Intrinsic value of pSivida - PSDV

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$1.77

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$1.77

 
Intrinsic value

$17.04

 
Up/down potential

+863%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of PSDV 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 0.1

 

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, %
  -92.59
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  2
  3
  5
  7
  11
  15
  21
  28
  37
  47
  60
  74
  90
  109
  130
  153
  178
  204
  233
  264
  297
  332
  369
  407
  447
  489
  533
  578
  626
  675
  726
Variable operating expenses, $m
 
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  45
  55
  65
  76
  89
  102
  117
  132
  149
  166
  184
  203
  224
  245
  266
  289
  313
  338
  363
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
  23
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  45
  55
  65
  76
  89
  102
  117
  132
  149
  166
  184
  203
  224
  245
  266
  289
  313
  338
  363
Operating income, $m
  -22
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  45
  55
  65
  76
  89
  102
  117
  132
  149
  166
  184
  203
  224
  245
  266
  289
  313
  338
  363
EBITDA, $m
  -21
  2
  3
  5
  7
  10
  14
  18
  24
  31
  39
  48
  59
  71
  84
  99
  115
  133
  152
  172
  193
  216
  240
  265
  291
  318
  346
  376
  407
  439
  472
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  32
Earnings before tax, $m
  -22
  2
  3
  4
  5
  7
  10
  13
  17
  22
  28
  35
  42
  51
  60
  71
  82
  94
  107
  122
  137
  152
  169
  186
  205
  224
  244
  264
  286
  308
  332
Tax expense, $m
  0
  0
  1
  1
  1
  2
  3
  4
  5
  6
  8
  9
  11
  14
  16
  19
  22
  25
  29
  33
  37
  41
  46
  50
  55
  60
  66
  71
  77
  83
  90
Net income, $m
  -22
  1
  2
  3
  4
  5
  7
  10
  13
  16
  20
  25
  31
  37
  44
  52
  60
  69
  78
  89
  100
  111
  123
  136
  149
  163
  178
  193
  209
  225
  242

