Intrinsic value of Cardiome Pharma - CRME

Previous Close

$1.41

  Intrinsic Value

$0.25

stock screener

  Rating & Target

str. sell

-83%

Previous close

$1.41

 
Intrinsic value

$0.25

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of CRME 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  19.05
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  25
  30
  36
  42
  48
  55
  63
  71
  80
  89
  99
  109
  119
  131
  142
  154
  166
  179
  193
  207
  221
  237
  252
  269
  286
  303
  322
  341
  361
  382
  404
Variable operating expenses, $m
 
  61
  73
  85
  98
  113
  129
  145
  163
  182
  202
  222
  244
  266
  290
  314
  340
  366
  393
  422
  452
  482
  515
  548
  583
  619
  656
  695
  736
  779
  823
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
  41
  61
  73
  85
  98
  113
  129
  145
  163
  182
  202
  222
  244
  266
  290
  314
  340
  366
  393
  422
  452
  482
  515
  548
  583
  619
  656
  695
  736
  779
  823
Operating income, $m
  -16
  -31
  -37
  -43
  -50
  -58
  -66
  -74
  -83
  -93
  -103
  -113
  -124
  -136
  -148
  -160
  -173
  -187
  -201
  -215
  -230
  -246
  -262
  -279
  -297
  -315
  -335
  -355
  -375
  -397
  -420
EBITDA, $m
  -13
  -28
  -33
  -38
  -44
  -51
  -58
  -66
  -74
  -82
  -91
  -100
  -110
  -120
  -131
  -142
  -153
  -165
  -178
  -190
  -204
  -218
  -232
  -247
  -263
  -279
  -296
  -314
  -332
  -351
  -372
Interest expense (income), $m
  2
  3
  4
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
Earnings before tax, $m
  -19
  -34
  -41
  -48
  -56
  -65
  -74
  -84
  -94
  -105
  -117
  -129
  -142
  -156
  -170
  -184
  -199
  -215
  -231
  -248
  -266
  -284
  -303
  -323
  -344
  -365
  -388
  -411
  -435
  -461
  -487
Tax expense, $m
  1
  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
  -20
  -34
  -41
  -48
  -56
  -65
  -74
  -84
  -94
  -105
  -117
  -129
  -142
  -156
  -170
  -184
  -199
  -215
  -231
  -248
  -266
  -284
  -303
  -323
  -344
  -365
  -388
  -411
  -435
  -461
  -487

