Intrinsic value of Bristol-Myers Squibb - BMY

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$56.64

  Intrinsic Value

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  Value-price divergence*

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$56.64

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

We calculate the intrinsic value of BMY 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 95.0

 

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, %
  17.31
  22.30
  20.57
  19.01
  17.61
  16.35
  15.22
  14.19
  13.27
  12.45
  11.70
  11.03
  10.43
  9.89
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
Revenue, $m
  19,427
  23,759
  28,646
  34,093
  40,097
  46,654
  53,752
  61,382
  69,530
  78,184
  87,334
  96,968
  107,081
  117,667
  128,725
  140,256
  152,264
  164,759
  177,750
  191,253
  205,285
  219,867
  235,023
  250,778
  267,162
  284,207
  301,947
  320,419
  339,663
  359,722
  380,639
Variable operating expenses, $m
 
  21,563
  25,857
  30,642
  35,918
  41,678
  47,915
  54,618
  61,777
  69,381
  77,420
  85,198
  94,083
  103,384
  113,099
  123,230
  133,781
  144,759
  156,173
  168,037
  180,366
  193,178
  206,494
  220,336
  234,731
  249,707
  265,294
  281,524
  298,432
  316,056
  334,434
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
  13,435
  21,563
  25,857
  30,642
  35,918
  41,678
  47,915
  54,618
  61,777
  69,381
  77,420
  85,198
  94,083
  103,384
  113,099
  123,230
  133,781
  144,759
  156,173
  168,037
  180,366
  193,178
  206,494
  220,336
  234,731
  249,707
  265,294
  281,524
  298,432
  316,056
  334,434
Operating income, $m
  5,992
  2,197
  2,790
  3,451
  4,180
  4,976
  5,837
  6,764
  7,753
  8,803
  9,914
  11,771
  12,998
  14,283
  15,626
  17,025
  18,483
  20,000
  21,577
  23,216
  24,919
  26,689
  28,529
  30,442
  32,430
  34,500
  36,653
  38,895
  41,231
  43,666
  46,205
EBITDA, $m
  6,374
  3,133
  3,777
  4,495
  5,287
  6,152
  7,088
  8,094
  9,168
  10,309
  11,515
  12,786
  14,119
  15,515
  16,973
  18,493
  20,077
  21,724
  23,437
  25,218
  27,068
  28,991
  30,989
  33,066
  35,227
  37,474
  39,813
  42,249
  44,787
  47,431
  50,189
Interest expense (income), $m
  191
  200
  330
  476
  638
  817
  1,013
  1,224
  1,452
  1,695
  1,953
  2,226
  2,513
  2,815
  3,131
  3,460
  3,804
  4,162
  4,535
  4,922
  5,325
  5,744
  6,179
  6,631
  7,100
  7,589
  8,097
  8,626
  9,177
  9,751
  10,350
Earnings before tax, $m
  5,915
  1,997
  2,460
  2,975
  3,542
  4,159
  4,825
  5,539
  6,301
  7,108
  7,961
  9,545
  10,485
  11,469
  12,495
  13,565
  14,679
  15,838
  17,042
  18,294
  19,594
  20,946
  22,351
  23,811
  25,330
  26,910
  28,556
  30,269
  32,054
  33,915
  35,856
Tax expense, $m
  1,408
  539
  664
  803
  956
  1,123
  1,303
  1,496
  1,701
  1,919
  2,149
  2,577
  2,831
  3,097
  3,374
  3,663
  3,963
  4,276
  4,601
  4,939
  5,290
  5,655
  6,035
  6,429
  6,839
  7,266
  7,710
  8,173
  8,655
  9,157
  9,681
Net income, $m
  4,457
  1,457
  1,796
  2,172
  2,586
  3,036
  3,522
  4,044
  4,600
  5,189
  5,811
  6,968
  7,654
  8,372
  9,122
  9,903
  10,716
  11,561
  12,441
  13,354
  14,304
  15,290
  16,316
  17,382
  18,491
  19,645
  20,846
  22,096
  23,399
  24,758
  26,175

