Intrinsic value of Quintiles IMS Holdings - Q

Previous Close

$91.70

  Intrinsic Value

$485.05

stock screener

  Rating & Target

str. buy

+429%

  Value-price divergence*

+5000%

Previous close

$91.70

 
Intrinsic value

$485.05

 
Up/down potential

+429%

 
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 Q 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 21.1

 

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, %
  19.87
  55.80
  50.72
  46.15
  42.03
  38.33
  35.00
  32.00
  29.30
  26.87
  24.68
  22.71
  20.94
  19.35
  17.91
  16.62
  15.46
  14.41
  13.47
  12.62
  11.86
  11.18
  10.56
  10.00
  9.50
  9.05
  8.65
  8.28
  7.95
  7.66
  7.39
Revenue, $m
  6,878
  10,716
  16,151
  23,604
  33,526
  46,377
  62,607
  82,640
  106,851
  135,559
  169,017
  207,405
  250,839
  299,370
  352,995
  411,668
  475,308
  543,816
  617,079
  694,984
  777,426
  864,311
  955,570
  1,051,152
  1,151,036
  1,255,229
  1,363,768
  1,476,719
  1,594,177
  1,716,269
  1,843,148
Variable operating expenses, $m
 
  8,928
  12,912
  18,376
  25,649
  35,069
  46,966
  61,651
  79,399
  100,443
  124,968
  152,036
  183,875
  219,450
  258,759
  301,768
  348,420
  398,639
  452,343
  509,451
  569,883
  633,574
  700,470
  770,535
  843,754
  920,132
  999,695
  1,082,492
  1,168,594
  1,258,092
  1,351,099
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
  6,267
  8,928
  12,912
  18,376
  25,649
  35,069
  46,966
  61,651
  79,399
  100,443
  124,968
  152,036
  183,875
  219,450
  258,759
  301,768
  348,420
  398,639
  452,343
  509,451
  569,883
  633,574
  700,470
  770,535
  843,754
  920,132
  999,695
  1,082,492
  1,168,594
  1,258,092
  1,351,099
Operating income, $m
  611
  1,788
  3,239
  5,229
  7,877
  11,308
  15,641
  20,989
  27,452
  35,116
  44,048
  55,369
  66,964
  79,920
  94,236
  109,899
  126,889
  145,178
  164,736
  185,534
  207,542
  230,737
  255,100
  280,617
  307,282
  335,097
  364,073
  394,226
  425,583
  458,177
  492,049
EBITDA, $m
  900
  3,052
  4,600
  6,722
  9,548
  13,208
  17,830
  23,535
  30,431
  38,606
  48,135
  59,068
  71,438
  85,259
  100,531
  117,241
  135,365
  154,876
  175,741
  197,928
  221,406
  246,151
  272,141
  299,362
  327,809
  357,482
  388,393
  420,561
  454,013
  488,784
  524,918
Interest expense (income), $m
  124
  249
  493
  839
  1,313
  1,944
  2,761
  3,793
  5,067
  6,607
  8,432
  10,560
  13,001
  15,763
  18,849
  22,259
  25,990
  30,037
  34,393
  39,052
  44,006
  49,248
  54,774
  60,577
  66,655
  73,006
  79,632
  86,534
  93,717
  101,186
  108,950
Earnings before tax, $m
  479
  1,539
  2,746
  4,390
  6,565
  9,364
  12,880
  17,196
  22,385
  28,510
  35,616
  44,809
  53,963
  64,157
  75,387
  87,640
  100,899
  115,141
  130,343
  146,482
  163,536
  181,489
  200,326
  220,040
  240,627
  262,091
  284,441
  307,692
  331,867
  356,991
  383,099
Tax expense, $m
  345
  416
  741
  1,185
  1,772
  2,528
  3,478
  4,643
  6,044
  7,698
  9,616
  12,099
  14,570
  17,322
  20,355
  23,663
  27,243
  31,088
  35,193
  39,550
  44,155
  49,002
  54,088
  59,411
  64,969
  70,765
  76,799
  83,077
  89,604
  96,388
  103,437
Net income, $m
  115
  1,124
  2,004
  3,205
  4,792
  6,836
  9,402
  12,553
  16,341
  20,812
  26,000
  32,711
  39,393
  46,835
  55,033
  63,977
  73,656
  84,053
  95,150
  106,932
  119,382
  132,487
  146,238
  160,629
  175,658
  191,326
  207,642
  224,615
  242,263
  260,603
  279,662