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  29
  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
  32
  5
  7
  11
  16
  23
  31
  42
  55
  71
  89
  111
  136
  164
  195
  229
  266
  307
  350
  396
  446
  498
  553
  610
  670
  733
  799
  867
  938
  1,012
  1,089
Adjusted assets (=assets-cash), $m
  3
  5
  7
  11
  16
  23
  31
  42
  55
  71
  89
  111
  136
  164
  195
  229
  266
  307
  350
  396
  446
  498
  553
  610
  670
  733
  799
  867
  938
  1,012
  1,089
Revenue / Adjusted assets
  0.667
  0.600
  0.714
  0.636
  0.688
  0.652
  0.677
  0.667
  0.673
  0.662
  0.674
  0.667
  0.662
  0.665
  0.667
  0.668
  0.669
  0.664
  0.666
  0.667
  0.666
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
Average production assets, $m
  2
  2
  4
  6
  8
  11
  16
  21
  28
  35
  45
  56
  68
  82
  97
  114
  133
  153
  175
  198
  223
  249
  276
  305
  335
  367
  400
  434
  469
  506
  545
Working capital, $m
  25
  -6
  -10
  -15
  -21
  -30
  -42
  -56
  -73
  -94
  -119
  -148
  -181
  -218
  -260
  -305
  -355
  -409
  -467
  -529
  -595
  -664
  -737
  -814
  -894
  -978
  -1,066
  -1,157
  -1,252
  -1,350
  -1,453
Total debt, $m
  0
  -7
  -4
  -1
  3
  9
  17
  27
  38
  53
  69
  89
  111
  136
  164
  195
  229
  265
  304
  346
  390
  437
  486
  538
  592
  649
  708
  770
  834
  900
  969
Total liabilities, $m
  11
  4
  7
  10
  14
  20
  28
  38
  49
  64
  80
  100
  122
  147
  175
  206
  240
  276
  315
  357
  401
  448
  497
  549
  603
  660
  719
  781
  845
  911
  980
Total equity, $m
  21
  0
  1
  1
  2
  2
  3
  4
  5
  7
  9
  11
  14
  16
  19
  23
  27
  31
  35
  40
  45
  50
  55
  61
  67
  73
  80
  87
  94
  101
  109
Total liabilities and equity, $m
  32
  4
  8
  11
  16
  22
  31
  42
  54
  71
  89
  111
  136
  163
  194
  229
  267
  307
  350
  397
  446
  498
  552
  610
  670
  733
  799
  868
  939
  1,012
  1,089
Debt-to-equity ratio
  0.000
  -13.930
  -5.840
  -0.920
  2.160
  4.150
  5.470
  6.370
  7.000
  7.450
  7.770
  8.010
  8.190
  8.330
  8.430
  8.520
  8.590
  8.640
  8.690
  8.720
  8.750
  8.780
  8.800
  8.820
  8.840
  8.850
  8.860
  8.870
  8.880
  8.890
  8.900
Adjusted equity ratio
  -2.667
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -22
  1
  2
  3
  4
  5
  7
  10
  13
  16
  20
  25
  31
  37
  44
  52
  60
  69
  78
  89
  100
  111
  123
  136
  149
  163
  178
  193
  209
  225
  242
Depreciation, amort., depletion, $m
  1
  0
  1
  1
  2
  2
  3
  4
  6
  7
  9
  11
  14
  16
  19
  23
  27
  31
  35
  40
  45
  50
  55
  61
  67
  73
  80
  87
  94
  101
  109
Funds from operations, $m
  -14
  2
  3
  4
  6
  8
  10
  14
  18
  23
  29
  36
  44
  53
  63
  74
  86
  99
  113
  128
  144
  161
  179
  197
  217
  237
  258
  280
  303
  326
  351
Change in working capital, $m
  2
  -2
  -3
  -5
  -7
  -9
  -11
  -14
  -17
  -21
  -25
  -29
  -33
  -37
  -41
  -46
  -50
  -54
  -58
  -62
  -66
  -69
  -73
  -77
  -80
  -84
  -88
  -91
  -95
  -99
  -103
Cash from operations, $m
  -16
  4
  6
  9
  12
  17
  22
  28
  36
  44
  54
  65
  77
  90
  105
  120
  136
  153
  171
  190
  210
  230
  252
  274
  297
  321
  345
  371
  398
  425
  454
Maintenance CAPEX, $m
  0
  0
  0
  -1
  -1
  -2
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -14
  -16
  -19
  -23
  -27
  -31
  -35
  -40
  -45
  -50
  -55
  -61
  -67
  -73
  -80
  -87
  -94
  -101
New CAPEX, $m
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -38
Cash from investing activities, $m
  -4
  -1
  -1
  -3
  -4
  -5
  -6
  -8
  -11
  -14
  -16
  -20
  -23
  -28
  -32
  -36
  -42
  -47
  -53
  -58
  -65
  -71
  -77
  -84
  -91
  -98
  -106
  -114
  -123
  -131
  -139
Free cash flow, $m
  -20
  2
  4
  6
  9
  12
  15
  20
  25
  31
  38
  45
  54
  63
  73
  83
  95
  107
  119
  132
  146
  160
  175
  190
  206
  222
  239
  257
  275
  294
  314
Issuance/(repayment) of debt, $m
  0
  -7
  2
  3
  4
  6
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  34
  36
  39
  42
  44
  47
  49
  52
  54
  57
  59
  62
  64
  67
  69
Issuance/(repurchase) of shares, $m
  17
  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  
  17
  -7
  2
  3
  4
  6
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  34
  36
  39
  42
  44
  47
  49
  52
  54
  57
  59
  62
  64
  67
  69
Total cash flow (excl. dividends), $m
  -4
  -4
  7
  10
  13
  18
  23
  29
  37
  45
  55
  65
  76
  88
  101
  114
  128
  143
  158
  174
  190
  207
  224
  242
  260
  279
  298
  318
  339
  361
  383
Retained Cash Flow (-), $m
  2
  -8
  0
  0
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
Prev. year cash balance distribution, $m
 
  29
  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
 
  16
  7
  9
  13
  17
  22
  28
  35
  44
  53
  63
  74
  85
  98
  111
  125
  139
  154
  169
  185
  202
  218
  236
  254
  273
  292
  312
  332
  353
  375
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
 
