Intrinsic value of Incyte - INCY

Previous Close

$121.74

  Intrinsic Value

$293.88

stock screener

  Rating & Target

str. buy

+141%

  Value-price divergence*

+5000%

Previous close

$121.74

 
Intrinsic value

$293.88

 
Up/down potential

+141%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

We calculate the intrinsic value of INCY 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 22.9

 

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, %
  46.68
  46.00
  41.90
  38.21
  34.89
  31.90
  29.21
  26.79
  24.61
  22.65
  20.88
  19.30
  17.87
  16.58
  15.42
  14.38
  13.44
  12.60
  11.84
  11.15
  10.54
  9.98
  9.49
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
Revenue, $m
  1,106
  1,615
  2,291
  3,167
  4,272
  5,634
  7,280
  9,231
  11,502
  14,107
  17,054
  20,344
  23,979
  27,955
  32,266
  36,905
  41,866
  47,140
  52,720
  58,601
  64,776
  71,244
  78,002
  85,052
  92,395
  100,037
  107,983
  116,243
  124,826
  133,746
  143,016
Variable operating expenses, $m
 
  1,176
  1,663
  2,292
  3,087
  4,066
  5,249
  6,651
  8,285
  10,157
  12,275
  14,625
  17,238
  20,096
  23,196
  26,531
  30,097
  33,889
  37,900
  42,128
  46,567
  51,217
  56,076
  61,143
  66,422
  71,916
  77,628
  83,566
  89,737
  96,149
  102,813
Fixed operating expenses, $m
 
  158
  162
  166
  170
  174
  179
  183
  188
  192
  197
  202
  207
  212
  218
  223
  229
  234
  240
  246
  252
  259
  265
  272
  279
  286
  293
  300
  307
  315
  323
Total operating expenses, $m
  961
  1,334
  1,825
  2,458
  3,257
  4,240
  5,428
  6,834
  8,473
  10,349
  12,472
  14,827
  17,445
  20,308
  23,414
  26,754
  30,326
  34,123
  38,140
  42,374
  46,819
  51,476
  56,341
  61,415
  66,701
  72,202
  77,921
  83,866
  90,044
  96,464
  103,136
Operating income, $m
  145
  280
  467
  709
  1,015
  1,394
  1,852
  2,396
  3,030
  3,758
  4,581
  5,517
  6,534
  7,646
  8,852
  10,151
  11,540
  13,017
  14,580
  16,227
  17,957
  19,768
  21,662
  23,637
  25,694
  27,835
  30,062
  32,376
  34,782
  37,281
  39,879
EBITDA, $m
  203
  334
  536
  799
  1,132
  1,543
  2,040
  2,630
  3,317
  4,106
  4,999
  5,997
  7,099
  8,306
  9,614
  11,022
  12,528
  14,129
  15,824
  17,610
  19,485
  21,450
  23,503
  25,644
  27,875
  30,196
  32,610
  35,120
  37,728
  40,438
  43,255
Interest expense (income), $m
  7
  23
  42
  69
  102
  145
  198
  261
  336
  424
  524
  638
  765
  905
  1,059
  1,225
  1,404
  1,596
  1,799
  2,014
  2,241
  2,480
  2,729
  2,990
  3,262
  3,545
  3,840
  4,147
  4,466
  4,797
  5,141
Earnings before tax, $m
  107
  258
  424
  640
  913
  1,249
  1,655
  2,135
  2,694
  3,334
  4,057
  4,879
  5,768
  6,741
  7,794
  8,926
  10,136
  11,421
  12,781
  14,212
  15,715
  17,289
  18,933
  20,647
  22,432
  24,290
  26,222
  28,230
  30,316
  32,485
  34,738
Tax expense, $m
  3
  70
  115
  173
  246
  337
  447
  576
  727
  900
  1,095
  1,317
  1,557
  1,820
  2,104
  2,410
  2,737
  3,084
  3,451
  3,837
  4,243
  4,668
  5,112
  5,575
  6,057
  6,558
  7,080
  7,622
  8,185
  8,771
  9,379
Net income, $m
  104
  188
  310
  467
  666
  912
  1,208
  1,559
  1,967
  2,434
  2,961
  3,561
  4,211
  4,921
  5,689
  6,516
  7,399
  8,338
  9,330
  10,375
  11,472
  12,621
  13,821
  15,072
  16,375
  17,732
  19,142
  20,608
  22,131
  23,714
  25,359

