Intrinsic value of Celgene - CELG

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$134.31

  Intrinsic Value

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  Value-price divergence*

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$134.31

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

We calculate the intrinsic value of CELG 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 106.0

 

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, %
  21.32
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.01
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.59
  7.33
  7.09
  6.88
  6.70
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
Revenue, $m
  11,229
  13,059
  15,040
  17,169
  19,442
  21,855
  24,406
  27,092
  29,911
  32,862
  35,944
  39,157
  42,503
  45,985
  49,605
  53,368
  57,278
  61,341
  65,564
  69,954
  74,520
  79,270
  84,213
  89,361
  94,724
  100,314
  106,143
  112,226
  118,574
  125,204
  132,131
Variable operating expenses, $m
 
  8,984
  10,273
  11,658
  13,137
  14,707
  16,367
  18,115
  19,949
  21,869
  23,874
  25,478
  27,656
  29,921
  32,276
  34,725
  37,269
  39,913
  42,660
  45,517
  48,487
  51,578
  54,795
  58,144
  61,634
  65,271
  69,064
  73,021
  77,152
  81,466
  85,973
Fixed operating expenses, $m
 
  660
  677
  694
  711
  729
  747
  766
  785
  804
  824
  845
  866
  888
  910
  933
  956
  980
  1,004
  1,030
  1,055
  1,082
  1,109
  1,136
  1,165
  1,194
  1,224
  1,254
  1,286
  1,318
  1,351
Total operating expenses, $m
  8,419
  9,644
  10,950
  12,352
  13,848
  15,436
  17,114
  18,881
  20,734
  22,673
  24,698
  26,323
  28,522
  30,809
  33,186
  35,658
  38,225
  40,893
  43,664
  46,547
  49,542
  52,660
  55,904
  59,280
  62,799
  66,465
  70,288
  74,275
  78,438
  82,784
  87,324
Operating income, $m
  2,810
  3,415
  4,091
  4,818
  5,594
  6,420
  7,293
  8,212
  9,178
  10,189
  11,245
  12,834
  13,982
  15,176
  16,419
  17,710
  19,053
  20,449
  21,899
  23,408
  24,977
  26,610
  28,310
  30,080
  31,926
  33,849
  35,856
  37,950
  40,136
  42,420
  44,807
EBITDA, $m
  3,315
  4,332
  5,073
  5,870
  6,721
  7,626
  8,583
  9,591
  10,649
  11,758
  12,916
  14,123
  15,382
  16,691
  18,052
  19,468
  20,939
  22,469
  24,059
  25,712
  27,431
  29,221
  31,083
  33,023
  35,045
  37,153
  39,351
  41,646
  44,041
  46,544
  49,158
Interest expense (income), $m
  527
  510
  513
  631
  758
  894
  1,038
  1,190
  1,350
  1,519
  1,695
  1,879
  2,070
  2,270
  2,478
  2,694
  2,919
  3,152
  3,394
  3,646
  3,908
  4,181
  4,464
  4,759
  5,067
  5,387
  5,720
  6,068
  6,431
  6,810
  7,206
Earnings before tax, $m
  2,373
  2,905
  3,578
  4,186
  4,836
  5,526
  6,255
  7,022
  7,827
  8,670
  9,551
  10,955
  11,911
  12,906
  13,941
  15,017
  16,135
  17,297
  18,505
  19,762
  21,069
  22,429
  23,846
  25,321
  26,859
  28,463
  30,136
  31,882
  33,705
  35,610
  37,601
Tax expense, $m
  374
  784
  966
  1,130
  1,306
  1,492
  1,689
  1,896
  2,113
  2,341
  2,579
  2,958
  3,216
  3,485
  3,764
  4,054
  4,356
  4,670
  4,996
  5,336
  5,689
  6,056
  6,438
  6,837
  7,252
  7,685
  8,137
  8,608
  9,100
  9,615
  10,152
Net income, $m
  1,999
  2,121
  2,612
  3,056
  3,530
  4,034
  4,566
  5,126
  5,714
  6,329
  6,972
  7,997
  8,695
  9,422
  10,177
  10,962
  11,778
  12,627
  13,509
  14,426
  15,380
  16,373
  17,407
  18,484
  19,607
  20,778
  21,999
  23,274
  24,605
  25,996
  27,449

