Intrinsic value of Bristol-Myers Squibb - BMY

Previous Close

$57.50

  Intrinsic Value

$26.07

stock screener

  Rating & Target

str. sell

-55%

  Value-price divergence*

+122%

Previous close

$57.50

 
Intrinsic value

$26.07

 
Up/down potential

-55%

 
Rating

str. sell

 
Value-price divergence*

+122%

*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 96.4

 

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, %
  17.31
  12.30
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.55
  7.29
  7.06
  6.86
  6.67
  6.50
  6.35
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
Revenue, $m
  19,427
  21,817
  24,341
  26,997
  29,784
  32,699
  35,744
  38,918
  42,222
  45,660
  49,235
  52,949
  56,810
  60,822
  64,991
  69,326
  73,835
  78,525
  83,407
  88,492
  93,789
  99,311
  105,069
  111,078
  117,351
  123,902
  130,746
  137,900
  145,380
  153,205
  161,392
Variable operating expenses, $m
 
  19,856
  22,074
  24,407
  26,856
  29,417
  32,092
  34,881
  37,784
  40,805
  43,946
  46,522
  49,914
  53,439
  57,102
  60,911
  64,872
  68,993
  73,283
  77,750
  82,404
  87,255
  92,315
  97,595
  103,106
  108,861
  114,875
  121,160
  127,733
  134,607
  141,801
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
  19,856
  22,074
  24,407
  26,856
  29,417
  32,092
  34,881
  37,784
  40,805
  43,946
  46,522
  49,914
  53,439
  57,102
  60,911
  64,872
  68,993
  73,283
  77,750
  82,404
  87,255
  92,315
  97,595
  103,106
  108,861
  114,875
  121,160
  127,733
  134,607
  141,801
Operating income, $m
  5,992
  1,961
  2,267
  2,590
  2,928
  3,282
  3,651
  4,037
  4,438
  4,855
  5,289
  6,427
  6,896
  7,383
  7,889
  8,415
  8,963
  9,532
  10,125
  10,742
  11,385
  12,055
  12,754
  13,484
  14,245
  15,040
  15,871
  16,740
  17,648
  18,597
  19,591
EBITDA, $m
  6,374
  2,877
  3,209
  3,560
  3,927
  4,312
  4,713
  5,131
  5,567
  6,021
  6,492
  6,982
  7,491
  8,020
  8,569
  9,141
  9,735
  10,354
  10,998
  11,668
  12,367
  13,095
  13,854
  14,646
  15,473
  16,337
  17,240
  18,183
  19,169
  20,201
  21,280
Interest expense (income), $m
  191
  200
  272
  347
  426
  509
  596
  687
  782
  880
  983
  1,090
  1,200
  1,316
  1,435
  1,560
  1,689
  1,823
  1,963
  2,109
  2,260
  2,418
  2,583
  2,755
  2,934
  3,121
  3,316
  3,521
  3,734
  3,957
  4,190
Earnings before tax, $m
  5,915
  1,761
  1,995
  2,242
  2,502
  2,772
  3,055
  3,349
  3,656
  3,975
  4,306
  5,338
  5,696
  6,068
  6,454
  6,856
  7,274
  7,709
  8,162
  8,633
  9,125
  9,637
  10,171
  10,729
  11,311
  11,919
  12,555
  13,219
  13,914
  14,640
  15,401
Tax expense, $m
  1,408
  475
  539
  605
  675
  749
  825
  904
  987
  1,073
  1,163
  1,441
  1,538
  1,638
  1,743
  1,851
  1,964
  2,081
  2,204
  2,331
  2,464
  2,602
  2,746
  2,897
  3,054
  3,218
  3,390
  3,569
  3,757
  3,953
  4,158
Net income, $m
  4,457
  1,285
  1,457
  1,637
  1,826
  2,024
  2,230
  2,445
  2,669
  2,902
  3,143
  3,897
  4,158
  4,429
  4,711
  5,005
  5,310
  5,627
  5,958
  6,302
  6,661
  7,035
  7,425
  7,832
  8,257
  8,701
  9,165
  9,650
  10,157
  10,687
  11,243

