Intrinsic value of BioMarin Pharmaceutical - BMRN

Previous Close

$80.98

  Intrinsic Value

$3.63

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-77%

Previous close

$80.98

 
Intrinsic value

$3.63

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-77%

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

We calculate the intrinsic value of BMRN 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 14.3

 

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, %
  25.51
  28.30
  25.97
  23.87
  21.99
  20.29
  18.76
  17.38
  16.14
  15.03
  14.03
  13.12
  12.31
  11.58
  10.92
  10.33
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.29
  7.07
  6.86
  6.67
  6.51
  6.35
  6.22
  6.10
Revenue, $m
  1,117
  1,433
  1,805
  2,236
  2,728
  3,281
  3,897
  4,574
  5,313
  6,111
  6,968
  7,883
  8,854
  9,879
  10,958
  12,090
  13,274
  14,511
  15,801
  17,143
  18,540
  19,992
  21,501
  23,070
  24,700
  26,394
  28,155
  29,987
  31,892
  33,876
  35,941
Variable operating expenses, $m
 
  1,605
  2,017
  2,494
  3,038
  3,650
  4,331
  5,080
  5,898
  6,781
  7,729
  8,721
  9,795
  10,930
  12,123
  13,376
  14,686
  16,055
  17,481
  18,967
  20,512
  22,119
  23,788
  25,524
  27,327
  29,201
  31,150
  33,176
  35,284
  37,479
  39,764
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
  1,920
  1,605
  2,017
  2,494
  3,038
  3,650
  4,331
  5,080
  5,898
  6,781
  7,729
  8,721
  9,795
  10,930
  12,123
  13,376
  14,686
  16,055
  17,481
  18,967
  20,512
  22,119
  23,788
  25,524
  27,327
  29,201
  31,150
  33,176
  35,284
  37,479
  39,764
Operating income, $m
  -803
  -172
  -212
  -258
  -310
  -369
  -434
  -506
  -585
  -670
  -761
  -838
  -942
  -1,051
  -1,166
  -1,286
  -1,412
  -1,543
  -1,681
  -1,823
  -1,972
  -2,126
  -2,287
  -2,454
  -2,627
  -2,807
  -2,995
  -3,189
  -3,392
  -3,603
  -3,823
EBITDA, $m
  -706
  -44
  -55
  -69
  -84
  -101
  -120
  -140
  -163
  -188
  -214
  -242
  -272
  -303
  -336
  -371
  -407
  -445
  -485
  -526
  -569
  -613
  -660
  -708
  -758
  -810
  -864
  -920
  -979
  -1,039
  -1,103
Interest expense (income), $m
  9
  23
  35
  50
  67
  86
  107
  131
  157
  186
  217
  250
  285
  323
  363
  405
  448
  494
  542
  592
  644
  698
  755
  813
  874
  937
  1,003
  1,071
  1,142
  1,216
  1,293
Earnings before tax, $m
  -831
  -195
  -247
  -307
  -376
  -454
  -541
  -637
  -742
  -855
  -978
  -1,088
  -1,227
  -1,374
  -1,528
  -1,690
  -1,860
  -2,038
  -2,223
  -2,416
  -2,616
  -2,825
  -3,042
  -3,267
  -3,501
  -3,744
  -3,997
  -4,260
  -4,534
  -4,819
  -5,116
Tax expense, $m
  -201
  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
Net income, $m
  -630
  -195
  -247
  -307
  -376
  -454
  -541
  -637
  -742
  -855
  -978
  -1,088
  -1,227
  -1,374
  -1,528
  -1,690
  -1,860
  -2,038
  -2,223
  -2,416
  -2,616
  -2,825
  -3,042
  -3,267
  -3,501
  -3,744
  -3,997
  -4,260
  -4,534
  -4,819
  -5,116