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,350
  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
  33,707
  33,464
  40,347
  48,018
  56,475
  65,709
  75,707
  86,453
  97,929
  110,119
  123,005
  136,575
  150,819
  165,728
  181,303
  197,543
  214,457
  232,054
  250,352
  269,371
  289,134
  309,672
  331,018
  353,208
  376,284
  400,291
  425,277
  451,295
  478,399
  506,651
  536,112
Adjusted assets (=assets-cash), $m
  27,357
  33,464
  40,347
  48,018
  56,475
  65,709
  75,707
  86,453
  97,929
  110,119
  123,005
  136,575
  150,819
  165,728
  181,303
  197,543
  214,457
  232,054
  250,352
  269,371
  289,134
  309,672
  331,018
  353,208
  376,284
  400,291
  425,277
  451,295
  478,399
  506,651
  536,112
Revenue / Adjusted assets
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
Average production assets, $m
  6,098
  7,460
  8,995
  10,705
  12,591
  14,649
  16,878
  19,274
  21,832
  24,550
  27,423
  30,448
  33,623
  36,948
  40,420
  44,040
  47,811
  51,734
  55,814
  60,053
  64,460
  69,038
  73,797
  78,744
  83,889
  89,241
  94,811
  100,612
  106,654
  112,953
  119,521
Working capital, $m
  4,863
  -594
  -716
  -852
  -1,002
  -1,166
  -1,344
  -1,535
  -1,738
  -1,955
  -2,183
  -2,424
  -2,677
  -2,942
  -3,218
  -3,506
  -3,807
  -4,119
  -4,444
  -4,781
  -5,132
  -5,497
  -5,876
  -6,269
  -6,679
  -7,105
  -7,549
  -8,010
  -8,492
  -8,993
  -9,516
Total debt, $m
  6,708
  9,424
  13,588
  18,229
  23,346
  28,932
  34,981
  41,482
  48,425
  55,800
  63,596
  71,806
  80,423
  89,444
  98,866
  108,692
  118,924
  129,571
  140,641
  152,147
  164,104
  176,530
  189,444
  202,869
  216,830
  231,354
  246,471
  262,211
  278,610
  295,702
  313,525
Total liabilities, $m
  17,530
  20,246
  24,410
  29,051
  34,168
  39,754
  45,803
  52,304
  59,247
  66,622
  74,418
  82,628
  91,245
  100,266
  109,688
  119,514
  129,746
  140,393
  151,463
  162,969
  174,926
  187,352
  200,266
  213,691
  227,652
  242,176
  257,293
  273,033
  289,432
  306,524
  324,347
Total equity, $m
  16,177
  13,218
  15,937
  18,967
  22,308
  25,955
  29,904
  34,149
  38,682
  43,497
  48,587
  53,947
  59,573
  65,463
  71,615
  78,030
  84,710
  91,662
  98,889
  106,401
  114,208
  122,321
  130,752
  139,517
  148,632
  158,115
  167,984
  178,261
  188,968
  200,127
  211,764
Total liabilities and equity, $m
  33,707
  33,464
  40,347
  48,018
  56,476
  65,709
  75,707
  86,453
  97,929
  110,119
  123,005
  136,575
  150,818
  165,729
  181,303
  197,544
  214,456
  232,055
  250,352
  269,370
  289,134
  309,673
  331,018
  353,208
  376,284
  400,291
  425,277
  451,294
  478,400
  506,651
  536,111
Debt-to-equity ratio
  0.415
  0.710
  0.850
  0.960
  1.050
  1.110
  1.170
  1.210
  1.250
  1.280
  1.310
  1.330
  1.350
  1.370
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.440
  1.450
  1.450
  1.460
  1.460
  1.470
  1.470
  1.470
  1.480
  1.480
Adjusted equity ratio
  0.359
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,457
  1,457
  1,796
  2,172
  2,586
  3,036
  3,522
  4,044
  4,600
  5,189
  5,811
  6,968
  7,654
  8,372
  9,122
  9,903
  10,716
  11,561
  12,441
  13,354
  14,304
  15,290
  16,316
  17,382
  18,491
  19,645
  20,846
  22,096
  23,399
  24,758
  26,175
Depreciation, amort., depletion, $m
  382
  936
  987
  1,044
  1,107
  1,176
  1,250
  1,330
  1,415
  1,506
  1,602
  1,015
  1,121