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7,970
  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
  28,086
  23,404
  26,954
  30,769
  34,842
  39,167
  43,739
  48,553
  53,605
  58,892
  64,415
  70,174
  76,171
  82,411
  88,898
  95,641
  102,648
  109,930
  117,498
  125,366
  133,548
  142,060
  150,920
  160,145
  169,756
  179,774
  190,221
  201,121
  212,499
  224,380
  236,794
Adjusted assets (=assets-cash), $m
  20,116
  23,404
  26,954
  30,769
  34,842
  39,167
  43,739
  48,553
  53,605
  58,892
  64,415
  70,174
  76,171
  82,411
  88,898
  95,641
  102,648
  109,930
  117,498
  125,366
  133,548
  142,060
  150,920
  160,145
  169,756
  179,774
  190,221
  201,121
  212,499
  224,380
  236,794
Revenue / Adjusted assets
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
Average production assets, $m
  11,090
  12,903
  14,860
  16,963
  19,209
  21,593
  24,114
  26,767
  29,552
  32,468
  35,512
  38,687
  41,993
  45,433
  49,010
  52,727
  56,590
  60,605
  64,777
  69,115
  73,626
  78,318
  83,203
  88,289
  93,587
  99,110
  104,870
  110,879
  117,151
  123,702
  130,545
Working capital, $m
  7,909
  509
  587
  670
  758
  852
  952
  1,057
  1,167
  1,282
  1,402
  1,527
  1,658
  1,793
  1,935
  2,081
  2,234
  2,392
  2,557
  2,728
  2,906
  3,092
  3,284
  3,485
  3,694
  3,912
  4,140
  4,377
  4,624
  4,883
  5,153
Total debt, $m
  14,289
  13,865
  17,061
  20,494
  24,160
  28,053
  32,167
  36,500
  41,046
  45,805
  50,776
  55,959
  61,356
  66,971
  72,810
  78,879
  85,186
  91,739
  98,550
  105,631
  112,995
  120,656
  128,630
  136,933
  145,583
  154,599
  164,001
  173,811
  184,051
  194,744
  205,916
Total liabilities, $m
  21,486
  21,063
  24,259
  27,692
  31,358
  35,251
  39,365
  43,698
  48,244
  53,003
  57,974
  63,157
  68,554
  74,169
  80,008
  86,077
  92,384
  98,937
  105,748
  112,829
  120,193
  127,854
  135,828
  144,131
  152,781
  161,797
  171,199
  181,009
  191,249
  201,942
  213,114
Total equity, $m
  6,599
  2,340
  2,695
  3,077
  3,484
  3,917
  4,374
  4,855
  5,360
  5,889
  6,442
  7,017
  7,617
  8,241
  8,890
  9,564
  10,265
  10,993
  11,750
  12,537
  13,355
  14,206
  15,092
  16,015
  16,976
  17,977
  19,022
  20,112
  21,250
  22,438
  23,679
Total liabilities and equity, $m
  28,085
  23,403
  26,954
  30,769
  34,842
  39,168
  43,739
  48,553
  53,604
  58,892
  64,416
  70,174
  76,171
  82,410
  88,898
  95,641
  102,649
  109,930
  117,498
  125,366
  133,548
  142,060
  150,920
  160,146
  169,757
  179,774
  190,221
  201,121
  212,499
  224,380
  236,793
Debt-to-equity ratio
  2.165
  5.920
  6.330
  6.660
  6.930
  7.160
  7.350
  7.520
  7.660
  7.780
  7.880
  7.970
  8.060
  8.130
  8.190
  8.250
  8.300
  8.350
  8.390
  8.430
  8.460
  8.490
  8.520
  8.550
  8.580
  8.600
  8.620
  8.640
  8.660
  8.680
  8.700
Adjusted equity ratio
  -0.068
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,999
  2,121
  2,612
  3,056
  3,530
  4,034
  4,566
  5,126
  5,714
  6,329
  6,972
  7,997
  8,695
  9,422
  10,177
  10,962
  11,778
  12,627
  13,509
  14,426
  15,380
  16,373
  17,407
  18,484
  19,607
  20,778
  21,999
  23,274
  24,605
  25,996
  27,449
Depreciation, amort., depletion, $m
  505
  917
  982
  1,052
  1,127
  1,206
  1,290
  1,379
  1,472
  1,569
  1,670