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  790
  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
  4,024
  4,154
  5,233
  6,482
  7,907
  9,511
  11,295
  13,259
  15,399
  17,714
  20,198
  22,849
  25,662
  28,634
  31,762
  35,043
  38,476
  42,061
  45,799
  49,690
  53,739
  57,948
  62,323
  66,869
  71,593
  76,504
  81,608
  86,917
  92,441
  98,190
  104,177
Adjusted assets (=assets-cash), $m
  3,234
  4,154
  5,233
  6,482
  7,907
  9,511
  11,295
  13,259
  15,399
  17,714
  20,198
  22,849
  25,662
  28,634
  31,762
  35,043
  38,476
  42,061
  45,799
  49,690
  53,739
  57,948
  62,323
  66,869
  71,593
  76,504
  81,608
  86,917
  92,441
  98,190
  104,177
Revenue / Adjusted assets
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
Average production assets, $m
  1,370
  1,757
  2,213
  2,742
  3,344
  4,023
  4,778
  5,608
  6,513
  7,492
  8,543
  9,665
  10,854
  12,111
  13,434
  14,822
  16,274
  17,791
  19,371
  21,018
  22,730
  24,510
  26,361
  28,284
  30,282
  32,359
  34,518
  36,763
  39,100
  41,532
  44,064
Working capital, $m
  983
  275
  347
  429
  524
  630
  748
  878
  1,020
  1,173
  1,338
  1,514
  1,700
  1,897
  2,104
  2,321
  2,549
  2,786
  3,034
  3,291
  3,560
  3,838
  4,128
  4,429
  4,742
  5,068
  5,406
  5,757
  6,123
  6,504
  6,901
Total debt, $m
  683
  1,012
  1,424
  1,901
  2,445
  3,058
  3,740
  4,490
  5,308
  6,192
  7,141
  8,153
  9,228
  10,363
  11,558
  12,811
  14,123
  15,492
  16,920
  18,407
  19,953
  21,561
  23,232
  24,969
  26,774
  28,649
  30,599
  32,627
  34,737
  36,934
  39,221
Total liabilities, $m
  1,257
  1,587
  1,999
  2,476
  3,020
  3,633
  4,315
  5,065
  5,883
  6,767
  7,716
  8,728
  9,803
  10,938
  12,133
  13,386
  14,698
  16,067
  17,495
  18,982
  20,528
  22,136
  23,807
  25,544
  27,349
  29,224
  31,174
  33,202
  35,312
  37,509
  39,796
Total equity, $m
  2,766
  2,567
  3,234
  4,006
  4,887
  5,878
  6,980
  8,194
  9,517
  10,947
  12,483
  14,121
  15,859
  17,696
  19,629
  21,657
  23,778
  25,994
  28,304
  30,709
  33,211
  35,812
  38,516
  41,325
  44,245
  47,279
  50,434
  53,715
  57,128
  60,682
  64,382
Total liabilities and equity, $m
  4,023
  4,154
  5,233
  6,482
  7,907
  9,511
  11,295
  13,259
  15,400
  17,714
  20,199
  22,849
  25,662
  28,634
  31,762
  35,043
  38,476
  42,061
  45,799
  49,691
  53,739
  57,948
  62,323
  66,869
  71,594
  76,503
  81,608
  86,917
  92,440
  98,191
  104,178
Debt-to-equity ratio
  0.247
  0.390
  0.440
  0.470
  0.500
  0.520
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.580
  0.590
  0.590
  0.590
  0.590
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
Adjusted equity ratio
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -630
  -195
  -247
  -307
  -376
  -454
  -541
  -637
  -742
  -855
  -978
  -1,088
  -1,227
  -1,374
  -1,528
  -1,690
  -1,860
  -2,038
  -2,223
  -2,416
  -2,616
  -2,825
  -3,042
  -3,267
  -3,501
  -3,744
  -3,997
  -4,260
  -4,534
  -4,819
  -5,116
Depreciation, amort., depletion, $m
  97
  128
  156
  189
  226
  268
  315
  366
  422
  482
  547
  597
  670
  748
  829
  915
  1,005
  1,098
  1,196
  1,297
  1,403
  1,513
  1,627
  1,746
  1,869
  1,997
  2,131
  2,269
  2,414
  2,564
  2,720
Funds from operations, $m
