Intrinsic value of Phibro Animal Health - PAHC

Previous Close

$34.80

  Intrinsic Value

$23.10

stock screener

  Rating & Target

sell

-34%

Previous close

$34.80

 
Intrinsic value

$23.10

 
Up/down potential

-34%

 
Rating

sell

We calculate the intrinsic value of PAHC 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 2017), $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 1.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.60
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  764
  788
  815
  844
  875
  909
  944
  982
  1,023
  1,066
  1,112
  1,161
  1,212
  1,267
  1,324
  1,385
  1,449
  1,517
  1,588
  1,663
  1,742
  1,826
  1,913
  2,006
  2,103
  2,205
  2,312
  2,425
  2,544
  2,669
  2,800
Variable operating expenses, $m
 
  197
  204
  211
  218
  227
  236
  245
  255
  266
  277
  287
  299
  313
  327
  342
  358
  374
  392
  411
  430
  451
  472
  495
  519
  544
  571
  599
  628
  659
  691
Fixed operating expenses, $m
 
  502
  515
  528
  541
  554
  568
  582
  597
  612
  627
  643
  659
  675
  692
  710
  727
  746
  764
  783
  803
  823
  844
  865
  886
  908
  931
  954
  978
  1,003
  1,028
Total operating expenses, $m
  669
  699
  719
  739
  759
  781
  804
  827
  852
  878
  904
  930
  958
  988
  1,019
  1,052
  1,085
  1,120
  1,156
  1,194
  1,233
  1,274
  1,316
  1,360
  1,405
  1,452
  1,502
  1,553
  1,606
  1,662
  1,719
Operating income, $m
  95
  89
  97
  106
  116
  127
  141
  155
  171
  189
  208
  231
  254
  279
  305
  334
  364
  397
  432
  469
  509
  552
  597
  646
  697
  752
  810
  872
  938
  1,007
  1,081
EBITDA, $m
  121
  115
  124
  133
  145
  157
  171
  187
  204
  223
  244
  266
  291
  317
  345
  375
  408
  443
  480
  519
  562
  607
  655
  706
  761
  819
  880
  945
  1,014
  1,088
  1,165
Interest expense (income), $m
  15
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  39
  41
  43
  45
  48
  51
  53
  56
  59
  63
  66
Earnings before tax, $m
  81
  75
  82
  90
  100
  111
  123
  136
  151
  168
  186
  208
  229
  252
  277
  304
  333
  364
  397
  433
  471
  511
  555
  601
  649
  702
  757
  816
  878
  944
  1,015
Tax expense, $m
  16
  20
  22
  24
  27
  30
  33
  37
  41
  45
  50
  56
  62
  68
  75
  82
  90
  98
  107
  117
  127
  138
  150
  162
  175
  189
  204
  220
  237
  255
  274
Net income, $m
  65
  55
  60
  66
  73
  81
  90
  99
  110
  123
  136
  152
  167
  184
  203
  222
  243
  266
  290
  316
  344
  373
  405
  438
  474
  512
  553
  595
  641
  689
  741