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
  30,727
  34,283
  38,024
  41,949
  46,055
  50,343
  54,813
  59,468
  64,310
  69,344
  74,577
  80,014
  85,664
  91,537
  97,643
  103,992
  110,599
  117,475
  124,636
  132,097
  139,874
  147,985
  156,448
  165,283
  174,509
  184,149
  194,225
  204,761
  215,781
  227,312
Adjusted assets (=assets-cash), $m
  27,357
  30,727
  34,283
  38,024
  41,949
  46,055
  50,343
  54,813
  59,468
  64,310
  69,344
  74,577
  80,014
  85,664
  91,537
  97,643
  103,992
  110,599
  117,475
  124,636
  132,097
  139,874
  147,985
  156,448
  165,283
  174,509
  184,149
  194,225
  204,761
  215,781
  227,312
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
  6,850
  7,643
  8,477
  9,352
  10,268
  11,224
  12,220
  13,258
  14,337
  15,460
  16,626
  17,838
  19,098
  20,407
  21,768
  23,184
  24,657
  26,190
  27,786
  29,450
  31,184
  32,992
  34,879
  36,848
  38,905
  41,054
  43,301
  45,649
  48,106
  50,677
Working capital, $m
  4,863
  -545
  -609
  -675
  -745
  -817
  -894
  -973
  -1,056
  -1,142
  -1,231
  -1,324
  -1,420
  -1,521
  -1,625
  -1,733
  -1,846
  -1,963
  -2,085
  -2,212
  -2,345
  -2,483
  -2,627
  -2,777
  -2,934
  -3,098
  -3,269
  -3,447
  -3,635
  -3,830
  -4,035
Total debt, $m
  6,708
  7,768
  9,919
  12,182
  14,557
  17,041
  19,636
  22,340
  25,156
  28,086
  31,131
  34,297
  37,586
  41,005
  44,558
  48,252
  52,093
  56,090
  60,250
  64,583
  69,097
  73,802
  78,709
  83,829
  89,174
  94,756
  100,588
  106,684
  113,058
  119,726
  126,702
Total liabilities, $m
  17,530
  18,590
  20,741
  23,004
  25,379
  27,863
  30,458
  33,162
  35,978
  38,908
  41,953
  45,119
  48,408
  51,827
  55,380
  59,074
  62,915
  66,912
  71,072
  75,405
  79,919
  84,624
  89,531
  94,651
  99,996
  105,578
  111,410
  117,506
  123,880
  130,548
  137,524
Total equity, $m
  16,177
  12,137
  13,542
  15,019
  16,570
  18,192
  19,886
  21,651
  23,490
  25,402
  27,391
  29,458
  31,606
  33,837
  36,157
  38,569
  41,077
  43,686
  46,403
  49,231
  52,178
  55,250
  58,454
  61,797
  65,287
  68,931
  72,739
  76,719
  80,881
  85,234
  89,788
Total liabilities and equity, $m
  33,707
  30,727
  34,283
  38,023
  41,949
  46,055
  50,344
  54,813
  59,468
  64,310
  69,344
  74,577
  80,014
  85,664
  91,537
  97,643
  103,992
  110,598
  117,475
  124,636
  132,097
  139,874
  147,985
  156,448
  165,283
  174,509
  184,149
  194,225
  204,761
  215,782
  227,312
Debt-to-equity ratio
  0.415
  0.640
  0.730
  0.810
  0.880
  0.940
  0.990
  1.030
  1.070
  1.110
  1.140
  1.160
  1.190
  1.210
  1.230
  1.250
  1.270
  1.280
  1.300
  1.310
  1.320
  1.340
  1.350
  1.360
  1.370
  1.370
  1.380
  1.390
  1.400
  1.400
  1.410
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
  1,285
  1,457
  1,637
  1,826
  2,024
  2,230
  2,445
  2,669
  2,902
  3,143
  3,897
  4,158
  4,429
  4,711
  5,005
  5,310
  5,627
  5,958
  6,302
  6,661
  7,035
  7,425
  7,832
  8,257
  8,701
  9,165
  9,650
  10,157
  10,687
  11,243
Depreciation, amort., depletion, $m
  382
  916
  942
  970
  999
  1,030
  1,062
  1,095
  1,129
  1,165
  1,203
  554
  595
  637
  680
  726
  773
  822
  873
  926
  982
  1,039
  1,100