  1,232
  1,347
  1,468
  1,594
  1,724
  1,860
  2,002
  2,149
  2,301
  2,460
  2,625
  2,796
  2,975
  3,160
  3,354
  3,555
  3,765
  3,984
Funds from operations, $m
  303
  2,394
  2,783
  3,216
  3,693
  4,212
  4,772
  5,374
  6,015
  6,695
  7,413
  7,983
  8,775
  9,604
  10,469
  11,371
  12,309
  13,286
  14,301
  15,356
  16,452
  17,592
  18,776
  20,007
  21,287
  22,619
  24,006
  25,450
  26,955
  28,523
  30,159
Change in working capital, $m
  -2,547
  -108
  -122
  -136
  -150
  -164
  -177
  -191
  -204
  -216
  -229
  -241
  -253
  -265
  -276
  -288
  -300
  -312
  -325
  -338
  -351
  -365
  -379
  -394
  -410
  -426
  -444
  -462
  -481
  -501
  -523
Cash from operations, $m
  2,850
  2,769
  2,905
  3,353
  3,843
  4,376
  4,950
  5,564
  6,219
  6,911
  7,642
  8,224
  9,028
  9,868
  10,745
  11,659
  12,610
  13,598
  14,626
  15,694
  16,803
  17,956
  19,155
  20,401
  21,697
  23,045
  24,449
  25,912
  27,436
  29,024
  30,682
Maintenance CAPEX, $m
  0
  -203
  -249
  -300
  -357
  -420
  -488
  -563
  -642
  -728
  -818
  -914
  -1,015
  -1,121
  -1,232
  -1,347
  -1,468
  -1,594
  -1,724
  -1,860
  -2,002
  -2,149
  -2,301
  -2,460
  -2,625
  -2,796
  -2,975
  -3,160
  -3,354
  -3,555
  -3,765
New CAPEX, $m
  -1,215
  -1,362
  -1,535
  -1,710
  -1,885
  -2,059
  -2,229
  -2,396
  -2,559
  -2,717
  -2,873
  -3,025
  -3,175
  -3,324
  -3,472
  -3,621
  -3,771
  -3,923
  -4,079
  -4,240
  -4,406
  -4,579
  -4,759
  -4,947
  -5,145
  -5,352
  -5,570
  -5,800
  -6,043
  -6,298
  -6,568
Cash from investing activities, $m
  1,480
  -1,565
  -1,784
  -2,010
  -2,242
  -2,479
  -2,717
  -2,959
  -3,201
  -3,445
  -3,691
  -3,939
  -4,190
  -4,445
  -4,704
  -4,968
  -5,239
  -5,517
  -5,803
  -6,100
  -6,408
  -6,728
  -7,060
  -7,407
  -7,770
  -8,148
  -8,545
  -8,960
  -9,397
  -9,853
  -10,333
Free cash flow, $m
  4,330
  1,203
  1,122
  1,343
  1,601
  1,897
  2,232
  2,606
  3,018
  3,466
  3,950
  4,284
  4,837
  5,424
  6,042
  6,691
  7,371
  8,081
  8,822
  9,593
  10,395
  11,229
  12,095
  12,994
  13,927
  14,897
  15,904
  16,951
  18,039
  19,171
  20,349
Issuance/(repayment) of debt, $m
  110
  3,708
  4,165
  4,641
  5,116
  5,587
  6,049
  6,501
  6,943
  7,375
  7,796
  8,210
  8,617
  9,021
  9,422
  9,826
  10,233
  10,647
  11,070
  11,506
  11,957
  12,425
  12,914
  13,425
  13,961
  14,524
  15,117
  15,741
  16,398
  17,092
  17,824
Issuance/(repurchase) of shares, $m
  -50
  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  
  102
  3,708
  4,165
  4,641
  5,116
  5,587
  6,049
  6,501
  6,943
  7,375
  7,796
  8,210
  8,617
  9,021
  9,422
  9,826
  10,233
  10,647
  11,070
  11,506
  11,957
  12,425
  12,914
  13,425
  13,961
  14,524
  15,117
  15,741
  16,398
  17,092
  17,824
Total cash flow (excl. dividends), $m
  4,399
  4,911
  5,287
  5,984
  6,717
  7,484
  8,281
  9,107
  9,961
  10,841
  11,747
  12,494
  13,455
  14,444
  15,464
  16,516
  17,604
  18,728
  19,892
  21,099
  22,352
  23,654
  25,009
  26,419
  27,888
  29,421
  31,021
  32,692
  34,438
  36,263
  38,172
Retained Cash Flow (-), $m
  -1,911
  -2,399
  -2,719
  -3,030
  -3,340
  -3,647
  -3,949
  -4,245
  -4,533
  -4,815
  -5,090
  -5,360
  -5,626
  -5,889
  -6,152
  -6,415
  -6,681
  -6,951
  -7,228
  -7,512
  -7,807
  -8,113
  -8,431
  -8,765
  -9,115
  -9,483
  -9,869
  -10,277
  -10,706
  -11,159
  -11,637
Prev. year cash balance distribution, $m
 