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  809
  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
  1,639
  2,018
  2,864
  3,959
  5,340
  7,043
  9,100
  11,538
  14,378
  17,634
  21,317
  25,430
  29,974
  34,943
  40,332
  46,132
  52,333
  58,925
  65,900
  73,251
  80,970
  89,055
  97,503
  106,315
  115,494
  125,046
  134,979
  145,303
  156,033
  167,182
  178,770
Adjusted assets (=assets-cash), $m
  830
  2,018
  2,864
  3,959
  5,340
  7,043
  9,100
  11,538
  14,378
  17,634
  21,317
  25,430
  29,974
  34,943
  40,332
  46,132
  52,333
  58,925
  65,900
  73,251
  80,970
  89,055
  97,503
  106,315
  115,494
  125,046
  134,979
  145,303
  156,033
  167,182
  178,770
Revenue / Adjusted assets
  1.333
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
Average production assets, $m
  262
  381
  541
  747
  1,008
  1,330
  1,718
  2,178
  2,715
  3,329
  4,025
  4,801
  5,659
  6,597
  7,615
  8,710
  9,880
  11,125
  12,442
  13,830
  15,287
  16,814
  18,409
  20,072
  21,805
  23,609
  25,484
  27,433
  29,459
  31,564
  33,752
Working capital, $m
  720
  -129
  -183
  -253
  -342
  -451
  -582
  -738
  -920
  -1,129
  -1,364
  -1,628
  -1,918
  -2,236
  -2,581
  -2,952
  -3,349
  -3,771
  -4,218
  -4,688
  -5,182
  -5,700
  -6,240
  -6,804
  -7,392
  -8,003
  -8,639
  -9,299
  -9,986
  -10,700
  -11,441
Total debt, $m
  651
  1,211
  1,957
  2,922
  4,141
  5,643
  7,458
  9,608
  12,112
  14,984
  18,233
  21,861
  25,868
  30,251
  35,004
  40,119
  45,588
  51,403
  57,555
  64,038
  70,847
  77,978
  85,429
  93,201
  101,297
  109,721
  118,482
  127,588
  137,052
  146,886
  157,106
Total liabilities, $m
  1,219
  1,780
  2,526
  3,491
  4,710
  6,212
  8,027
  10,177
  12,681
  15,553
  18,802
  22,430
  26,437
  30,820
  35,573
  40,688
  46,157
  51,972
  58,124
  64,607
  71,416
  78,547
  85,998
  93,770
  101,866
  110,290
  119,051
  128,157
  137,621
  147,455
  157,675
Total equity, $m
  419
  238
  338
  467
  630
  831
  1,074
  1,362
  1,697
  2,081
  2,515
  3,001
  3,537
  4,123
  4,759
  5,444
  6,175
  6,953
  7,776
  8,644
  9,555
  10,509
  11,505
  12,545
  13,628
  14,755
  15,927
  17,146
  18,412
  19,728
  21,095
Total liabilities and equity, $m
  1,638
  2,018
  2,864
  3,958
  5,340
  7,043
  9,101
  11,539
  14,378
  17,634
  21,317
  25,431
  29,974
  34,943
  40,332
  46,132
  52,332
  58,925
  65,900
  73,251
  80,971
  89,056
  97,503
  106,315
  115,494
  125,045
  134,978
  145,303
  156,033
  167,183
  178,770
Debt-to-equity ratio
  1.554
  5.090
  5.790
  6.260
  6.570
  6.790
  6.940
  7.060
  7.140
  7.200
  7.250
  7.280
  7.310
  7.340
  7.360
  7.370
  7.380
  7.390
  7.400
  7.410
  7.420
  7.420
  7.430
  7.430
  7.430
  7.440
  7.440
  7.440
  7.440
  7.450
  7.450
Adjusted equity ratio
  -0.470
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118
  0.118