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,238
  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
  21,208
  31,151
  46,951
  68,618
  97,460
  134,816
  181,997
  240,231
  310,613
  394,067
  491,327
  602,922
  729,183
  870,261
  1,026,148
  1,196,708
  1,381,711
  1,580,861
  1,793,835
  2,020,303
  2,259,958
  2,512,533
  2,777,819
  3,055,674
  3,346,035
  3,648,923
  3,964,442
  4,292,787
  4,634,235
  4,989,153
  5,357,988
Adjusted assets (=assets-cash), $m
  19,970
  31,151
  46,951
  68,618
  97,460
  134,816
  181,997
  240,231
  310,613
  394,067
  491,327
  602,922
  729,183
  870,261
  1,026,148
  1,196,708
  1,381,711
  1,580,861
  1,793,835
  2,020,303
  2,259,958
  2,512,533
  2,777,819
  3,055,674
  3,346,035
  3,648,923
  3,964,442
  4,292,787
  4,634,235
  4,989,153
  5,357,988
Revenue / Adjusted assets
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
Average production assets, $m
  3,677
  5,733
  8,641
  12,628
  17,936
  24,812
  33,495
  44,212
  57,165
  72,524
  90,424
  110,962
  134,199
  160,163
  188,852
  220,242
  254,290
  290,942
  330,137
  371,817
  415,923
  462,407
  511,230
  562,366
  615,804
  671,548
  729,616
  790,044
  852,885
  918,204
  986,084
Working capital, $m
  632
  -804
  -1,211
  -1,770
  -2,514
  -3,478
  -4,696
  -6,198
  -8,014
  -10,167
  -12,676
  -15,555
  -18,813
  -22,453
  -26,475
  -30,875
  -35,648
  -40,786
  -46,281
  -52,124
  -58,307
  -64,823
  -71,668
  -78,836
  -86,328
  -94,142
  -102,283
  -110,754
  -119,563
  -128,720
  -138,236
Total debt, $m
  7,200
  14,094
  23,969
  37,511
  55,537
  78,885
  108,373
  144,769
  188,758
  240,917
  301,704
  371,451
  450,364
  538,538
  635,967
  742,568
  858,194
  982,663
  1,115,772
  1,257,314
  1,407,099
  1,564,958
  1,730,762
  1,904,421
  2,085,897
  2,275,202
  2,472,401
  2,677,617
  2,891,022
  3,112,846
  3,343,368
Total liabilities, $m
  12,575
  19,469
  29,344
  42,886
  60,912
  84,260
  113,748
  150,144
  194,133
  246,292
  307,079
  376,826
  455,739
  543,913
  641,342
  747,943
  863,569
  988,038
  1,121,147
  1,262,689
  1,412,474
  1,570,333
  1,736,137
  1,909,796
  2,091,272
  2,280,577
  2,477,776
  2,682,992
  2,896,397
  3,118,221
  3,348,743
Total equity, $m
  8,633
  11,682
  17,607
  25,732
  36,547
  50,556
  68,249
  90,087
  116,480
  147,775
  184,248
  226,096
  273,444
  326,348
  384,805
  448,766
  518,141
  592,823
  672,688
  757,614
  847,484
  942,200
  1,041,682
  1,145,878
  1,254,763
  1,368,346
  1,486,666
  1,609,795
  1,737,838
  1,870,932
  2,009,246
Total liabilities and equity, $m
  21,208
  31,151
  46,951
  68,618
  97,459
  134,816
  181,997
  240,231
  310,613
  394,067
  491,327
  602,922
  729,183
  870,261
  1,026,147
  1,196,709
  1,381,710
  1,580,861
  1,793,835
  2,020,303
  2,259,958
  2,512,533
  2,777,819
  3,055,674
  3,346,035
  3,648,923
  3,964,442
  4,292,787
  4,634,235
  4,989,153
  5,357,989
Debt-to-equity ratio
  0.834
  1.210
  1.360
  1.460
  1.520
  1.560
  1.590
  1.610
  1.620
  1.630
  1.640
  1.640
  1.650
  1.650
  1.650
  1.650
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
Adjusted equity ratio
  0.370
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  115
  1,124
  2,004
  3,205
  4,792
  6,836
  9,402
  12,553
  16,341
  20,812
  26,000
  32,711
  39,393
  46,835
  55,033
  63,977
  73,656
  84,053
  95,150
  106,932
  119,382
  132,487
  146,238
  160,629
  175,658
  191,326
  207,642
  224,615
  242,263
  260,603
  279,662
Depreciation, amort., depletion, $m
  289
  1,264
  1,361
  1,494
  1,671
  1,900
  2,189
  2,546
  2,978
  3,490
  4,087
  3,699
  4,473
  5,339
  6,295
  7,341
  8,476
  9,698
  11,005
  12,394
  13,864
  15,414
  17,041
  18,746