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  27
  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
  67
  48
  57
  67
  77
  89
  101
  114
  128
  143
  158
  174
  191
  209
  227
  246
  266
  287
  309
  331
  354
  378
  404
  430
  457
  485
  515
  545
  577
  611
  646
Adjusted assets (=assets-cash), $m
  40
  48
  57
  67
  77
  89
  101
  114
  128
  143
  158
  174
  191
  209
  227
  246
  266
  287
  309
  331
  354
  378
  404
  430
  457
  485
  515
  545
  577
  611
  646
Revenue / Adjusted assets
  0.625
  0.625
  0.632
  0.627
  0.623
  0.618
  0.624
  0.623
  0.625
  0.622
  0.627
  0.626
  0.623
  0.627
  0.626
  0.626
  0.624
  0.624
  0.625
  0.625
  0.624
  0.627
  0.624
  0.626
  0.626
  0.625
  0.625
  0.626
  0.626
  0.625
  0.625
Average production assets, $m
  20
  24
  28
  33
  39
  44
  51
  57
  64
  71
  79
  87
  96
  104
  114
  123
  133
  144
  154
  165
  177
  189
  202
  215
  228
  243
  257
  273
  289
  305
  323
Working capital, $m
  31
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  46
  49
  51
  55
  58
  61
  65
Total debt, $m
  19
  26
  33
  41
  50
  59
  69
  80
  92
  104
  116
  130
  144
  158
  173
  189
  206
  223
  241
  259
  278
  298
  319
  340
  363
  386
  411
  436
  462
  490
  519
Total liabilities, $m
  33
  40
  47
  55
  64
  73
  83
  94
  106
  118
  130
  144
  158
  172
  187
  203
  220
  237
  255
  273
  292
  312
  333
  354
  377
  400
  425
  450
  476
  504
  533
Total equity, $m
  34
  8
  10
  12
  14
  16
  18
  20
  22
  25
  28
  30
  33
  37
  40
  43
  47
  50
  54
  58
  62
  66
  71
  75
  80
  85
  90
  95
  101
  107
  113
Total liabilities and equity, $m
  67
  48
  57
  67
  78
  89
  101
  114
  128
  143
  158
  174
  191
  209
  227
  246
  267
  287
  309
  331
  354
  378
  404
  429
  457
  485
  515
  545
  577
  611
  646
Debt-to-equity ratio
  0.559
  3.050
  3.310
  3.510
  3.680
  3.810
  3.920
  4.010
  4.090
  4.150
  4.210
  4.260
  4.300
  4.330
  4.360
  4.390
  4.410
  4.440
  4.460
  4.470
  4.490
  4.500
  4.520
  4.530
  4.540
  4.550
  4.560
  4.570
  4.580
  4.580
  4.590
Adjusted equity ratio
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -20
  -34
  -41
  -48
  -56
  -65
  -74
  -84
  -94
  -105
  -117
  -129
  -142
  -156
  -170
  -184
  -199
  -215
  -231
  -248
  -266
  -284
  -303
  -323
  -344
  -365
  -388
  -411
  -435
  -461
  -487
Depreciation, amort., depletion, $m
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
Funds from operations, $m
  -18
  -30
  -36
  -43
  -50
  -58
  -66
  -75
  -85
  -95
  -105
  -116
  -128
  -140
  -153
  -166
  -179
  -194
  -208
  -224
  -240
  -256
  -273
  -291
  -310
  -329
  -349
  -370
  -392
  -415
  -439
Change in working capital, $m
  -2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  -16
  -31
  -37
  -44
  -51
  -59
  -68
  -77
  -86
  -96
  -107
  -118
  -130
  -142
  -154
  -168
  -181
  -196
  -210
  -226
  -242
  -259
  -276
  -294
  -313
  -332
  -352
  -374
  -396
  -419
  -443
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
New CAPEX, $m
  -14
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
Cash from investing activities, $m
  -14
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -37
  -38
  -41
  -43
  -46
  -48
  -51
  -53
  -57
  -60
  -63
Free cash flow, $m
  -30
  -38
  -45
  -53
  -61
  -71
  -80
  -91
  -102
  -113
  -125
  -138
  -151
  -165
  -179
  -194
  -210
  -226
  -243
  -260
  -278
  -297
  -317
  -337
  -358
  -380
  -403
  -427
  -452
  -478
  -506
Issuance/(repayment) of debt, $m
  10
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
  29
Issuance/(repurchase) of shares, $m
  35
  35
  42
  50
  58
  67
  76
  86
  97
  108
  120
  132
  145
  159
  173
  187
  203
  219
  235
  252
  270
  289
  308
  328
  349
  370
  393
  417
  441
  467
  493
Cash from financing (excl. dividends), $m  
  39
  42
  49
  58
  67
  76
  86
  97
  108
  120
  133
  145
  159
  174
  188
  203
  219
  236
  253
  270
  289
  309
  329
  350
  371
  393
  417
  442
  467
  495
  522
Total cash flow (excl. dividends), $m
  9
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
Retained Cash Flow (-), $m
  -14
  -35
  -42
  -50
  -58
  -67
  -76
  -86
  -97
  -108
  -120
  -132
  -145
  -159
  -173
  -187
  -203
  -219
  -235
  -252
  -270
  -289
  -308
  -328
  -349
  -370
  -393
  -417
  -441
  -467
  -493
Prev. year cash balance distribution, $m
 
  27
  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
 
  -4
  -38
  -45
  -53
  -61
  -70
  -80
  -90
  -101
  -112
  -124
  -137
  -150
  -164
  -178
  -193
  -209
  -225
  -242
  -259
  -277
  -296
  -315
  -336
  -357
  -379
  -402
  -426
  -451
  -477
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
 
  -4
  -35
  -39
  -43
  -47
  -51
  -54
  -56
  -58
  -59
  -59
  -59
  -57
  -55
  -52
  -49
  -45
  -41
  -37
  -33
  -29
  -25
  -21
  -17
  -14
  -11
  -9
  -7
  -5
  -4
Current shareholders' claim on cash, %
  100
  22.2
  4.9
  1.1
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Cardiome Pharma Corp. (Cardiome) is a specialty pharmaceutical company. The Company is engaged in the development and commercialization of cardiovascular therapies for heart disease. The Company's segments are Europe and Rest of World. Cardiome has two marketed, in-hospital, cardiology products, which include BRINAVESS (vernakalant IV), approved in Europe and other territories for the conversion of onset atrial fibrillation (AF) to sinus rhythm in adults, and AGGRASTAT (tirofiban hydrochloride (HCl)), indicated for use in patients with acute coronary syndrome. Cardiome also commercializes ESMOCARD and ESMOCARD LYO (esmolol hydrochloride), a short-acting beta-blocker used to control heart rate in various cardiovascular indications, in select European markets. Cardiome has also licensed TREVYENT, a development-stage drug device combination product that is under development for pulmonary arterial hypertension, in certain regions outside the United States.

