Intrinsic value of Enanta Pharmaceuticals - ENTA

Previous Close

$37.74

  Intrinsic Value

$46.05

stock screener

  Rating & Target

buy

+22%

  Value-price divergence*

-120%

Previous close

$37.74

 
Intrinsic value

$46.05

 
Up/down potential

+22%

 
Rating

buy

 
Value-price divergence*

-120%

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

We calculate the intrinsic value of ENTA 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 0.7

 

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, %
  -45.34
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  88
  90
  92
  94
  97
  100
  103
  106
  110
  114
  119
  123
  128
  134
  139
  146
  152
  159
  166
  173
  181
  190
  199
  208
  218
  228
  239
  250
  263
  275
  289
Variable operating expenses, $m
 
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  66
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
  57
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  66
Operating income, $m
  31
  69
  71
  73
  75
  77
  80
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  123
  128
  134
  140
  147
  153
  161
  168
  176
  185
  194
  203
  213
  223
EBITDA, $m
  33
  70
  72
  74
  76
  78
  80
  83
  86
  89
  93
  96
  100
  105
  109
  114
  119
  124
  129
  135
  142
  148
  155
  162
  170
  178
  187
  196
  205
  215
  225
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
Earnings before tax, $m
  33
  69
  71
  73
  75
  77
  80
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  222
Tax expense, $m
  11
  19
  19
  20
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
Net income, $m
  22
  51
  52
  53
  55
  56
  58
  60
  62
  64
  67
  70
  72
  75
  79
  82
  85
  89
  93
  98
  102
  107
  112
  117
  122
  128
  134
  141
  148
  155
  162

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  210
  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
  281
  72
  74
  76
  78
  81
  83
  86
  89
  92
  96
  100
  104
  108
  113
  117
  123
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  222
  233
Adjusted assets (=assets-cash), $m
  71
  72
  74
  76
  78
  81
  83
  86
  89
  92
  96
  100
  104
  108
  113
  117
  123
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  222
  233
Revenue / Adjusted assets
  1.239
  1.250
  1.243
  1.237
  1.244
  1.235
  1.241
  1.233
  1.236
  1.239
  1.240
  1.230
  1.231
  1.241
  1.230
  1.248
  1.236
  1.242
  1.239
  1.236
  1.240
  1.242
  1.244
  1.238
  1.239
  1.239
  1.238
  1.238
  1.241
  1.239
  1.240
Average production assets, $m
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Working capital, $m
  224
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
Total debt, $m
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
Total liabilities, $m
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
Total equity, $m
  270
  61
  63
  64
  66
  68
  70
  73
  75
  78
  81
  84
  88
  91
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142
  148
  156
  163
  171
  179
  188
  197
Total liabilities and equity, $m
  281
  72
  74
  76
  78
  80
  83
  86
  89
  92
  96
  99
  104
  108
  112
  117
  123
  128
  134
  140
  147
  153
  160
  168
  175
  185
  193
  202
  212
  222
  233
Debt-to-equity ratio
  0.004
  0.020
  0.020
  0.030
  0.030
  0.040
  0.040
  0.050
  0.050
  0.060
  0.060
  0.060
  0.070
  0.070
  0.080
  0.080
  0.090
  0.090
  0.090
  0.100
  0.100
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
Adjusted equity ratio
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  22
  51
  52
  53
  55
  56
  58
  60
  62
  64
  67
  70
  72
  75
  79
  82
  85
  89
  93
  98
  102
  107
  112
  117
  122
  128
  134
  141
  148
  155
  162
Depreciation, amort., depletion, $m
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Funds from operations, $m
  42
  51
  53
  54
  55
  57
  59
  61
  63
  65
  68
  71
  73
  76
  80
  83
  87
  91
  95
  99
  103
  108
  113
  119
  124
  130
  136
  143
  150
  157
  165
Change in working capital, $m
  6
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  36
  51
  52
  53
  55
  57
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
  98
  102
  107
  112
  117
  123
  128
  135
  141
  148
  155
  162
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
New CAPEX, $m
  -5
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -44
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Free cash flow, $m
  -8
  50
  51
  53
  54
  56
  57
  59
  61
  64
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
Issuance/(repayment) of debt, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
Issuance/(repurchase) of shares, $m
  3
  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  
  3
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
Total cash flow (excl. dividends), $m
  -5
  50
  52
  53
  54
  56
  58
  60
  62
  64
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  140
  146
  153
  161
Retained Cash Flow (-), $m
  -34
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
Prev. year cash balance distribution, $m
 