  16
  6
  8
  10
  13
  16
  19
  22
  25
  28
  30
  31
  32
  33
  33
  32
  30
  28
  26
  24
  21
  18
  15
  13
  11
  9
  7
  5
  4
  3
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
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pSivida Corp. develops sustained-release drug-delivery products for the treatment of chronic eye diseases in the United States and the United Kingdom. It offers ILUVIEN, an injectable, sustained-release micro-insert for use in treating vision impairment associated with diabetic macular edema; and Retisert for the treatment of posterior segment uveitis. The company is also developing Medidur, an injectable, sustained-release micro-insert, which is in Phase III clinical trials for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye. Its pre-clinical development program focuses on developing products using its core platform technologies, Durasert and Tethadur, to deliver drugs and biologics to treat wet and dry age-related macular degeneration, glaucoma, osteoarthritis, and other diseases. The company has strategic collaborations with Alimera Sciences, Inc.; Pfizer, Inc.; Bausch & Lomb Incorporated; and Enigma Therapeutics Limited. pSivida Corp. was founded in 1987 and is headquartered in Watertown, Massachusetts.

FINANCIAL RATIOS  of  pSivida (PSDV)

Valuation Ratios
P/E Ratio -2.7
Price to Sales 30.2
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow -3.8
Price to Free Cash Flow -3.8
Growth Rates
Sales Growth Rate -92.6%
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
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -68.8%
Ret/ On Assets - 3 Yr. Avg. -37.9%
Return On Total Capital -100%
Ret/ On T. Cap. - 3 Yr. Avg. -60.5%
Return On Equity -100%
Return On Equity - 3 Yr. Avg. -60.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -1050%
EBITDA Margin - 3 Yr. Avg. -474.7%
Operating Margin -1050%
Oper. Margin - 3 Yr. Avg. -496.9%
Pre-Tax Margin -1100%
Pre-Tax Margin - 3 Yr. Avg. -503.7%
Net Profit Margin -1100%
Net Profit Margin - 3 Yr. Avg. -503.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PSDV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PSDV stock intrinsic value calculation we used $2 million for the last fiscal year's total revenue generated by pSivida. The default revenue input number comes from 2016 income statement of pSivida. 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 PSDV stock valuation model: a) initial revenue growth rate of 60% 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 PSDV is calculated based on our internal credit rating of pSivida, 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 pSivida.
    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 PSDV stock the variable cost ratio is equal to 50%.

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 PSDV 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 pSivida.

Corporate tax rate of 27% is the nominal tax rate for pSivida. 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 PSDV 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 PSDV are equal to 75%.

Life of production assets of 1.5 years is the average useful life of capital assets used in pSivida 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 PSDV is equal to -200%. 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 - $21 million for pSivida - 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 33.593 million for pSivida 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 pSivida at the current share price and the inputted number of shares is $0.1 billion.


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COMPANY NEWS

▶ ETFs with exposure to pSivida Corp. : April 11, 2017   [Apr-11-17 02:23PM  Capital Cube]
▶ ETFs with exposure to pSivida Corp. : March 30, 2017   [Mar-29-17 08:35PM  Capital Cube]
▶ PSivida posts 2Q loss   [05:30PM  Associated Press]
▶ Watertown's pSivida appoints new CEO to focus on commercialization   [Sep-15-16 11:25AM  at bizjournals.com]
▶ PSivida reports 4Q loss   [Sep-12-16 04:17PM  AP]
▶ pSivida Announces 13 New Patents Issued or Allowed   [Aug-29-16 10:00AM  GlobeNewswire]
▶ PSivida reports 3Q loss   [May-05-16 06:20PM  AP]
▶ PSivida reports 2Q loss   [04:20PM  AP]
▶ pSivida Closes $17.8 Million Offering   [Jan-13-16 07:45AM  GlobeNewswire]
▶ pSivida Announces Proposed Public Offering of Common Stock   [Jan-06-16 05:57PM  GlobeNewswire]
Stock chart of PSDV Financial statements of PSDV
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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