  5,358
  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
 
  7,870
  2,568
  2,953
  3,377
  3,836
  4,332
  4,863
  5,428
  6,026
  6,657
  7,134
  7,829
  8,555
  9,312
  10,101
  10,923
  11,777
  12,665
  13,587
  14,546
  15,542
  16,577
  17,654
  18,773
  19,939
  21,151
  22,415
  23,731
  25,104
  26,535
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
 
  7,545
  2,351
  2,570
  2,780
  2,974
  3,144
  3,285
  3,392
  3,461
  3,490
  3,388
  3,341
  3,253
  3,126
  2,966
  2,776
  2,562
  2,332
  2,092
  1,848
  1,608
  1,375
  1,157
  956
  776
  617
  481
  367
  274
  200
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

Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets, and distributes biopharmaceutical products worldwide. The company offers chemically-synthesized drug or small molecule, and biologic in various therapeutic areas, such as oncology; cardiovascular; immunoscience; and virology comprising human immunodeficiency virus infection (HIV). Its products include Empliciti, a humanized monoclonal antibody to treat multiple myeloma; Opdivo, a human monoclonal antibody to treat renal cell carcinoma, non-small cell lung cancer, classical Hodgkin lymphoma, gastric cancer, melanoma, metastatic urothelial carcinoma, and squamous cell carcinoma of the head and neck; Erbitux, an IgG1 monoclonal antibody that blocks the epidermal growth factor receptor; Sprycel, a tyrosine kinase inhibitor for the treatment of adults with Philadelphia chromosome-positive chronic myeloid leukemia; and Yervoy, a monoclonal antibody for metastatic melanoma. The company’s products also comprise Eliquis, an oral factor Xa inhibitor targeted at stroke prevention in atrial fibrillation, and the prevention and treatment of venous thromboembolic disorders; Baraclude to treat chronic hepatitis B virus; Daklinza and Sunvepra to treat hepatitis C virus (HCV); Reyataz and Sustiva to treat HIV; Abilify, an antipsychotic agent for adults with schizophrenia, bipolar mania disorder, and depressive disorder; Beclabuvir, a non-nucleoside NS5B inhibitor for the treatment of HCV; and Orencia to treat rheumatoid arthritis. The company has collaboration with Portola Pharmaceuticals, Inc. to develop and commercialize andexanet alfa, an investigational agent; and license agreement with Nitto Denko Corporation to develop and commercialize siRNA molecules targeted at HSP47 in vitamin A. The company was formerly known as Bristol-Myers Company and changed its name to Bristol-Myers Squibb Company in 1989. Bristol-Myers Squibb Company was founded in 1887 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Bristol-Myers Squibb (BMY)