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  104
  188
  310
  467
  666
  912
  1,208
  1,559
  1,967
  2,434
  2,961
  3,561
  4,211
  4,921
  5,689
  6,516
  7,399
  8,338
  9,330
  10,375
  11,472
  12,621
  13,821
  15,072
  16,375
  17,732
  19,142
  20,608
  22,131
  23,714
  25,359
Depreciation, amort., depletion, $m
  58
  54
  70
  90
  116
  149
  187
  233
  287
  349
  418
  480
  566
  660
  761
  871
  988
  1,113
  1,244
  1,383
  1,529
  1,681
  1,841
  2,007
  2,181
  2,361
  2,548
  2,743
  2,946
  3,156
  3,375
Funds from operations, $m
  330
  242
  379
  558
  783
  1,060
  1,395
  1,792
  2,254
  2,782
  3,379
  4,042
  4,777
  5,580
  6,451
  7,387
  8,387
  9,450
  10,574
  11,758
  13,001
  14,302
  15,662
  17,079
  18,556
  20,092
  21,690
  23,351
  25,077
  26,870
  28,734
Change in working capital, $m
  25
  -41
  -54
  -70
  -88
  -109
  -132
  -156
  -182
  -208
  -236
  -263
  -291
  -318
  -345
  -371
  -397
  -422
  -446
  -470
  -494
  -517
  -541
  -564
  -587
  -611
  -636
  -661
  -687
  -714
  -742
Cash from operations, $m
  305
  283
  434
  628
  871
  1,169
  1,527
  1,948
  2,435
  2,991
  3,615
  4,305
  5,068
  5,898
  6,796
  7,758
  8,784
  9,872
  11,021
  12,228
  13,495
  14,820
  16,202
  17,643
  19,143
  20,704
  22,326
  24,012
  25,763
  27,584
  29,476
Maintenance CAPEX, $m
  0
  -26
  -38
  -54
  -75
  -101
  -133
  -172
  -218
  -271
  -333
  -402
  -480
  -566
  -660
  -761
  -871
  -988
  -1,113
  -1,244
  -1,383
  -1,529
  -1,681
  -1,841
  -2,007
  -2,181
  -2,361
  -2,548
  -2,743
  -2,946
  -3,156
New CAPEX, $m
  -120
  -120
  -160
  -207
  -261
  -322
  -388
  -460
  -536
  -615
  -695
  -777
  -858
  -938
  -1,017
  -1,095
  -1,171
  -1,245
  -1,317
  -1,388
  -1,457
  -1,526
  -1,595
  -1,664
  -1,733
  -1,803
  -1,875
  -1,949
  -2,026
  -2,105
  -2,188
Cash from investing activities, $m
  -232
  -146
  -198
  -261
  -336
  -423
  -521
  -632
  -754
  -886
  -1,028
  -1,179
  -1,338
  -1,504
  -1,677
  -1,856
  -2,042
  -2,233
  -2,430
  -2,632
  -2,840
  -3,055
  -3,276
  -3,505
  -3,740
  -3,984
  -4,236
  -4,497
  -4,769
  -5,051
  -5,344
Free cash flow, $m
  73
  137
  236
  367
  536
  747
  1,006
  1,316
  1,681
  2,104
  2,587
  3,126
  3,730
  4,394
  5,119
  5,902
  6,742
  7,639
  8,591
  9,596
  10,654
  11,764
  12,926
  14,139
  15,403
  16,720
  18,090
  19,514
  20,994
  22,533
  24,132
Issuance/(repayment) of debt, $m
  0
  560
  746
  965
  1,218
  1,502
  1,815
  2,150
  2,505
  2,872
  3,248
  3,628
  4,007
  4,383
  4,753
  5,115
  5,469
  5,815
  6,152
  6,483
  6,809
  7,131
  7,451
  7,772
  8,096
  8,425
  8,761
  9,106
  9,463
  9,834
  10,220
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  
  59
  560
  746
  965
  1,218
  1,502
  1,815
  2,150
  2,505
  2,872
  3,248
  3,628
  4,007
  4,383
  4,753
  5,115
  5,469
  5,815
  6,152
  6,483
  6,809
  7,131
  7,451
  7,772
  8,096
  8,425
  8,761
  9,106
  9,463
  9,834
  10,220
Total cash flow (excl. dividends), $m
  131
  697
  982
  1,332
  1,754
  2,249
  2,820
  3,466
  4,186
  4,977
  5,835
  6,754
  7,737
  8,777
  9,872
  11,017
  12,212
  13,454
  14,743
  16,080
  17,463
  18,895
  20,377
  21,911
  23,499
  25,145
  26,850
  28,620
  30,458
  32,367
  34,352
Retained Cash Flow (-), $m
  -248
  -75
  -100
  -129
  -163
  -201
  -243
  -288
  -335
  -384
  -435
  -485
  -536
  -586
  -636
  -684
  -732
  -778
  -823
  -867
  -911
  -954
  -997
  -1,040
  -1,083
  -1,127
  -1,172
  -1,218
  -1,266
  -1,316
  -1,367
Prev. year cash balance distribution, $m
 