  20,527
  22,385
  24,321
  26,335
  28,429
  30,607
  32,869
Funds from operations, $m
  1,072
  2,387
  3,365
  4,698
  6,463
  8,736
  11,592
  15,099
  19,320
  24,302
  30,087
  36,410
  43,867
  52,174
  61,328
  71,319
  82,133
  93,751
  106,155
  119,326
  133,246
  147,901
  163,279
  179,375
  196,185
  213,711
  231,962
  250,950
  270,692
  291,210
  312,532
Change in working capital, $m
  212
  -288
  -408
  -559
  -744
  -964
  -1,217
  -1,502
  -1,816
  -2,153
  -2,509
  -2,879
  -3,258
  -3,640
  -4,022
  -4,400
  -4,773
  -5,138
  -5,495
  -5,843
  -6,183
  -6,516
  -6,844
  -7,169
  -7,491
  -7,815
  -8,140
  -8,471
  -8,809
  -9,157
  -9,516
Cash from operations, $m
  860
  2,675
  3,773
  5,257
  7,207
  9,699
  12,809
  16,602
  21,135
  26,455
  32,596
  39,289
  47,124
  55,813
  65,350
  75,719
  86,906
  98,889
  111,650
  125,168
  139,429
  154,417
  170,124
  186,543
  203,676
  221,526
  240,103
  259,421
  279,501
  300,367
  322,048
Maintenance CAPEX, $m
  0
  -123
  -191
  -288
  -421
  -598
  -827
  -1,116
  -1,474
  -1,906
  -2,417
  -3,014
  -3,699
  -4,473
  -5,339
  -6,295
  -7,341
  -8,476
  -9,698
  -11,005
  -12,394
  -13,864
  -15,414
  -17,041
  -18,746
  -20,527
  -22,385
  -24,321
  -26,335
  -28,429
  -30,607
New CAPEX, $m
  -164
  -2,057
  -2,908
  -3,988
  -5,308
  -6,875
  -8,683
  -10,717
  -12,953
  -15,359
  -17,900
  -20,538
  -23,237
  -25,964
  -28,689
  -31,390
  -34,048
  -36,652
  -39,196
  -41,679
  -44,106
  -46,484
  -48,823
  -51,136
  -53,438
  -55,743
  -58,068
  -60,428
  -62,840
  -65,319
  -67,880
Cash from investing activities, $m
  1,731
  -2,180
  -3,099
  -4,276
  -5,729
  -7,473
  -9,510
  -11,833
  -14,427
  -17,265
  -20,317
  -23,552
  -26,936
  -30,437
  -34,028
  -37,685
  -41,389
  -45,128
  -48,894
  -52,684
  -56,500
  -60,348
  -64,237
  -68,177
  -72,184
  -76,270
  -80,453
  -84,749
  -89,175
  -93,748
  -98,487
Free cash flow, $m
  2,591
  496
  674
  982
  1,478
  2,227
  3,299
  4,768
  6,709
  9,191
  12,279
  15,737
  20,188
  25,376
  31,321
  38,034
  45,516
  53,761
  62,756
  72,485
  82,929
  94,069
  105,887
  118,366
  131,492
  145,256
  159,650
  174,672
  190,326
  206,619
  223,561
Issuance/(repayment) of debt, $m
  -1,313
  6,986
  9,875
  13,542
  18,026
  23,348
  29,488
  36,396
  43,989
  52,159
  60,787
  69,747
  78,913
  88,174
  97,429
  106,600
  115,626
  124,469
  133,109
  141,543
  149,784
  157,859
  165,803
  173,659
  181,476
  189,305
  197,200
  205,215
  213,405
  221,824
  230,522
Issuance/(repurchase) of shares, $m
  -1,000
  3,071
  3,921
  4,920
  6,024
  7,173
  8,291
  9,285
  10,052
  10,483
  10,473
  9,137
  7,955
  6,069
  3,425
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,284
  10,057
  13,796
  18,462
  24,050
  30,521
  37,779
  45,681
  54,041
  62,642
  71,260
  78,884
  86,868
  94,243
  100,854
  106,600
  115,626
  124,469
  133,109
  141,543
  149,784
  157,859
  165,803
  173,659
  181,476
  189,305
  197,200
  205,215
  213,405
  221,824
  230,522
Total cash flow (excl. dividends), $m
  221
  10,554
  14,469
  19,444
  25,528
  32,747
  41,078
  50,449
  60,749
  71,833
  83,539
  94,620
  107,056
  119,619
  132,176
  144,634
  161,143
  178,230
  195,864
  214,027
  232,713
  251,928
  271,690
  292,025
  312,968
  334,560
  356,849
  379,888
  403,732
  428,442
  454,083
Retained Cash Flow (-), $m
  -9,197
  -4,195
  -5,925
  -8,125
  -10,816
  -14,009
  -17,693
  -21,838
  -26,393
  -31,295
  -36,472
  -41,848
  -47,348
  -52,904
  -58,458
  -63,960
  -69,376
  -74,682
  -79,865
  -84,926
  -89,871
  -94,716
  -99,482
  -104,196
  -108,886
  -113,583
  -118,320
  -123,129
  -128,043
  -133,094
  -138,313
Prev. year cash balance distribution, $m
 