  -388
  -67
  -91
  -118
  -150
  -186
  -227
  -271
  -320
  -373
  -431
  -492
  -557
  -626
  -699
  -776
  -856
  -940
  -1,027
  -1,118
  -1,213
  -1,312
  -1,414
  -1,521
  -1,632
  -1,747
  -1,867
  -1,991
  -2,121
  -2,255
  -2,396
Change in working capital, $m
  -160
  61
  71
  83
  94
  106
  118
  130
  142
  153
  165
  176
  186
  197
  207
  217
  227
  237
  248
  258
  268
  279
  290
  301
  313
  325
  338
  352
  366
  381
  397
Cash from operations, $m
  -228
  -128
  -162
  -201
  -245
  -293
  -345
  -401
  -462
  -527
  -595
  -667
  -743
  -823
  -906
  -993
  -1,083
  -1,177
  -1,275
  -1,376
  -1,481
  -1,591
  -1,704
  -1,822
  -1,945
  -2,072
  -2,205
  -2,343
  -2,486
  -2,636
  -2,792
Maintenance CAPEX, $m
  0
  -85
  -108
  -137
  -169
  -206
  -248
  -295
  -346
  -402
  -462
  -527
  -597
  -670
  -748
  -829
  -915
  -1,005
  -1,098
  -1,196
  -1,297
  -1,403
  -1,513
  -1,627
  -1,746
  -1,869
  -1,997
  -2,131
  -2,269
  -2,414
  -2,564
New CAPEX, $m
  -148
  -387
  -456
  -528
  -603
  -678
  -755
  -830
  -905
  -979
  -1,051
  -1,121
  -1,190
  -1,257
  -1,323
  -1,388
  -1,452
  -1,516
  -1,581
  -1,646
  -1,712
  -1,780
  -1,850
  -1,923
  -1,998
  -2,077
  -2,159
  -2,246
  -2,336
  -2,432
  -2,532
Cash from investing activities, $m
  -484
  -472
  -564
  -665
  -772
  -884
  -1,003
  -1,125
  -1,251
  -1,381
  -1,513
  -1,648
  -1,787
  -1,927
  -2,071
  -2,217
  -2,367
  -2,521
  -2,679
  -2,842
  -3,009
  -3,183
  -3,363
  -3,550
  -3,744
  -3,946
  -4,156
  -4,377
  -4,605
  -4,846
  -5,096
Free cash flow, $m
  -712
  -599
  -727
  -866
  -1,017
  -1,177
  -1,348
  -1,527
  -1,714
  -1,908
  -2,109
  -2,316
  -2,530
  -2,750
  -2,977
  -3,210
  -3,450
  -3,698
  -3,954
  -4,218
  -4,491
  -4,774
  -5,068
  -5,372
  -5,689
  -6,018
  -6,361
  -6,719
  -7,092
  -7,481
  -7,888
Issuance/(repayment) of debt, $m
  0
  351
  412
  477
  544
  613
  682
  750
  818
  884
  949
  1,013
  1,075
  1,135
  1,195
  1,253
  1,312
  1,369
  1,428
  1,487
  1,547
  1,608
  1,671
  1,737
  1,805
  1,876
  1,950
  2,028
  2,110
  2,196
  2,287
Issuance/(repurchase) of shares, $m
  787
  764
  914
  1,079
  1,257
  1,446
  1,644
  1,851
  2,065
  2,286
  2,513
  2,727
  2,966
  3,210
  3,461
  3,718
  3,982
  4,253
  4,533
  4,821
  5,118
  5,426
  5,745
  6,076
  6,421
  6,779
  7,152
  7,541
  7,948
  8,372
  8,816
Cash from financing (excl. dividends), $m  
  727
  1,115
  1,326
  1,556
  1,801
  2,059
  2,326
  2,601
  2,883
  3,170
  3,462
  3,740
  4,041
  4,345
  4,656
  4,971
  5,294
  5,622
  5,961
  6,308
  6,665
  7,034
  7,416
  7,813
  8,226
  8,655
  9,102
  9,569
  10,058
  10,568
  11,103
Total cash flow (excl. dividends), $m
  11
  516
  599
  690
  785
  881
  978
  1,074
  1,169
  1,262
  1,354
  1,423
  1,510
  1,596
  1,679
  1,762
  1,843
  1,925
  2,007
  2,089
  2,174
  2,260
  2,349
  2,441
  2,536
  2,636
  2,741
  2,850
  2,966
  3,087
  3,214
Retained Cash Flow (-), $m
  -365
  -764
  -914
  -1,079
  -1,257
  -1,446
  -1,644
  -1,851
  -2,065
  -2,286
  -2,513
  -2,727
  -2,966
  -3,210
  -3,461
  -3,718
  -3,982
  -4,253
  -4,533
  -4,821
  -5,118
  -5,426
  -5,745
  -6,076
  -6,421
  -6,779
  -7,152
  -7,541
  -7,948
  -8,372
  -8,816
Prev. year cash balance distribution, $m
 
