93,482
  97,815
  102,385
  107,202
  112,277
  117,622
  123,249
  129,173
  135,406
  141,964
  148,862
Total equity, $m
  14,854
  11,500
  11,764
  12,067
  12,406
  12,782
  13,195
  13,644
  14,131
  14,655
  15,217
  15,819
  16,461
  17,144
  17,871
  18,642
  19,459
  20,324
  21,238
  22,204
  23,225
  24,301
  25,436
  26,633
  27,894
  29,222
  30,620
  32,092
  33,640
  35,269
  36,983
Total liabilities and equity, $m
  62,526
  57,788
  59,117
  60,637
  62,342
  64,232
  66,306
  68,564
  71,009
  73,642
  76,468
  79,492
  82,718
  86,153
  89,804
  93,678
  97,783
  102,129
  106,724
  111,579
  116,707
  122,116
  127,821
  133,835
  140,171
  146,844
  153,869
  161,265
  169,046
  177,233
  185,845
Debt-to-equity ratio
  1.132
  1.340
  1.400
  1.470
  1.540
  1.610
  1.690
  1.760
  1.840
  1.920
  2.000
  2.070
  2.150
  2.220
  2.300
  2.370
  2.440
  2.510
  2.570
  2.640
  2.700
  2.760
  2.810
  2.870
  2.920
  2.970
  3.020
  3.060
  3.110
  3.150
  3.190
Adjusted equity ratio
  0.160
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,499
  2,433
  2,490
  2,555
  2,628
  2,708
  2,796
  2,890
  2,993
  3,103
  3,220
  4,197
  4,331
  4,473
  4,624
  4,785
  4,954
  5,134
  5,324
  5,524
  5,736
  5,959
  6,194
  6,442
  6,703
  6,978
  7,267
  7,572
  7,892
  8,229
  8,584
Depreciation, amort., depletion, $m
  2,357
  2,925
  2,966
  3,012
  3,064
  3,122
  3,185
  3,254
  3,328
  3,408
  3,494
  2,421
  2,519
  2,623
  2,735
  2,852
  2,977
  3,110
  3,250
  3,398
  3,554
  3,718
  3,892
  4,075
  4,268
  4,471
  4,685
  4,911
  5,147
  5,397
  5,659
Funds from operations, $m
  3,982
  5,358
  5,456
  5,568
  5,692
  5,830
  5,980
  6,144
  6,321
  6,511
  6,714
  6,617
  6,850
  7,097
  7,359
  7,637
  7,932
  8,244
  8,573
  8,922
  9,289
  9,677
  10,086
  10,517
  10,971
  11,449
  11,952
  12,482
  13,040
  13,626
  14,243
Change in working capital, $m
  -163
  -112
  -131
  -150
  -168
  -186
  -205
  -223
  -241
  -260
  -279
  -298
  -318
  -339
  -360
  -382
  -405
  -429
  -453
  -479
  -506
  -534
  -563
  -593
  -625
  -658
  -693
  -730
  -768
  -808
  -850
Cash from operations, $m
  4,145
  8,157
  5,587
  5,718
  5,861
  6,016
  6,185
  6,367
  6,562
  6,771
  6,993
  6,916
  7,168
  7,435
  7,719
  8,019
  8,337
  8,672
  9,027
  9,401
  9,795
  10,211
  10,649
  11,110
  11,596
  12,108
  12,646
  13,212
  13,807