  256
  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
 
  878
  882
  1,203
  1,591
  2,048
  2,577
  3,179
  3,851
  4,592
  5,401
  6,268
  7,201
  8,191
  9,236
  10,333
  11,480
  12,676
  13,920
  15,212
  16,552
  17,941
  19,380
  20,871
  22,416
  24,017
  25,678
  27,402
  29,192
  31,051
  32,985
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
 
  842
  807
  1,047
  1,310
  1,588
  1,871
  2,147
  2,407
  2,638
  2,831
  2,977
  3,073
  3,114
  3,101
  3,033
  2,917
  2,758
  2,564
  2,342
  2,103
  1,856
  1,608
  1,368
  1,142
  934
  749
  588
  452
  339
  248
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

Incyte Corporation focuses on the discovery, development, and commercialization of proprietary therapeutics in oncology in the United States and internationally. It offers JAKAFI for the treatment of myelofibrosis and polycythemia vera cancers. The company’s clinical stage products include ruxolitinib cream that is in Phase II clinical trial for the treatment of alopecia areata and atopic dermatitis; and baricitinib, which is in Phase III clinical trial for treatment of rheumatoid arthritis. In addition, it is developing itacitinib that is in Phase I/II clinical trials in combination with osimertinib for non-small cell lung cancer (NSCLC); INCB52793, INCB54329 (BRD), INCB57643 (BRD), and INCB53914 (PIM), which are in Phase I/II trials for the treatment of advanced malignancies; INCB54828 (FGFR1/2/3) that is in Phase II clinical trial the treatment of bladder cancer, cholangiocarcinoma, and 8p11 MPNs; INCB59872 (LSD1), which is in Phase II clinical trial the treatment of acute myeloid leukemia and small cell lung cancer; and capmatinib that is in Phase II clinical trial for the treatment of NSCLC and liver cancer. Further, the company’s clinical stage products include epacadostat, which is in Phase II clinical trial for the treatment of various tumors, and in Phase I/II clinical trials for the treatment of NSCLC and bladder cancer, as well as in Phase III clinical trial for the treatment of advanced melanoma; and INCB01158, INCSHR1210, INCAGN1876 (GITR), and INCAGN1949 (OX40), which are in Phase I/II clinical trials for the treatment of solid tumors. It markets its JAKAFI product through a network of specialty pharmacy providers and wholesalers. The company has collaboration agreements with Novartis International Pharmaceutical Ltd.; Eli Lilly and Company; Agenus Inc.; Jiangsu Hengrui Medicine Co., Ltd.; Merus N.V.; Calithera Biosciences, Inc; Pfizer Inc; and Abramson Cancer Center. Incyte Corporation was founded in 1991 and is headquartered in Wilmington, Delaware.

FINANCIAL RATIOS  of  Incyte (INCY)

Valuation Ratios
P/E Ratio 221.1
Price to Sales 20.8
Price to Book 54.9
Price to Tangible Book
Price to Cash Flow 75.4
Price to Free Cash Flow 124.3
Growth Rates
Sales Growth Rate 46.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 361.5%
Cap. Spend. - 3 Yr. Gr. Rate 97.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 155.4%
Total Debt to Equity 155.4%
Interest Coverage 16
Management Effectiveness
Return On Assets 8.4%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital 11.2%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 35.3%
Return On Equity - 3 Yr. Avg. 28.6%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 95.8%
Gross Margin - 3 Yr. Avg. 97.2%
EBITDA Margin 15.6%
EBITDA Margin - 3 Yr. Avg. 8.2%
Operating Margin 13.1%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 9.7%
Pre-Tax Margin - 3 Yr. Avg. 0.4%
Net Profit Margin 9.4%
Net Profit Margin - 3 Yr. Avg. 0.3%
Effective Tax Rate 2.8%
Eff/ Tax Rate - 3 Yr. Avg. 5.8%
Payout Ratio 0%

INCY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INCY stock intrinsic value calculation we used $1106 million for the last fiscal year's total revenue generated by Incyte. The default revenue input number comes from 2016 income statement of Incyte. 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 INCY stock valuation model: a) initial revenue growth rate of 46% 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 INCY is calculated based on our internal credit rating of Incyte, 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 Incyte.
    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 INCY stock the variable cost ratio is equal to 73.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $154 million in the base year in the intrinsic value calculation for INCY 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 Incyte.