  768
  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
 
  519
  -315
  -389
  -472
  -565
  -666
  -777
  -896
  -1,023
  -1,159
  -1,303
  -1,455
  -1,615
  -1,782
  -1,957
  -2,139
  -2,329
  -2,526
  -2,731
  -2,945
  -3,166
  -3,396
  -3,636
  -3,884
  -4,143
  -4,411
  -4,691
  -4,982
  -5,285
  -5,601
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
 
  498
  -288
  -339
  -389
  -438
  -484
  -525
  -560
  -588
  -608
  -619
  -621
  -614
  -598
  -574
  -543
  -507
  -465
  -421
  -374
  -327
  -282
  -238
  -198
  -161
  -129
  -101
  -77
  -58
  -42
Current shareholders' claim on cash, %
  100
  93.1
  87.1
  81.9
  77.2
  73.0
  69.3
  65.9
  62.8
  60.1
  57.5
  55.2
  53.0
  51.0
  49.2
  47.5
  45.8
  44.3
  42.9
  41.5
  40.2
  39.0
  37.8
  36.7
  35.6
  34.6
  33.6
  32.7
  31.8
  30.9
  30.0

BioMarin Pharmaceutical Inc. develops and commercializes pharmaceuticals for serious diseases and medical conditions in the United States, Europe, Latin America, and internationally. Its commercial products include Vimizim, an enzyme replacement therapy for the treatment of MPS IV A, a lysosomal storage disorder; Naglazyme, a recombinant form of N-acetylgalactosamine 4-sulfatase for patients with mucopolysaccharidosis VI; Kuvan, a proprietary synthetic oral form of 6R-BH4 used to treat patients with phenylketonuria (PKU), an inherited metabolic disease; Aldurazyme used for the treatment of patients with mucopolysaccharidosis I, a genetic disease; and Firdapse, a form of 3,4-diaminopyridine used for the treatment of Lambert Myasthenic Syndrome, an autoimmune disease. The company also conducts clinical trials on several investigational product candidates for the treatment of various diseases, including Kyndrisa, an exon-51 skipping compound for the treatment of Duchenne muscular dystrophy (DMD); pegvaliase, an enzyme substitution therapy for the treatment of PKU; reveglucosidase alfa, an enzyme replacement therapy for Pompe disease; vosoritide, a peptide therapeutic for the treatment of achondroplasia; BMN 044, BMN 045, and BMN 053 for DMD treatment; cerliponase alfa for the treatment of late infantile neuronal ceroid lipofuscinosis; and BMN 270, an AAV VIII vector and Factor VIII gene therapy drug development candidate for the treatment of hemophilia A. In addition, it develops preclinical product candidates for genetic and other metabolic diseases, such as alpha-N-acetyglucosaminidase. The company serves specialty pharmacies and end-users, such as hospitals and foreign government agencies; and distributors and pharmaceutical wholesalers. BioMarin Pharmaceutical Inc. has a collaboration agreement with Genzyme Corporation. The company was founded in 1996 and is headquartered in San Rafael, California.

FINANCIAL RATIOS  of  BioMarin Pharmaceutical (BMRN)