  14,434
  15,092
Maintenance CAPEX, $m
  0
  -1,725
  -1,760
  -1,800
  -1,846
  -1,898
  -1,956
  -2,019
  -2,088
  -2,162
  -2,242
  -2,328
  -2,421
  -2,519
  -2,623
  -2,735
  -2,852
  -2,977
  -3,110
  -3,250
  -3,398
  -3,554
  -3,718
  -3,892
  -4,075
  -4,268
  -4,471
  -4,685
  -4,911
  -5,147
  -5,397
New CAPEX, $m
  -2,314
  -631
  -745
  -851
  -956
  -1,059
  -1,162
  -1,265
  -1,370
  -1,475
  -1,583
  -1,694
  -1,808
  -1,925
  -2,045
  -2,170
  -2,300
  -2,435
  -2,575
  -2,721
  -2,872
  -3,031
  -3,196
  -3,369
  -3,550
  -3,739
  -3,936
  -4,143
  -4,360
  -4,587
  -4,825
Cash from investing activities, $m
  -3,969
  -2,356
  -2,505
  -2,651
  -2,802
  -2,957
  -3,118
  -3,284
  -3,458
  -3,637
  -3,825
  -4,022
  -4,229
  -4,444
  -4,668
  -4,905
  -5,152
  -5,412
  -5,685
  -5,971
  -6,270
  -6,585
  -6,914
  -7,261
  -7,625
  -8,007
  -8,407
  -8,828
  -9,271
  -9,734
  -10,222
Free cash flow, $m
  176
  5,801
  3,083
  3,066
  3,059
  3,059
  3,067
  3,083
  3,105
  3,133
  3,167
  2,893
  2,940
  2,992
  3,050
  3,114
  3,184
  3,260
  3,342
  3,430
  3,525
  3,626
  3,734
  3,849
  3,971
  4,101
  4,238
  4,383
  4,537
  4,699
  4,871
Issuance/(repayment) of debt, $m
  2,172
  923
  1,065
  1,217
  1,366
  1,514
  1,661
  1,809
  1,958
  2,109
  2,264
  2,422
  2,584
  2,751
  2,924
  3,103
  3,288
  3,481
  3,681
  3,889
  4,107
  4,333
  4,570
  4,817
  5,075
  5,345
  5,628
  5,924
  6,233
  6,558
  6,898
Issuance/(repurchase) of shares, $m
  47
  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  
  2,237
  923
  1,065
  1,217
  1,366
  1,514
  1,661
  1,809
  1,958
  2,109
  2,264
  2,422
  2,584
  2,751
  2,924
  3,103
  3,288
  3,481
  3,681
  3,889
  4,107
  4,333
  4,570
  4,817
  5,075
  5,345
  5,628
  5,924
  6,233
  6,558
  6,898
Total cash flow (excl. dividends), $m
  2,434
  6,724
  4,147
  4,283
  4,425
  4,573
  4,728
  4,891
  5,062
  5,242
  5,431
  5,315
  5,524
  5,744
  5,974
  6,217
  6,473
  6,741
  7,023
  7,320
  7,632
  7,959
  8,304
  8,666
  9,046
  9,446
  9,866
  10,307
  10,770
  11,257
  11,768
Retained Cash Flow (-), $m
  3,636
  -241
  -264
  -302
  -339
  -376
  -413
  -449
  -486
  -524
  -562
  -602
  -642
  -684
  -726
  -771
  -817
  -865
  -914
  -966
  -1,020
  -1,077
  -1,135
  -1,197
  -1,261
  -1,328
  -1,398
  -1,472
  -1,549
  -1,629
  -1,714
Prev. year cash balance distribution, $m
 