  1,163
  1,228
  1,297
  1,368
  1,443
  1,522
  1,604
  1,689
Funds from operations, $m
  303
  2,201
  2,399
  2,607
  2,825
  3,054
  3,292
  3,540
  3,798
  4,067
  4,346
  4,451
  4,752
  5,066
  5,392
  5,730
  6,083
  6,449
  6,831
  7,228
  7,643
  8,074
  8,525
  8,995
  9,485
  9,998
  10,533
  11,093
  11,679
  12,291
  12,932
Change in working capital, $m
  -2,547
  -60
  -63
  -66
  -70
  -73
  -76
  -79
  -83
  -86
  -89
  -93
  -97
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -132
  -138
  -144
  -150
  -157
  -164
  -171
  -179
  -187
  -196
  -205
Cash from operations, $m
  2,850
  2,261
  2,462
  2,673
  2,895
  3,126
  3,368
  3,619
  3,881
  4,153
  4,436
  4,544
  4,849
  5,166
  5,496
  5,839
  6,195
  6,567
  6,953
  7,355
  7,775
  8,212
  8,669
  9,145
  9,642
  10,162
  10,704
  11,272
  11,866
  12,487
  13,136
Maintenance CAPEX, $m
  0
  -203
  -228
  -255
  -283
  -312
  -342
  -374
  -407
  -442
  -478
  -515
  -554
  -595
  -637
  -680
  -726
  -773
  -822
  -873
  -926
  -982
  -1,039
  -1,100
  -1,163
  -1,228
  -1,297
  -1,368
  -1,443
  -1,522
  -1,604
New CAPEX, $m
  -1,215
  -752
  -793
  -834
  -875
  -916
  -956
  -997
  -1,038
  -1,080
  -1,122
  -1,166
  -1,212
  -1,260
  -1,309
  -1,361
  -1,416
  -1,473
  -1,533
  -1,596
  -1,663
  -1,734
  -1,808
  -1,887
  -1,970
  -2,057
  -2,149
  -2,246
  -2,349
  -2,457
  -2,571
Cash from investing activities, $m
  1,480
  -955
  -1,021
  -1,089
  -1,158
  -1,228
  -1,298
  -1,371
  -1,445
  -1,522
  -1,600
  -1,681
  -1,766
  -1,855
  -1,946
  -2,041
  -2,142
  -2,246
  -2,355
  -2,469
  -2,589
  -2,716
  -2,847
  -2,987
  -3,133
  -3,285
  -3,446
  -3,614
  -3,792
  -3,979
  -4,175
Free cash flow, $m
  4,330
  1,305
  1,441
  1,585
  1,737
  1,899
  2,070
  2,249
  2,436
  2,631
  2,835
  2,862
  3,083
  3,312
  3,550
  3,797
  4,054
  4,321
  4,598
  4,886
  5,185
  5,497
  5,821
  6,158
  6,510
  6,876
  7,258
  7,657
  8,073
  8,508
  8,962
Issuance/(repayment) of debt, $m
  110
  2,052
  2,151
  2,263
  2,374
  2,484
  2,594
  2,704
  2,816
  2,929
  3,046
  3,166
  3,290
  3,418
  3,553
  3,694
  3,842
  3,997
  4,160
  4,332
  4,514
  4,705
  4,907
  5,120
  5,345
  5,582
  5,832
  6,096
  6,374
  6,667
  6,976
Issuance/(repurchase) of shares, $m
  -50
  33
  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
  2,085
  2,151
  2,263
  2,374
  2,484
  2,594
  2,704
  2,816
  2,929
  3,046
  3,166
  3,290
  3,418
  3,553
  3,694
  3,842
  3,997
  4,160
  4,332
  4,514
  4,705
  4,907
  5,120
  5,345
  5,582
  5,832
  6,096
  6,374
  6,667
  6,976
Total cash flow (excl. dividends), $m
  4,399
  3,390
  3,592
  3,848
  4,112
  4,384
  4,664
  4,953
  5,252
  5,561
  5,881
  6,027
  6,372
  6,730
  7,103
  7,491
  7,896
  8,318
  8,758
  9,218
  9,699
  10,202
  10,728
  11,279
  11,855
  12,458
  13,091
  13,753
  14,448
  15,175
  15,938
Retained Cash Flow (-), $m
  -1,911
  -1,318
  -1,404
  -1,478
  -1,550
  -1,622
  -1,694
  -1,766
  -1,839
  -1,913
  -1,989
  -2,067
  -2,148
  -2,232
  -2,320
  -2,412
  -2,508
  -2,609
  -2,716
  -2,829
  -2,947
  -3,072
  -3,204
  -3,343
  -3,490
  -3,644
  -3,808
  -3,980
  -4,162
  -4,353
  -4,555
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
 