Valuation Ratios
P/E Ratio -22.2
Price to Sales 12.5
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow -61.3
Price to Free Cash Flow -37.2
Growth Rates
Sales Growth Rate 25.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.1%
Cap. Spend. - 3 Yr. Gr. Rate 17.9%
Financial Strength
Quick Ratio 36
Current Ratio 0.1
LT Debt to Equity 23.9%
Total Debt to Equity 24.7%
Interest Coverage -91
Management Effectiveness
Return On Assets -16.1%
Ret/ On Assets - 3 Yr. Avg. -8.9%
Return On Total Capital -19.3%
Ret/ On T. Cap. - 3 Yr. Avg. -10.8%
Return On Equity -24.4%
Return On Equity - 3 Yr. Avg. -14.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 81.2%
Gross Margin - 3 Yr. Avg. 82.6%
EBITDA Margin -64.9%
EBITDA Margin - 3 Yr. Avg. -28.5%
Operating Margin -71.9%
Oper. Margin - 3 Yr. Avg. -32.3%
Pre-Tax Margin -74.4%
Pre-Tax Margin - 3 Yr. Avg. -36.2%
Net Profit Margin -56.4%
Net Profit Margin - 3 Yr. Avg. -31.2%
Effective Tax Rate 24.2%
Eff/ Tax Rate - 3 Yr. Avg. 2%
Payout Ratio 0%

BMRN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BMRN stock intrinsic value calculation we used $1117 million for the last fiscal year's total revenue generated by BioMarin Pharmaceutical. The default revenue input number comes from 2016 income statement of BioMarin Pharmaceutical. 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 BMRN stock valuation model: a) initial revenue growth rate of 28.3% 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 BMRN is calculated based on our internal credit rating of BioMarin Pharmaceutical, 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 BioMarin Pharmaceutical.
    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 BMRN stock the variable cost ratio is equal to 112.4%.

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 BMRN 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 BioMarin Pharmaceutical.

Corporate tax rate of 27% is the nominal tax rate for BioMarin Pharmaceutical. 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 BMRN 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 BMRN are equal to 122.6%.

Life of production assets of 16.2 years is the average useful life of capital assets used in BioMarin Pharmaceutical 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 BMRN is equal to 19.2%. 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 - $2766 million for BioMarin Pharmaceutical - 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 176.953 million for BioMarin Pharmaceutical 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 BioMarin Pharmaceutical at the current share price and the inputted number of shares is $14.3 billion.

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COMPANY NEWS

▶ 20 Undervalued, Sustainable Stocks   [06:00AM  Morningstar]
▶ What Weighed On Biotechs Last Week?   [Aug-08-17 10:17AM  Barrons.com]
▶ BioMarin reports 2Q loss   [Aug-02-17 10:02PM  Associated Press]
▶ Sarepta Rockets On Consensus-Crushing Sales, Narrowing Losses   [04:22PM  Investor's Business Daily]
▶ Sarepta skips over a Duchenne patent battle with $35M settlement   [01:45PM  American City Business Journals]
▶ BioMarin snags cash as Sarepta skips Duchenne patent battle   [01:45PM  American City Business Journals]
▶ Biotech 2Q17: It's Mostly all Gravy   [Jul-13-17 09:46AM  Barrons.com]
▶ Could This Biotech Win In Hemophilia With 'One And Done' Drug?   [Jul-11-17 04:43PM  Investor's Business Daily]
▶ What Analysts Recommend for BioMarin Pharmaceuticals   [Jul-10-17 09:07AM  Market Realist]
▶ BioMarin (BMRN) in Focus: Stock Moves 7% Higher   [Jun-22-17 08:37AM  Zacks]
▶ BioMarin to Attend Upcoming Investor Conference   [May-31-17 06:00AM  PR Newswire]
▶ Why Sangamo Therapeutics Inc. Jumped Higher Today   [May-12-17 04:20PM  Motley Fool]
▶ BioMarin Pharmaceutical Inc. Moves Toward Profitability   [May-09-17 01:40PM  Motley Fool]
▶ BioMarin: Is Profitability On The Horizon?   [May-08-17 02:57PM  Barrons.com]
▶ These Biotechs Are Grabbing Bullish Views In Wake Of Earnings   [May-05-17 04:27PM  Investor's Business Daily]
▶ BioMarin reports 1Q loss   [May-04-17 04:46PM  Associated Press]
▶ BioMarin to Attend Two Upcoming Investor Conferences   [May-02-17 08:30AM  PR Newswire]
▶ The Hot Stock: Alexion Pharmaceuticals Climbs 3.3%   [Apr-13-17 04:18PM  Barrons.com]
▶ 3 Stocks We'd Buy and Hold for the Next 20 Years   [Apr-06-17 08:24AM  Motley Fool]
Stock chart of BMRN Financial statements of BMRN
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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