  1,146
  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
 
  7,505
  8,544
  11,319
  14,712
  18,738
  23,385
  28,611
  34,356
  40,538
  47,066
  52,772
  59,708
  66,715
  73,718
  80,674
  91,767
  103,549
  115,999
  129,102
  142,842
  157,213
  172,208
  187,830
  204,083
  220,977
  238,530
  256,759
  275,689
  295,348
  315,769
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  6,968
  7,314
  8,864
  10,455
  11,980
  13,325
  14,388
  15,087
  15,372
  15,228
  14,386
  13,529
  12,387
  11,047
  9,602
  8,529
  7,381
  6,222
  5,107
  4,079
  3,170
  2,394
  1,756
  1,251
  863
  577
  373
  233
  141
  82
Current shareholders' claim on cash, %
  100
  85.6
  75.3
  67.5
  61.6
  57.0
  53.4
  50.6
  48.4
  46.7
  45.4
  44.5
  43.8
  43.4
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2
  43.2

Quintiles IMS Holdings, Inc. provides integrated information and technology-enabled healthcare services in the Americas, Europe, Africa, and the Asia-Pacific. It operates through three segments: Commercial Solutions, Research & Development Solutions, and Integrated Engagement Services. The Commercial Solutions segment offers country level performance metrics related to sales of pharmaceutical products, prescribing trends, medical treatment, and promotional activity across various channels, including retail, hospital, and mail order to life science companies, and investment and financial sectors that deal with life science companies; and measurement of sales or prescribing activity at the regional, zip code, and individual prescriber level to pharmaceutical sales organizations. This segment also provides OneKey, a reference database of healthcare professionals; real-world insights, and various cloud-based applications and related implementation services; and strategic and implementation consulting services, including advanced analytics and commercial processes outsourcing services. The Research & Development Solutions segment offers biopharmaceutical development services comprising project management and clinical monitoring, clinical trial support, and strategic planning and design services, as well as clinical trial, genomic, and bioanalytical laboratory services. The Integrated Engagement Services segment provides health care provider and patient engagement services, and scientific strategy and medical affairs services. Quintiles IMS Holdings, Inc. serves pharmaceutical, biotechnology, medical device, and healthcare companies. The company was formerly known as Quintiles Transnational Holdings Inc. and changed its name to Quintiles IMS Holdings, Inc. as a result of its merger with IMS Health Holdings, Inc. in October 2016. The company was founded in 1982 and is headquartered in Durham, North Carolina.

