Intrinsic value of Ocular Therapeutix - OCUL

Previous Close

$5.82

  Intrinsic Value

$0.48

stock screener

  Rating & Target

str. sell

-92%

  Value-price divergence*

0%

Previous close

$5.82

 
Intrinsic value

$0.48

 
Up/down potential

-92%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of OCUL 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 0.2

 

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, %
  0.00
  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
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
Variable operating expenses, $m
 
  41
  42
  43
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
  131
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
  45
  41
  42
  43
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
  131
Operating income, $m
  -43
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -48
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -119
  -125
EBITDA, $m
  -42
  -38
  -39
  -40
  -41
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -98
  -102
  -107
  -112
  -118
  -124
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
Earnings before tax, $m
  -45
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -74
  -77
  -81
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
  -122
  -128
Tax expense, $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
  0
Net income, $m
  -45
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -74
  -77
  -81
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
  -122
  -128

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  68
  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
  75
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
Adjusted assets (=assets-cash), $m
  7
  28
  28
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
Revenue / Adjusted assets
  0.286
  0.071
  0.071
  0.069
  0.067
  0.065
  0.063
  0.061
  0.088
  0.086
  0.083
  0.079
  0.077
  0.073
  0.070
  0.067
  0.064
  0.082
  0.078
  0.075
  0.071
  0.069
  0.082
  0.078
  0.075
  0.071
  0.068
  0.078
  0.074
  0.071
  0.079
Average production assets, $m
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
Working capital, $m
  62
  0
  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
Total debt, $m
  16
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56
  59
  62
Total liabilities, $m
  23
  21
  22
  23
  23
  24
  25
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
Total equity, $m
  52
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Total liabilities and equity, $m
  75
  27
  28
  29
  30
  31
  32
  32
  34
  35
  36
  38
  40
  41
  43
  45
  46
  49
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
Debt-to-equity ratio
  0.308
  2.360
  2.390
  2.410
  2.440
  2.480
  2.510
  2.540
  2.570
  2.610
  2.640
  2.670
  2.710
  2.740
  2.770
  2.800
  2.830
  2.860
  2.890
  2.910
  2.940
  2.960
  2.990
  3.010
  3.030
  3.050
  3.070
  3.090
  3.110
  3.130
  3.150
Adjusted equity ratio
  -2.286
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -45
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -74
  -77
  -81
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
  -122
  -128
Depreciation, amort., depletion, $m
  1
  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
Funds from operations, $m
  -32
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -105
  -111
  -116
  -122
  -127
Change in working capital, $m
  2
  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 operations, $m
  -34
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -105
  -111
  -116
  -122
  -127
Maintenance CAPEX, $m
  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
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $m
  -2
  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 investing activities, $m
  36
  0
  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
Free cash flow, $m
  2
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -88
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
Issuance/(repayment) of debt, $m
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Issuance/(repurchase) of shares, $m
  1
  40
  41
  42
  43
  44
  46
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  123
  129
Cash from financing (excl. dividends), $m  
  1
  40
  41
  43
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  63
  66
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  110
  115
  121
  126
  132
Total cash flow (excl. dividends), $m
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
Retained Cash Flow (-), $m
  38
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -118
  -123
  -129
Prev. year cash balance distribution, $m
 
  46
  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
  -40
  -41
  -42
  -44
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -95
  -99
  -104
  -109
  -114
  -120
  -126
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
 
  6
  -37
  -36
  -35
  -34
  -33
  -31
  -30
  -29
  -27
  -26
  -24
  -22
  -20
  -19
  -17
  -15
  -13
  -12
  -10
  -9
  -7
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
Current shareholders' claim on cash, %
  100
  31.5
  9.9
  3.1
  1.0
  0.3
  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