FINANCIAL RATIOS  of  Cardiome Pharma (CRME)

Valuation Ratios
P/E Ratio -2.2
Price to Sales 1.8
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -2.8
Price to Free Cash Flow -1.5
Growth Rates
Sales Growth Rate 19%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 55.9%
Total Debt to Equity 55.9%
Interest Coverage -9
Management Effectiveness
Return On Assets -31.1%
Ret/ On Assets - 3 Yr. Avg. -37%
Return On Total Capital -48.2%
Ret/ On T. Cap. - 3 Yr. Avg. -66.3%
Return On Equity -74.1%
Return On Equity - 3 Yr. Avg. -97.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 76%
Gross Margin - 3 Yr. Avg. 69.8%
EBITDA Margin -56%
EBITDA Margin - 3 Yr. Avg. -67.1%
Operating Margin -64%
Oper. Margin - 3 Yr. Avg. -75.1%
Pre-Tax Margin -76%
Pre-Tax Margin - 3 Yr. Avg. -83.4%
Net Profit Margin -80%
Net Profit Margin - 3 Yr. Avg. -84.8%
Effective Tax Rate -5.3%
Eff/ Tax Rate - 3 Yr. Avg. -1.8%
Payout Ratio 0%

CRME stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRME stock intrinsic value calculation we used $25 million for the last fiscal year's total revenue generated by Cardiome Pharma. The default revenue input number comes from 2016 income statement of Cardiome Pharma. 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 CRME stock valuation model: a) initial revenue growth rate of 20% 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 CRME is calculated based on our internal credit rating of Cardiome Pharma, 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 Cardiome Pharma.
    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 CRME stock the variable cost ratio is equal to 204%.

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 CRME 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 13.8% for Cardiome Pharma.

Corporate tax rate of 27% is the nominal tax rate for Cardiome Pharma. 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 CRME 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 CRME are equal to 80%.

Life of production assets of 6.7 years is the average useful life of capital assets used in Cardiome Pharma 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 CRME is equal to 16%. 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 - $34 million for Cardiome Pharma - 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 34.606 million for Cardiome Pharma 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 Cardiome Pharma at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Best TSX Growth Stocks   [Feb-15-18 11:02AM  Simply Wall St.]
▶ CRME: Initiating Coverage   [Feb-05-18 11:00AM  Zacks Small Cap Research]
▶ Cardiome reports 3Q loss   [Nov-16-17 05:14AM  Associated Press]
▶ Cardiome Reports Third Quarter 2017 Financial Results   [Nov-14-17 04:01PM  PR Newswire]
▶ Cardiome Provides U.S. Regulatory Update For BRINAVESS   [Aug-21-17 08:00AM  PR Newswire]
▶ Cardiome reports 2Q loss   [Aug-08-17 11:55PM  Associated Press]
▶ Cardiome Pharma Corp. Announces Voting Results   [Jun-23-17 08:00AM  PR Newswire]
▶ Cardiome Reports Changes To Senior Management Team   [May-16-17 08:00AM  CNW Group]
▶ Cardiome reports 1Q loss   [May-15-17 04:18PM  Associated Press]
▶ Cardiome reports 4Q loss   [Mar-07-17 04:20PM  Associated Press]
▶ Is CARDIOME PHARMA CORP (CRME) a Good Stock to Buy?   [Dec-13-16 07:04PM  at Insider Monkey]
▶ Cardiome Announces Recent Insider Purchases   [Aug-16-16 08:00AM  PR Newswire]
▶ New York Community Bank Drops in on Wednesdays 52-Week Low Club   [Jul-27-16 04:04PM  at 24/7 Wall St.]
▶ Noodles, Cardiome Lead Tuesdays 52-Week Low Club   [Jul-26-16 04:08PM  at 24/7 Wall St.]
▶ Cardiome Pharma Corp. Announces Voting Results   [Jun-24-16 08:00AM  PR Newswire]
Financial statements of CRME
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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