  1,290
  1,400
  1,514
  1,634
  1,758
  1,886
  2,020
  2,159
  2,304
  2,454
  2,611
  2,773
  2,943
  3,120
  3,304
  3,496
  3,696
  3,905
  4,123
  4,352
Funds from operations, $m
  4,522
  3,037
  3,594
  4,108
  4,657
  5,240
  5,856
  6,505
  7,186
  7,898
  8,642
  9,287
  10,095
  10,936
  11,811
  12,720
  13,665
  14,647
  15,668
  16,730
  17,834
  18,984
  20,181
  21,427
  22,727
  24,081
  25,495
  26,970
  28,510
  30,119
  31,801
Change in working capital, $m
  546
  71
  77
  83
  89
  94
  99
  105
  110
  115
  120
  125
  131
  136
  141
  147
  152
  158
  165
  171
  178
  185
  193
  201
  209
  218
  227
  237
  248
  259
  270
Cash from operations, $m
  3,976
  3,198
  3,517
  4,025
  4,569
  5,146
  5,757
  6,400
  7,076
  7,783
  8,522
  9,162
  9,965
  10,800
  11,669
  12,573
  13,512
  14,488
  15,503
  16,559
  17,656
  18,799
  19,988
  21,227
  22,517
  23,863
  25,267
  26,732
  28,262
  29,860
  31,530
Maintenance CAPEX, $m
  0
  -370
  -430
  -495
  -565
  -640
  -720
  -804
  -892
  -985
  -1,082
  -1,184
  -1,290
  -1,400
  -1,514
  -1,634
  -1,758
  -1,886
  -2,020
  -2,159
  -2,304
  -2,454
  -2,611
  -2,773
  -2,943
  -3,120
  -3,304
  -3,496
  -3,696
  -3,905
  -4,123
New CAPEX, $m
  -236
  -1,813
  -1,957
  -2,103
  -2,246
  -2,385
  -2,520
  -2,654
  -2,785
  -2,915
  -3,045
  -3,175
  -3,306
  -3,440
  -3,577
  -3,717
  -3,863
  -4,014
  -4,172
  -4,338
  -4,511
  -4,693
  -4,884
  -5,086
  -5,299
  -5,523
  -5,760
  -6,009
  -6,273
  -6,550
  -6,843
Cash from investing activities, $m
  -1,002
  -2,183
  -2,387
  -2,598
  -2,811
  -3,025
  -3,240
  -3,458
  -3,677
  -3,900
  -4,127
  -4,359
  -4,596
  -4,840
  -5,091
  -5,351
  -5,621
  -5,900
  -6,192
  -6,497
  -6,815
  -7,147
  -7,495
  -7,859
  -8,242
  -8,643
  -9,064
  -9,505
  -9,969
  -10,455
  -10,966
Free cash flow, $m
  2,974
  1,016
  1,129
  1,427
  1,758
  2,121
  2,517
  2,943
  3,398
  3,883
  4,395
  4,803
  5,369
  5,961
  6,578
  7,222
  7,891
  8,587
  9,311
  10,062
  10,842
  11,652
  12,493
  13,367
  14,276
  15,221
  16,204
  17,228
  18,294
  19,405
  20,564
Issuance/(repayment) of debt, $m
  0
  77
  3,195
  3,433
  3,666
  3,893
  4,115
  4,332
  4,547
  4,759
  4,971
  5,183
  5,397
  5,616
  5,839
  6,069
  6,306
  6,554
  6,811
  7,081
  7,364
  7,661
  7,974
  8,303
  8,650
  9,016
  9,402
  9,810
  10,240
  10,693
  11,172
Issuance/(repurchase) of shares, $m
  -1,793
  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  
  -1,646
  77
  3,195
  3,433
  3,666
  3,893
  4,115
  4,332
  4,547
  4,759
  4,971
  5,183
  5,397
  5,616
  5,839
  6,069
  6,306
  6,554
  6,811
  7,081
  7,364
  7,661
  7,974
  8,303
  8,650
  9,016
  9,402
  9,810
  10,240
  10,693
  11,172
Total cash flow (excl. dividends), $m
  1,290
  1,093
  4,324
  4,860
  5,423
  6,014
  6,631
  7,275
  7,945
  8,642
  9,366
  9,986
  10,766
  11,576
  12,417
  13,290
  14,198
  15,141
  16,122
  17,143
  18,205
  19,313
  20,467
  21,670
  22,926
  24,237
  25,606
  27,038
  28,534
  30,098
  31,735
Retained Cash Flow (-), $m
  -680
  -3,210
  -355
  -381
  -407
  -433
  -457
  -481
  -505
  -529
  -552
  -576
  -600
  -624
  -649
  -674
  -701
  -728
  -757
  -787
  -818
  -851
  -886
  -923
  -961
  -1,002
  -1,045
  -1,090
  -1,138
  -1,188
  -1,241
Prev. year cash balance distribution, $m
 