  3,595
  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
 
  10,078
  3,883
  3,981
  4,085
  4,197
  4,316
  4,442
  4,576
  4,718
  4,869
  4,713
  4,882
  5,060
  5,248
  5,446
  5,656
  5,876
  6,109
  6,354
  6,611
  6,883
  7,168
  7,469
  7,785
  8,118
  8,467
  8,835
  9,222
  9,628
  10,055
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  9,544
  3,464
  3,326
  3,178
  3,020
  2,852
  2,677
  2,494
  2,307
  2,117
  1,804
  1,629
  1,456
  1,287
  1,125
  971
  827
  695
  575
  468
  375
  295
  228
  173
  128
  93
  66
  45
  30
  20
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

AstraZeneca PLC engages in the discovery, development, and commercialization of prescription medicines for the treatment of respiratory, inflammation, autoimmune, cardiovascular, metabolic, oncology, infection, neuroscience, and gastrointestinal diseases worldwide. Its marketed products comprise Accolate, Bricanyl Respules, Bricanyl Turbuhaler, Daliresp, Duaklir Genuair, Eklira Genuair/Tudorza/Bretaris, Oxis Turbuhaler, Pulmicort Turbuhaler/Pulmicort Flexhaler, Pulmicort Respules, Rhinocort, Symbicort pMDI, and Symbicort Turbuhaler for respiratory, inflammation, and autoimmunity diseases; Atacand1/Atacand HCT/Atacand Plus, Brilinta/Brilique, Crestor2, Plendil, Seloken/Toprol-XL, Tenormin3, and Zestril4 for cardiovascular disease; and Bydureon, Byetta, Farxiga/Forxiga, Kombiglyze XR, Komboglyze, Onglyza, Symlin, Xigduo, and Xigduo XR for metabolic disease. The company’s marketed products also include Arimidex, Faslodex, Iressa, Lynparza, Nolvadex, Tagrisso, and Zoladex, as well as Casodex, Cosudex for oncology disease; Fluenz/FluMist, Fluenz Tetra/FluMist Quadrivalent1, Merrem/Meronem2, Synagis3, and Zinforo4 for infection disease; Diprivan, EMLA, Movantik/Moventig, Naropin, Seroquel IR, Seroquel XR, Vimovo1, Xylocaine, and Zomig for neuroscience disease; and Losec/Prilosec and Nexium for gastrointestinal disease. It serves primary care and specialty care physicians through distributors and local representative offices. The company’s pipeline includes 146 projects, of which 125 are in the clinical phase of development. It has collaboration agreements with Celgene Corporation; Immunocore Limited; Heptares Ltd.; Foundation Medicine, Inc., French National Institute of Health and Medical Research (Inserm); and FibroGen and Astellas, as well as a research agreement with Eli Lilly. The company was formerly known as Zeneca Group PLC and changed its name to AstraZeneca PLC in April 1999. AstraZeneca PLC was founded in 1992 and is headquartered in London, the United Kingdom.

FINANCIAL RATIOS  of  AstraZeneca ADR (AZN)

Valuation Ratios
P/E Ratio 12.4
Price to Sales 1.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 10.5
Price to Free Cash Flow 23.7
Growth Rates
Sales Growth Rate -6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 97.6%
Total Debt to Equity 113.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.8%
Return On Equity 21%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 82.6%
Gross Margin - 3 Yr. Avg. 81.1%
EBITDA Margin 28.6%
EBITDA Margin - 3 Yr. Avg. 26.1%
Operating Margin 21.3%
Oper. Margin - 3 Yr. Avg. 15.3%
Pre-Tax Margin 15.4%
Pre-Tax Margin - 3 Yr. Avg. 10.9%
Net Profit Margin 15.2%
Net Profit Margin - 3 Yr. Avg. 10.4%
Effective Tax Rate 4.1%
Eff/ Tax Rate - 3 Yr. Avg. 4.3%
Payout Ratio 101.8%

AZN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AZN stock intrinsic value calculation we used $23002 million for the last fiscal year's total revenue generated by AstraZeneca ADR. The default revenue input number comes from 2016 income statement of AstraZeneca ADR. 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 AZN 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 5.6%, whose default value for AZN is calculated based on our internal credit rating of AstraZeneca ADR, 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 AstraZeneca ADR.
    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 AZN stock the variable cost ratio is equal to 83.3%.

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 AZN 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 4.2% for AstraZeneca ADR.

Corporate tax rate of 27% is the nominal tax rate for AstraZeneca ADR. 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 AZN 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 AZN are equal to 138%.

Life of production assets of 18.4 years is the average useful life of capital assets used in AstraZeneca ADR 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 AZN is equal to -24.3%. 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 - $14854 million for AstraZeneca ADR - 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 2485.87 million for AstraZeneca ADR 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 AstraZeneca ADR at the current share price and the inputted number of shares is $85.4 billion.