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  56
  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
  623
  585
  605
  627
  650
  674
  701
  729
  760
  792
  826
  862
  900
  940
  983
  1,028
  1,076
  1,126
  1,179
  1,235
  1,294
  1,355
  1,420
  1,489
  1,561
  1,637
  1,717
  1,800
  1,889
  1,981
  2,079
Adjusted assets (=assets-cash), $m
  567
  585
  605
  627
  650
  674
  701
  729
  760
  792
  826
  862
  900
  940
  983
  1,028
  1,076
  1,126
  1,179
  1,235
  1,294
  1,355
  1,420
  1,489
  1,561
  1,637
  1,717
  1,800
  1,889
  1,981
  2,079
Revenue / Adjusted assets
  1.347
  1.347
  1.347
  1.346
  1.346
  1.349
  1.347
  1.347
  1.346
  1.346
  1.346
  1.347
  1.347
  1.348
  1.347
  1.347
  1.347
  1.347
  1.347
  1.347
  1.346
  1.348
  1.347
  1.347
  1.347
  1.347
  1.347
  1.347
  1.347
  1.347
  1.347
Average production assets, $m
  185
  190
  196
  203
  211
  219
  228
  237
  247
  257
  268
  280
  292
  305
  319
  334
  349
  366
  383
  401
  420
  440
  461
  483
  507
  531
  557
  584
  613
  643
  675
Working capital, $m
  248
  204
  211
  219
  227
  235
  245
  254
  265
  276
  288
  301
  314
  328
  343
  359
  375
  393
  411
  431
  451
  473
  496
  519
  545
  571
  599
  628
  659
  691
  725
Total debt, $m
  313
  322
  338
  356
  375
  395
  417
  441
  465
  492
  520
  549
  581
  614
  649
  686
  725
  767
  810
  856
  904
  955
  1,009
  1,065
  1,124
  1,187
  1,252
  1,321
  1,393
  1,470
  1,550
Total liabilities, $m
  472
  481
  497
  515
  534
  554
  576
  600
  624
  651
  679
  708
  740
  773
  808
  845
  884
  926
  969
  1,015
  1,063
  1,114
  1,168
  1,224
  1,283
  1,346
  1,411
  1,480
  1,552
  1,629
  1,709
Total equity, $m
  151
  104
  108
  112
  116
  120
  125
  130
  135
  141
  147
  153
  160
  167
  175
  183
  192
  200
  210
  220
  230
  241
  253
  265
  278
  291
  306
  320
  336
  353
  370
Total liabilities and equity, $m
  623
  585
  605
  627
  650
  674
  701
  730
  759
  792
  826
  861
  900
  940
  983
  1,028
  1,076
  1,126
  1,179
  1,235
  1,293
  1,355
  1,421
  1,489
  1,561
  1,637
  1,717
  1,800
  1,888
  1,982
  2,079
Debt-to-equity ratio
  2.073
  3.090
  3.140
  3.190
  3.240
  3.290
  3.340
  3.390
  3.440
  3.490
  3.540
  3.580
  3.630
  3.670
  3.710
  3.750
  3.790
  3.820
  3.860
  3.890
  3.930
  3.960
  3.990
  4.020
  4.050
  4.070
  4.100
  4.120
  4.140
  4.170
  4.190
Adjusted equity ratio
  0.168
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  65
  55
  60
  66
  73
  81
  90
  99
  110
  123
  136
  152
  167
  184
  203
  222
  243
  266
  290
  316
  344
  373
  405
  438
  474
  512
  553
  595
  641
  689
  741
Depreciation, amort., depletion, $m
  26
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  70
  73
  77
  80
  84
Funds from operations, $m
  99
  81
  87
  94
  102
  110
  120
  131
  144
  157
  172
  187
  204
  222
  242
  264
  287
  312
  338
  366
  396
  428
  462
  499
  537
  579
  622
  669
  718
  770
  825
Change in working capital, $m
  1
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
Cash from operations, $m
  98
  75
  80
  86
  94
  102
  111
  122
  133
  146
  160
  174
  191
  208
  228
  248
  270
  294
  319
  347
  376
  407
  440
  475
  512
  552
  594
  639
  687
  738
  791
Maintenance CAPEX, $m
  0
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -58
  -60
  -63
  -66
  -70
  -73
  -77
  -80
New CAPEX, $m
  -21
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
Cash from investing activities, $m
  -22
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -40
  -41
  -43
  -46
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -80
  -83
  -88
  -92
  -97
  -102
  -107
  -112
Free cash flow, $m
  76
  46
  50
  55
  61
  67
  75
  84
  94
  105
  117
  129
  143
  159
  175
  194
  213
  234
  257
  281
  307
  334
  364
  395
  428
  464
  502
  542
  585
  631
  679
Issuance/(repayment) of debt, $m
  -40
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  62
  66
  69
  72
  76
  80
Issuance/(repurchase) of shares, $m
  6
  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  
  -38
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  62
  66
  69
  72
  76
  80
Total cash flow (excl. dividends), $m
  38
  61
  66
  72
  80
  88
  97
  107
  119
  131
  145
  159
  175
  192
  211
  231
  252
  275
  300
  327
  355
  385
  417
  451
  488
  526
  568
  611
  658
  707
  759
Retained Cash Flow (-), $m
  -61
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
Prev. year cash balance distribution, $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
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
 
  108
  63
  69
  75
  83
  92
  102
  113
  125
  138
  152
  168
  185
  203
  223
  244
  266
  291
  317
  344
  374
  406
  439
  475
  513
  553
  596
  642
  690
  742
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  101
  54
  55
  55
  55
  55
  55
  53
  52
  49
  46
  43
  40
  36
  32
  28
  24
  20
  16
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
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