FINANCIAL RATIOS  of  Quintiles IMS Holdings (Q)

Valuation Ratios
P/E Ratio 187.7
Price to Sales 3.1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 25.1
Price to Free Cash Flow 31
Growth Rates
Sales Growth Rate 19.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 110.3%
Cap. Spend. - 3 Yr. Gr. Rate 13.3%
Financial Strength
Quick Ratio 13
Current Ratio 0.1
LT Debt to Equity 82.3%
Total Debt to Equity 83.4%
Interest Coverage 5
Management Effectiveness
Return On Assets 1.2%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 15.9%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. -36.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 30.9%
Gross Margin - 3 Yr. Avg. 28.7%
EBITDA Margin 13%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 10.3%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 8.5%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 72%
Eff/ Tax Rate - 3 Yr. Avg. 43.8%
Payout Ratio 0%

Q stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the Q stock intrinsic value calculation we used $6878 million for the last fiscal year's total revenue generated by Quintiles IMS Holdings. The default revenue input number comes from 2016 income statement of Quintiles IMS Holdings. 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 Q stock valuation model: a) initial revenue growth rate of 55.8% 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 7.7%, whose default value for Q is calculated based on our internal credit rating of Quintiles IMS Holdings, 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 Quintiles IMS Holdings.
    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 Q stock the variable cost ratio is equal to 88.9%.

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 Q 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 Quintiles IMS Holdings.

Corporate tax rate of 27% is the nominal tax rate for Quintiles IMS Holdings. 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 Q 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 Q are equal to 53.5%.

Life of production assets of 32.5 years is the average useful life of capital assets used in Quintiles IMS Holdings 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 Q is equal to -7.5%. 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 - $8633 million for Quintiles IMS Holdings - 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 229.702 million for Quintiles IMS Holdings 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 Quintiles IMS Holdings at the current share price and the inputted number of shares is $21.1 billion.

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COMPANY NEWS

▶ 3 Stocks That Could Soar More Than McDonald's   [Aug-17-17 09:15AM  Motley Fool]
▶ Quintiles IMS Holdings Continues to Execute   [Aug-04-17 04:03PM  Motley Fool]
▶ QuintilesIMS Reports Second-Quarter 2017 Results   [Aug-03-17 07:00AM  Business Wire]
▶ 3 Top Stocks You've Been Overlooking   [Jul-27-17 05:33PM  Motley Fool]
▶ Colleen Goggins Joins QuintilesIMS Board of Directors   [Jul-25-17 09:01PM  Business Wire]
▶ Billionaire Investors Backing A Marijuana Boom In 2017   [Jul-16-17 07:30PM  Oilprice.com]
▶ QuintilesIMS may offload contract sales business, says report   [Jun-22-17 05:40PM  American City Business Journals]
▶ [$$] Health-Care Investor NovaQuest Adds Partner   [Jun-16-17 06:03PM  The Wall Street Journal]
▶ High court won't hear appeal from former Qwest CEO   [Jun-12-17 09:42AM  Associated Press]
▶ Just one Triangle firm makes Fortune 500 cut for 2017   [Jun-07-17 12:45PM  American City Business Journals]
▶ QuintilesIMS Announces Pricing of Secondary Public Offering   [May-25-17 08:00AM  Business Wire]
▶ Biotech And Pharma Industry And Stock News   [May-12-17 04:02PM  Investor's Business Daily]
▶ Quintiles IMS Holdings Starts 2017 Strong   [May-04-17 10:07AM  Motley Fool]
▶ Quintiles beats 1Q profit forecasts   [May-03-17 07:24AM  Associated Press]
▶ QuintilesIMS in Deal to Use Salesforce.coms Cloud Technology   [Apr-25-17 12:35AM  The Wall Street Journal]
▶ Triangle CROs among best to work with, says survey   [Apr-03-17 03:10PM  at bizjournals.com]
▶ Triangle CROs among best to work with, says survey   [03:10PM  American City Business Journals]
▶ 9 New Stocks in the Wide Moat Focus   [Mar-28-17 06:00AM  Morningstar]
▶ Parexel Investors: Swimming With the Whales   [Mar-03-17 10:16AM  GuruFocus.com]
▶ QuintilesIMS Announces Pricing of Senior Notes   [Feb-23-17 06:16PM  Business Wire]
▶ QuintilesIMS releases first earnings report as a combined company   [Feb-14-17 04:05PM  at bizjournals.com]
▶ LabCorp In Talks to Buy Contract Researcher PPD   [Feb-06-17 11:15AM  at Investopedia]
▶ [$$] Quintiles Is a Play on the Cures Act   [Jan-03-17 01:27PM  at Barrons.com]
▶ Former CEO Tom Pike to leave QuintilesIMS   [Nov-30-16 10:27AM  at bizjournals.com]
▶ 3 Cheap Stocks With Shifting Moats   [Nov-09-16 06:00AM  at Morningstar]
Stock chart of Q Financial statements of Q
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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