  7,430
  2,188
  2,370
  2,562
  2,762
  2,970
  3,187
  3,413
  3,648
  3,893
  3,961
  4,224
  4,498
  4,783
  5,080
  5,388
  5,708
  6,042
  6,390
  6,752
  7,130
  7,524
  7,936
  8,365
  8,814
  9,283
  9,773
  10,286
  10,822
  11,384
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
 
  7,124
  2,003
  2,063
  2,109
  2,141
  2,156
  2,153
  2,133
  2,096
  2,041
  1,881
  1,803
  1,710
  1,606
  1,491
  1,369
  1,242
  1,113
  984
  858
  737
  624
  520
  426
  343
  271
  210
  159
  118
  86
Current shareholders' claim on cash, %
  100
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9

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 21.5
Price to Sales 4.9
Price to Book 5.9
Price to Tangible Book
Price to Cash Flow 33.6
Price to Free Cash Flow 58.5
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 12.3% 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 $96.4 billion.

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COMPANY NEWS

▶ [$$] Bristol-Myers Can Overcome Market's Pessimism   [Aug-16-17 03:31PM  Barrons.com]
▶ Pfizers Valuation after 2Q17 Earnings   [03:59PM  Market Realist]
▶ How Celgene Performed in 2Q17   [Aug-09-17 02:36PM  Market Realist]
▶ Retail names soar on earnings   [Aug-08-17 01:43PM  CNBC Videos]
▶ Q2 Earnings Fail to Impress Pharma ETF   [Aug-07-17 09:45AM  Zacks]
▶ [$$] Atlas Venture Scores Hat Trick of Early-Stage Biotech Exits   [Aug-04-17 07:40PM  The Wall Street Journal]
▶ How BMY Is Valued following Its 2Q17 Earnings   [07:37AM  Market Realist]
▶ Merck's Keytruda Plays Catch-Up to Bristol-Myers' Opdivo   [Aug-01-17 09:31PM  Motley Fool]
▶ Bristol-Myers Squibbs 2Q17 Earnings: Eliquis   [09:10AM  Market Realist]
▶ Bristol-Myers Squibbs 2Q17 Earnings: Opdivo   [Jul-31-17 06:05PM  Market Realist]
▶ Why Clovis Oncology Tumbled 13.5% Today   [04:51PM  Motley Fool]
▶ Why Clovis, Regeneron Are Leading A Biotech Deluge Today   [04:11PM  Investor's Business Daily]
▶ Bristol-Myers Squibb Reports Growth in 2Q17   [02:38PM  Market Realist]
▶ Clovis Sell-Off May Be Overdone   [01:45PM  TheStreet.com]
▶ Company News For July 28, 2017   [10:11AM  Zacks]
▶ Bristol-Myers beats Street 2Q forecasts   [01:24AM  Associated Press]
▶ Why Bristol-Myers is Tanking   [09:55AM  Barrons.com]
▶ Cancer drug war heats up as Big Pharma squares off against Genentech   [Jul-26-17 09:23PM  American City Business Journals]
Stock chart of BMY Financial statements 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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