Phibro Animal Health Corporation (Phibro) is a global diversified animal health and mineral nutrition company. The Company operates in three segments, which include Animal Health, Mineral Nutrition and Performance Products. The Company offers various products, which include Animal health products, such as antibacterials, anticoccidials, vaccines, nutritional specialty products and mineral nutrition products. The Company also manufactures and markets specific ingredients for use in the personal care, automotive, industrial chemical and chemical catalyst industries. The Company's Medicated Feed Additives (MFAs) and other business consist of concentrated medicated products, which are administered through animal feeds. The Company's MFAs and other business consists of the production and sale of antibacterials, including Stafac, Terramycin, Neo-Terramycin and Mecadox and anticoccidials, including Nicarb, Aviax, Aviax Plus, Coxistac and amprolium.

FINANCIAL RATIOS  of  Phibro Animal Health (PAHC)

Valuation Ratios
P/E Ratio 21.4
Price to Sales 1.8
Price to Book 9.2
Price to Tangible Book
Price to Cash Flow 14.2
Price to Free Cash Flow 18
Growth Rates
Sales Growth Rate 1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -41.7%
Cap. Spend. - 3 Yr. Gr. Rate 1%
Financial Strength
Quick Ratio 9
Current Ratio 0.2
LT Debt to Equity 203.3%
Total Debt to Equity 207.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 12.5%
Ret/ On Assets - 3 Yr. Avg. 14.9%
Return On Total Capital 14.4%
Ret/ On T. Cap. - 3 Yr. Avg. 18.5%
Return On Equity 53.9%
Return On Equity - 3 Yr. Avg. 153%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 32.5%
Gross Margin - 3 Yr. Avg. 31.8%
EBITDA Margin 16%
EBITDA Margin - 3 Yr. Avg. 15.4%
Operating Margin 12.4%
Oper. Margin - 3 Yr. Avg. 11.9%
Pre-Tax Margin 10.6%
Pre-Tax Margin - 3 Yr. Avg. 10.5%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 9.2%
Effective Tax Rate 19.8%
Eff/ Tax Rate - 3 Yr. Avg. 12%
Payout Ratio 24.6%

PAHC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PAHC stock intrinsic value calculation we used $764 million for the last fiscal year's total revenue generated by Phibro Animal Health. The default revenue input number comes from 2017 income statement of Phibro Animal Health. 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 PAHC stock valuation model: a) initial revenue growth rate of 3.2% 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 7%, whose default value for PAHC is calculated based on our internal credit rating of Phibro Animal Health, 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 Phibro Animal Health.
    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 PAHC stock the variable cost ratio is equal to 25%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $490 million in the base year in the intrinsic value calculation for PAHC 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 4.5% for Phibro Animal Health.

Corporate tax rate of 27% is the nominal tax rate for Phibro Animal Health. 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 PAHC 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 PAHC are equal to 24.1%.

Life of production assets of 8 years is the average useful life of capital assets used in Phibro Animal Health 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 PAHC is equal to 25.9%. 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 - $151 million for Phibro Animal Health - 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 39.892 million for Phibro Animal Health 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 Phibro Animal Health at the current share price and the inputted number of shares is $1.4 billion.

RELATED COMPANIES Price Int.Val. Rating
SNY Sanofi ADR 44.54 48.60  hold
ZTS Zoetis 70.79 11.21  str.sell
MRK Merck&Co 55.20 30.41  str.sell
LLY Eli Lilly 82.89 98.13  hold
ICCC Immucell 8.50 5.49  sell

COMPANY NEWS

▶ Phibro beats 1Q profit forecasts   [Nov-06-17 05:49PM  Associated Press]
▶ Phibro beats 4Q profit forecasts   [08:04PM  Associated Press]
▶ Phibro posts 3Q profit   [May-08-17 05:00PM  Associated Press]
▶ 7 Stocks Trending Up With Unusual Volume   [Feb-08-17 09:10AM  TheStreet.com]
▶ Is Phibro Animal Health Corp (PAHC) A Good Stock To Buy?   [Dec-11-16 09:52AM  at Insider Monkey]
Financial statements of PAHC
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.