RELATED COMPANIES Price Int.Val. Rating
PFE Pfizer 32.16 29.51  hold
ABBV AbbVie 66.32 52.92  hold
TEVA Teva Pharmaceu 28.71 170.57  str.buy
GSK GlaxoSmithKlin 42.57 106.53  str.buy
CELG Celgene 116.74 104.52  hold
LLY Eli Lilly 78.34 91.78  hold
MRK Merck&Co 65.04 29.32  str.sell

COMPANY NEWS

▶ Performance of Mercks Diabetes Portfolio in 1Q17   [May-24-17 10:36AM  Market Realist]
▶ Novo Nordisk Diabetes Lead Unscathed Following AstraZeneca Trial   [May-23-17 04:21PM  Investor's Business Daily]
▶ Biotech And Pharma Industry And Stock News   [03:02PM  Investor's Business Daily]
▶ Build Your Investing Watch List With Stock Ratings, Buy Zones, Earnings   [May-18-17 12:43PM  Investor's Business Daily]
▶ Which Stocks Are Showing Rising Relative Strength?   [12:42PM  Investor's Business Daily]
▶ Big Pharma Stock Astrazeneca Gets Relative Strength Upgrade   [11:42AM  Investor's Business Daily]
▶ Did AstraZeneca Rival Just Launch A Potential Blockbuster Drug?   [May-17-17 05:05PM  Investor's Business Daily]
▶ Eli Lilly: Worries Ahead In Patent Fight   [12:39PM  Barrons.com]
▶ [$$] Big pharma hopes rule change will ease China sales pain   [May-16-17 05:42PM  Financial Times]
▶ AstraZeneca Has Opportunity In Lung Cancer Treatment Vs. Dow's Merck   [May-15-17 04:19PM  Investor's Business Daily]
▶ Why AstraZeneca, Globalstar, and Snap Jumped Today   [May-12-17 04:39PM  Motley Fool]
▶ Yahoo Finance Live: Market Movers - May 12th, 2017   [07:20AM  Yahoo Finance Video]
▶ Can Dow's Merck Hang On To Edge In Lung Cancer Treatment?   [May-11-17 04:34PM  Investor's Business Daily]
▶ Tesaro Gets A Jump In Ovarian Cancer As Rivalries Heat Up   [May-10-17 04:18PM  Investor's Business Daily]
▶ How Clovis Might Still Quash AstraZeneca, Tesaro In Cancer   [May-04-17 04:48PM  Investor's Business Daily]
▶ Company News for May 03, 2017   [May-03-17 10:14AM  Zacks]
▶ Boston-based Pieris adds AstraZeneca as R&D partner in $45M deal   [10:05AM  American City Business Journals]
▶ FDA OKs immune-boosting drug for advanced bladder cancer   [May-01-17 06:23PM  Associated Press]
▶ Vertex Big Winner In Biopharma Q1 As AbbVie, AstraZeneca Dip   [Apr-28-17 04:09PM  Investor's Business Daily]
▶ AstraZeneca Wallops Profit Views Despite Toppling Sales; Eyes Key Trial   [Apr-27-17 05:03PM  Investor's Business Daily]
▶ Astrazeneca beats 1Q profit forecasts   [05:00AM  Associated Press]
▶ What Analysts Recommend for AstraZeneca   [Apr-26-17 12:05PM  Market Realist]
▶ Tesaro Inc Bulls Need a Reality Check   [Apr-25-17 03:43PM  Motley Fool]
▶ Tesaros Zejula Flops as H&S Pattern Emerges   [Apr-21-17 06:52AM  Investopedia]
▶ AbbVie's PARP Inhibitor Comes Up Empty   [Apr-20-17 01:21PM  Motley Fool]
▶ Group launching website to brand region as biotech leader   [09:52AM  American City Business Journals]
▶ [$$] Circassia halts allergy programme after failed trials   [Apr-18-17 07:27AM  Financial Times]
▶ Could Dow Stock Merck Undercut AstraZeneca In Lung Cancer?   [Apr-10-17 04:25PM  Investor's Business Daily]
Stock chart of AZN Financial statements of AZN Annual reports of AZN
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.