  210
  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
 
  259
  50
  51
  53
  54
  56
  57
  59
  61
  63
  66
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
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
 
  249
  46
  45
  43
  42
  40
  39
  37
  35
  33
  31
  29
  27
  25
  23
  20
  18
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
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

Enanta Pharmaceuticals, Inc., a research and development-focused biotechnology company focuses on discovering and developing small molecule drugs for the treatment of viral infections and liver diseases. The company’s research and development focuses on four disease targets: Hepatitis C virus (HCV), Hepatitis B virus (HBV), Non-alcoholic Steatohepatitis (NASH), and Respiratory Syncytial Virus (RSV). Its lead product is paritaprevir, a protease inhibitor designed for use against HCV. The company also develops HCV protease inhibitor in phase III development with AbbVie, as well as a HCV program using a different class of molecules known as cyclophilin inhibitors. In addition, it has a program in non-alcoholic steatohepatitis; and discovers programs in other areas of viral infection and liver disease. Enanta Pharmaceuticals, Inc. has a collaborative development and license agreement with AbbVie to develop and commercialize HCV NS3 and NS3/4A protease inhibitors. The company was founded in 1995 and is headquartered in Watertown, Massachusetts.

FINANCIAL RATIOS  of  Enanta Pharmaceuticals (ENTA)

Valuation Ratios
P/E Ratio 32.7
Price to Sales 8.2
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 20
Price to Free Cash Flow 23.2
Growth Rates
Sales Growth Rate -45.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 150%
Cap. Spend. - 3 Yr. Gr. Rate 38%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0.4%
Total Debt to Equity 0.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.3%
Ret/ On Assets - 3 Yr. Avg. 24.3%
Return On Total Capital 8.7%
Ret/ On T. Cap. - 3 Yr. Avg. 25.3%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. 25.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 39.8%
EBITDA Margin - 3 Yr. Avg. 52.5%
Operating Margin 35.2%
Oper. Margin - 3 Yr. Avg. 50.6%
Pre-Tax Margin 37.5%
Pre-Tax Margin - 3 Yr. Avg. 51.6%
Net Profit Margin 25%
Net Profit Margin - 3 Yr. Avg. 48.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. -2.9%
Payout Ratio 0%

ENTA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ENTA stock intrinsic value calculation we used $88 million for the last fiscal year's total revenue generated by Enanta Pharmaceuticals. The default revenue input number comes from 2016 income statement of Enanta Pharmaceuticals. 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 ENTA stock valuation model: a) initial revenue growth rate of 2% 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 ENTA is calculated based on our internal credit rating of Enanta Pharmaceuticals, 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 Enanta Pharmaceuticals.
    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 ENTA stock the variable cost ratio is equal to 22.7%.

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 ENTA 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 Enanta Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Enanta Pharmaceuticals. 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 ENTA 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 ENTA are equal to 8%.

Life of production assets of 10 years is the average useful life of capital assets used in Enanta Pharmaceuticals 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 ENTA is equal to 15.9%. 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 - $270 million for Enanta Pharmaceuticals - 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 19.002 million for Enanta Pharmaceuticals 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 Enanta Pharmaceuticals at the current share price and the inputted number of shares is $0.7 billion.

RELATED COMPANIES Price Int.Val. Rating
ABBV AbbVie 72.52 70.36  hold
ICPT Intercept Phar 128.78 3.11  str.sell
ACHN Achillion Phar 4.22 0.89  str.sell
SCLN SciClone Pharm 10.95 17.19  str.buy

COMPANY NEWS

▶ The Best Hep C Drug Stock to Buy in 2017   [Jun-08-17 02:41PM  Motley Fool]
▶ Top 4 Pharmaceutical Stocks for 2017   [May-19-17 08:00AM  Investopedia]
▶ Enanta Pharmaceuticals reports 2Q loss   [04:07PM  Associated Press]
▶ [$$] Rare Discovery: A Value in the Biotech World   [Mar-23-17 12:51AM  The Wall Street Journal]
▶ [$$] Rare Discovery: A Value in the Biotech World   [Mar-22-17 01:12PM  at The Wall Street Journal]
▶ Enanta Pharmaceuticals reports 1Q loss   [Feb-08-17 05:24PM  Associated Press]
▶ 3 Low-Volatility Biotech Stocks to Buy   [Dec-18-16 01:36PM  at Motley Fool]
Stock chart of ENTA Financial statements of ENTA Annual reports of ENTA
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.