Valuation Ratios
P/E Ratio 21.1
Price to Sales 4.9
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 33.1
Price to Free Cash Flow 57.6
Growth Rates
Sales Growth Rate 17.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 48.2%
Cap. Spend. - 3 Yr. Gr. Rate 17.7%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 35.3%
Total Debt to Equity 41.5%
Interest Coverage 32
Management Effectiveness
Return On Assets 14.1%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 20.3%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 29.3%
Return On Equity - 3 Yr. Avg. 17.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 74.6%
Gross Margin - 3 Yr. Avg. 75.9%
EBITDA Margin 33.4%
EBITDA Margin - 3 Yr. Avg. 23%
Operating Margin 30.8%
Oper. Margin - 3 Yr. Avg. 18.1%
Pre-Tax Margin 30.4%
Pre-Tax Margin - 3 Yr. Avg. 19.3%
Net Profit Margin 22.9%
Net Profit Margin - 3 Yr. Avg. 15%
Effective Tax Rate 23.8%
Eff/ Tax Rate - 3 Yr. Avg. 20%
Payout Ratio 57.1%

BMY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BMY stock intrinsic value calculation we used $19427 million for the last fiscal year's total revenue generated by Bristol-Myers Squibb. The default revenue input number comes from 2016 income statement of Bristol-Myers Squibb. 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 BMY stock valuation model: a) initial revenue growth rate of 22.3% 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 BMY is calculated based on our internal credit rating of Bristol-Myers Squibb, 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 Bristol-Myers Squibb.
    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 BMY stock the variable cost ratio is equal to 91.4%.

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 BMY 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 Bristol-Myers Squibb.

Corporate tax rate of 27% is the nominal tax rate for Bristol-Myers Squibb. 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 BMY 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 BMY are equal to 31.4%.

Life of production assets of 34 years is the average useful life of capital assets used in Bristol-Myers Squibb 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 BMY is equal to -2.5%. 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 - $16177 million for Bristol-Myers Squibb - 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 1677.16 million for Bristol-Myers Squibb 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 Bristol-Myers Squibb at the current share price and the inputted number of shares is $95.0 billion.


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COMPANY NEWS

▶ Changes in Bristol-Myers Squibbs Profitability 1Q17   [Jun-22-17 07:36AM  Market Realist]
▶ Bristol-Myers Squibb Reported Revenue Growth in 1Q17   [Jun-21-17 10:37AM  Market Realist]
▶ Is the Market Wrong About Bristol-Myers Squibb?   [Jun-15-17 03:21PM  Motley Fool]
▶ Bristol-Myers Squibb Announces Dividend   [04:05PM  Business Wire]
▶ Will Bristol-Myers Share Merck's Woe?   [11:51AM  Barrons.com]
▶ Merck: A Speed Bump For Keytruda?   [09:18AM  Barrons.com]
▶ 3 Dividend Stocks for Shrewd Investors   [Jun-09-17 11:09AM  Motley Fool]
▶ ASCO Was A Bust For Biotech   [Jun-07-17 12:56PM  Barrons.com]
▶ [$$] Is Bristol-Myers Falling Behind?   [07:25AM  Barrons.com]
▶ 3 Dividend Stocks Perfect for Retirement   [07:21AM  Motley Fool]
▶ [$$] Plenty Can Go Right for Bristol-Myers   [12:13AM  The Wall Street Journal]
▶ Dow's Merck Beats Out Rival Bristol In Melanoma Study   [04:18PM  Investor's Business Daily]
▶ Bristol Drug Shows Promise In Treatment Of Cervical Cancer   [04:10PM  Investor's Business Daily]
▶ Stocks to watch during ASCO   [12:49PM  CNBC Videos]
▶ [$$] Plenty Can Go Right for Bristol-Myers   [11:35AM  The Wall Street Journal]
▶ Novartis CEO sees no need for big takeover   [May-31-17 11:44AM  Reuters]
▶ Bristol-Myers Hookup Boosts Array BioPharma   [May-30-17 06:20PM  TheStreet.com]
▶ Better Buy: Celgene Corporation vs. Bristol-Myers Squibb   [May-28-17 07:27AM  Motley Fool]
Stock chart of BMY Financial statements of BMY Annual reports of BMY
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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