  7,469
  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
 
  5,352
  3,969
  4,478
  5,016
  5,581
  6,174
  6,794
  7,440
  8,113
  8,813
  9,410
  10,166
  10,952
  11,768
  12,616
  13,497
  14,413
  15,365
  16,356
  17,387
  18,461
  19,581
  20,748
  21,965
  23,235
  24,562
  25,948
  27,396
  28,910
  30,494
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  5,112
  3,605
  3,849
  4,058
  4,228
  4,353
  4,430
  4,457
  4,434
  4,360
  4,180
  4,020
  3,820
  3,584
  3,321
  3,037
  2,740
  2,436
  2,135
  1,843
  1,565
  1,307
  1,072
  863
  682
  528
  400
  296
  214
  151
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

Celgene Corporation discovers, develops, and commercializes therapies to treat cancer and inflammatory diseases worldwide. It offers REVLIMID, an oral immunomodulatory drug for multiple myeloma, myelodysplastic syndromes (MDS), and mantle cell lymphoma; POMALYST/IMNOVID to treat multiple myeloma; OTEZLA, a small-molecule inhibitor of phosphodiesterase 4 for psoriatic arthritis, psoriasis, and ankylosing spondylitis; and ABRAXANE, a solvent-free chemotherapy product to treat breast, non-small cell lung, pancreatic, and gastric cancers. The company’s products also include VIDAZA, a pyrimidine nucleoside analog for intermediate-2 and high-risk MDS, chronic myelomonocytic leukemia, and acute myeloid leukemia (AML); THALOMID to treat patients with multiple myeloma and erythema nodosum leprosum; and RITALIN and FOCALIN XR products. Its clinical stage products comprise OTEZLA for use in treating various immune-inflammatory diseases; luspatercept for beta-thalassemia and MDS; CC-486 to treat MDS, AML, and solid tumors; AG-881 for glioma with IDH mutations; LSD1 inhibitor to treat non-hodgkin lymphoma and solid tumors; CC-122 and CC-220 to treat hematological and solid tumor cancers, and inflammation and immunology diseases; and durvalumab, an anti-PDL-1 antibody, for multiple hematological cancers. The company has collaborative agreements with Acceleron Pharma, Inc.; Agios Pharmaceuticals, Inc.; Sutro Biopharma, Inc.; bluebird bio, Inc.; FORMA Therapeutics Holdings, LLC; OncoMed Pharmaceuticals, Inc.; NantBioScience, Inc.; AstraZeneca PLC; Lycera Corp.; Juno Therapeutics, Inc.; Nurix Inc.; and Jounce Therapeutics, Inc.; The company was founded in 1980 and is headquartered in Summit, New Jersey.

FINANCIAL RATIOS  of  Celgene (CELG)

Valuation Ratios
P/E Ratio 52.3
Price to Sales 9.3
Price to Book 15.8
Price to Tangible Book
Price to Cash Flow 26.3
Price to Free Cash Flow 28
Growth Rates
Sales Growth Rate 21.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.5%
Cap. Spend. - 3 Yr. Gr. Rate 11.2%
Financial Strength
Quick Ratio 16
Current Ratio 0.2
LT Debt to Equity 208.9%
Total Debt to Equity 216.5%
Interest Coverage 6
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. 10.4%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 31.9%
Return On Equity - 3 Yr. Avg. 30.2%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 96.1%
Gross Margin - 3 Yr. Avg. 95.5%
EBITDA Margin 30.3%
EBITDA Margin - 3 Yr. Avg. 32.3%
Operating Margin 25%
Oper. Margin - 3 Yr. Avg. 27.2%
Pre-Tax Margin 21.1%
Pre-Tax Margin - 3 Yr. Avg. 24.4%
Net Profit Margin 17.8%
Net Profit Margin - 3 Yr. Avg. 20.4%
Effective Tax Rate 15.8%
Eff/ Tax Rate - 3 Yr. Avg. 16.9%
Payout Ratio 0%

CELG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CELG stock intrinsic value calculation we used $11229 million for the last fiscal year's total revenue generated by Celgene. The default revenue input number comes from 2016 income statement of Celgene. 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 CELG stock valuation model: a) initial revenue growth rate of 16.3% 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 4.7%, whose default value for CELG is calculated based on our internal credit rating of Celgene, 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 Celgene.
    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 CELG stock the variable cost ratio is equal to 69.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $644 million in the base year in the intrinsic value calculation for CELG 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 3.7% for Celgene.

Corporate tax rate of 27% is the nominal tax rate for Celgene. 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 CELG 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 CELG are equal to 98.8%.

Life of production assets of 31.6 years is the average useful life of capital assets used in Celgene 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 CELG is equal to 3.9%. 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 - $6599 million for Celgene - 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 789.006 million for Celgene 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 Celgene at the current share price and the inputted number of shares is $106.0 billion.


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COMPANY NEWS

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Stock chart of CELG Financial statements of CELG Annual reports of CELG
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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