Corporate tax rate of 27% is the nominal tax rate for Incyte. 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 INCY 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 INCY are equal to 23.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Incyte 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 INCY is equal to -8%. 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 - $419 million for Incyte - 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 188.11 million for Incyte 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 Incyte at the current share price and the inputted number of shares is $22.9 billion.

RELATED COMPANIES Price Int.Val. Rating
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MRK Merck&Co 61.84 30.02  str.sell
BMY Bristol-Myers 56.77 26.07  str.sell
AMGN Amgen 167.81 182.48  hold
NLNK NewLink Geneti 6.44 1.07  str.sell

COMPANY NEWS

▶ Incyte reports 2Q loss   [Aug-01-17 10:56PM  Associated Press]
▶ Eli Lilly Tumbles On Arthritis Drug Delay   [04:02PM  Investor's Business Daily]
▶ Eli Lilly: What the Heck Just Happened?   [12:10PM  Barrons.com]
▶ Why Gilead Won't Buy Incyte and Vertex   [Jul-18-17 06:00AM  Investopedia]
▶ Gilead Could Acquire This Biotech But Vertex Is Still Better: Analyst   [Jul-14-17 04:44PM  Investor's Business Daily]
▶ Could Q2 Surprise Spike This Beleaguered Biotech's Stock?   [02:37PM  Investor's Business Daily]
▶ What Analysts Recommend for United Therapeutics in June 2017   [Jul-04-17 10:37AM  Market Realist]
▶ Keytrudas Developments in June 2017   [07:36AM  Market Realist]
▶ Gilead And Vertex Should Join But Don't Hold Your Breath: Analyst   [Jun-30-17 04:13PM  Investor's Business Daily]
▶ Seattle Genetics: A Disappointing StudyOr Was It?   [Jun-26-17 02:52PM  Barrons.com]
▶ Biotech Stocks To Watch And Pharma Industry News   [Jun-20-17 02:39PM  Investor's Business Daily]
▶ 3 Biotech Stocks That Could Become M&A Targets   [Jun-17-17 06:42AM  Motley Fool]
▶ How Incytes Jakafi Performed in 1Q17   [Jun-15-17 10:37AM  Market Realist]
▶ Analyzing Incytes Revenue Streams in 1Q17   [07:37AM  Market Realist]
▶ How Incytes Revenues Trended in 1Q17   [Jun-14-17 04:36PM  Market Realist]
▶ Roche-NewLink Drug Move Shouldn't Impact Incyte, Says Analyst   [Jun-09-17 04:27PM  Investor's Business Daily]
▶ ASCO Was A Bust For Biotech   [12:56PM  Barrons.com]
▶ Dow's Merck Making Massive Strides With Keytruda, Analyst Says   [Jun-06-17 04:42PM  Investor's Business Daily]
▶ Incyte: Don't WorryBe Happy!   [12:47PM  Barrons.com]
▶ The Biggest Loser: Incyte Tumbles 5.7%   [Jun-05-17 04:48PM  Barrons.com]
▶ Dow's Merck 'Clearly Won' Vs. Bristol, Roche In Cancer Trials   [03:54PM  Investor's Business Daily]
▶ Incyte: Much Ado About ASCO Data   [11:46AM  Barrons.com]
▶ Stocks to watch during ASCO   [Jun-02-17 12:49PM  CNBC Videos]
▶ Broadcom, VMware Touted Ahead Of Earnings; 'Baywatch' Flop Hits Viacom   [May-31-17 04:26PM  Investor's Business Daily]
▶ Biotech Musical Chairs: Who Leads Next   [06:00AM  Investopedia]
▶ [$$] Four things to watch at the Asco cancer meeting   [May-30-17 05:00AM  Financial Times]
▶ ETFs with exposure to Incyte Corp. : May 26, 2017   [May-26-17 01:12PM  Capital Cube]
▶ Incyte to Present at Upcoming Investor Conferences   [May-22-17 04:15PM  Business Wire]
▶ Incyte Was the S&P 500s Top Gainer on May 18   [09:07AM  Market Realist]
▶ Which Stocks Are Showing Rising Relative Strength?   [04:45PM  Investor's Business Daily]
Stock chart of INCY Financial statements of INCY
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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