Ocular Therapeutix, Inc., a biopharmaceutical company, focuses on the development and commercialization of therapies for diseases and conditions of the eye using its proprietary hydrogel platform technology in the United States. It markets ReSure Sealant, a hydrogel-based ophthalmic wound sealant to seal corneal incisions following cataract surgery. The company’s lead product includes DEXTENZA, which is in Phase III clinical trial for the treatment of post-surgical ocular inflammation and pain during cataract surgery, as well as for the treatment of allergic conjunctivitis; and in Phase II clinical trial for the treatment of inflammatory dry eye disease. It is also developing OTX-TP, which has completed Phase IIb clinical trial for glaucoma and ocular hypertension. In addition, the company has a pipeline of earlier stage punctum plug product candidates, including OTX-MP, which has completed a Phase I clinical trial evaluating safety and pharmacokinetics in patients during cataract surgery; and evaluates sustained-release injectable anti-VEGF drug depots for back-of-the-eye diseases. It has a strategic collaboration, option, and license agreement with Regeneron Pharmaceuticals, Inc. for the development of sustained release formulation of the vascular endothelial growth factor trap aflibercept for the treatment of wet age-related macular degeneration and other serious retinal diseases. Ocular Therapeutix, Inc. was founded in 2006 and is headquartered in Bedford, Massachusetts.

FINANCIAL RATIOS  of  Ocular Therapeutix (OCUL)

Valuation Ratios
P/E Ratio -3.2
Price to Sales 72.8
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow -4.3
Price to Free Cash Flow -4
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 34
Current Ratio 0
LT Debt to Equity 26.9%
Total Debt to Equity 30.8%
Interest Coverage -44
Management Effectiveness
Return On Assets -47.6%
Ret/ On Assets - 3 Yr. Avg. -48.9%
Return On Total Capital -52%
Ret/ On T. Cap. - 3 Yr. Avg. -53.5%
Return On Equity -63.4%
Return On Equity - 3 Yr. Avg. -65.1%
Asset Turnover 0
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 66.7%
EBITDA Margin -2150%
EBITDA Margin - 3 Yr. Avg. -2250%
Operating Margin -2150%
Oper. Margin - 3 Yr. Avg. -2250%
Pre-Tax Margin -2250%
Pre-Tax Margin - 3 Yr. Avg. -2383.3%
Net Profit Margin -2250%
Net Profit Margin - 3 Yr. Avg. -2383.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

OCUL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OCUL stock intrinsic value calculation we used $2 million for the last fiscal year's total revenue generated by Ocular Therapeutix. The default revenue input number comes from 2016 income statement of Ocular Therapeutix. 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 OCUL 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 OCUL is calculated based on our internal credit rating of Ocular Therapeutix, 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 Ocular Therapeutix.
    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 OCUL stock the variable cost ratio is equal to 2000%.

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 OCUL 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 6.5% for Ocular Therapeutix.

Corporate tax rate of 27% is the nominal tax rate for Ocular Therapeutix. 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 OCUL 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 OCUL are equal to 150%.

Life of production assets of 10 years is the average useful life of capital assets used in Ocular Therapeutix 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 OCUL is equal to -10%. 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 - $52 million for Ocular Therapeutix - 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 27.223 million for Ocular Therapeutix 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 Ocular Therapeutix at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
CRY CryoLife 19.15 11.43  sell
BVX Bovie Medical 2.40 0.24  str.sell
NVS Novartis ADR 84.10 35.73  str.sell
REGN Regeneron Phar 472.57 168.23  str.sell

COMPANY NEWS

▶ Ocular Therapeutix reports 2Q loss   [07:05PM  Associated Press]
▶ Ocular Therapeutix replaces regulatory chief after FDA rejection   [03:46PM  American City Business Journals]
▶ Bedfords Ocular Therapeutix turns to layoffs after FDA rejection   [05:45PM  American City Business Journals]
▶ Ocular Therapeutix faces fraud allegations as FDA rejects eye drug   [02:20PM  American City Business Journals]
Stock chart of OCUL Financial statements of OCUL
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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