Intrinsic value of Quintiles IMS Holdings - Q

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$90.88

  Intrinsic Value

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  Value-price divergence*

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$90.88

 
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*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 20.9

 

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, %
  19.87
  53.60
  48.74
  44.37
  40.43
  36.89
  33.70
  30.83
  28.25
  25.92
  23.83
  21.95
  20.25
  18.73
  17.35
  16.12
  15.01
  14.01
  13.11
  12.29
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.54
  7.29
Revenue, $m
  6,878
  10,565
  15,714
  22,685
  31,857
  43,608
  58,303
  76,276
  97,821
  123,177
  152,528
  186,001
  223,669
  265,553
  311,636
  361,866
  416,168
  474,456
  536,633
  602,610
  672,303
  745,642
  822,576
  903,073
  987,125
  1,074,749
  1,165,984
  1,260,896
  1,359,575
  1,462,134
  1,568,711
Variable operating expenses, $m
 
  8,817
  12,592
  17,702
  24,425
  33,039
  43,811
  56,986
  72,779
  91,366
  112,882
  136,346
  163,958
  194,661
  228,441
  265,262
  305,068
  347,794
  393,373
  441,737
  492,824
  546,585
  602,980
  661,988
  723,601
  787,833
  854,712
  924,286
  996,622
  1,071,801
  1,149,926
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
  8,817
  12,592
  17,702
  24,425
  33,039
  43,811
  56,986
  72,779
  91,366
  112,882
  136,346
  163,958
  194,661
  228,441
  265,262
  305,068
  347,794
  393,373
  441,737
  492,824
  546,585
  602,980
  661,988
  723,601
  787,833
  854,712
  924,286
  996,622
  1,071,801
  1,149,926
Operating income, $m
  611
  1,748
  3,122
  4,983
  7,432
  10,569
  14,492
  19,290
  25,042
  31,811
  39,646
  49,655
  59,711
  70,892
  83,195
  96,604
  111,101
  126,661
  143,260
  160,873
  179,479
  199,057
  219,596
  241,085
  263,524
  286,916
  311,272
  336,610
  362,954
  390,333
  418,785
EBITDA, $m
  900
  3,009
  4,475
  6,461
  9,073
  12,419
  16,604
  21,723
  27,859
  35,080
  43,439
  52,972
  63,700
  75,628
  88,752
  103,057
  118,522
  135,122
  152,830
  171,620
  191,468
  212,355
  234,265
  257,190
  281,128
  306,082
  332,066
  359,096
  387,199
  416,408
  446,760
Interest expense (income), $m
  124
  249
  484
  811
  1,254
  1,838
  2,585
  3,519
  4,662
  6,032
  7,645
  9,511
  11,640
  14,035
  16,698
  19,629
  22,823
  26,276
  29,983
  33,936
  38,132
  42,564
  47,227
  52,120
  57,238
  62,583
  68,155
  73,957
  79,992
  86,267
  92,789
Earnings before tax, $m
  479
  1,499
  2,639
  4,172
  6,177
  8,731
  11,907
  15,771
  20,379
  25,778
  32,002
  40,144
  48,071
  56,857
  66,496
  76,975
  88,278
  100,385
  113,278
  126,937
  141,347
  156,494
  172,368
  188,966
  206,286
  224,333
  243,117
  262,653
  282,961
  304,065
  325,996
Tax expense, $m
  345
  405
  712
  1,127
  1,668
  2,357
  3,215
  4,258
  5,502
  6,960
  8,640
  10,839
  12,979
  15,351
  17,954
  20,783
  23,835
  27,104
  30,585
  34,273
  38,164
  42,253
  46,539
  51,021
  55,697
  60,570
  65,642
  70,916
  76,400
  82,098
  88,019
Net income, $m
  115
  1,094
  1,926
  3,046
  4,510
  6,374
  8,692
  11,513
  14,877
  18,818
  23,361
  29,305
  35,092
  41,506
  48,542
  56,192
  64,443
  73,281
  82,693
  92,664
  103,183
  114,240
  125,829
  137,945
  150,589
  163,763
  177,475
  191,737
  206,562
  221,968
  237,977

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
  30,711
  45,680
  65,946
  92,607
  126,767
  169,485
  221,733
  284,363
  358,071
  443,395
  540,701
  650,200
  771,957
  905,918
  1,051,935
  1,209,792
  1,379,231
  1,559,981
  1,751,774
  1,954,370
  2,167,564
  2,391,209
  2,625,212
  2,869,551
  3,124,271
  3,389,489
  3,665,397
  3,952,254
  4,250,391
  4,560,207
Adjusted assets (=assets-cash), $m
  19,970
  30,711
  45,680
  65,946
  92,607
  126,767
  169,485
  221,733
  284,363
  358,071
  443,395
  540,701
  650,200
  771,957
  905,918
  1,051,935
  1,209,792
  1,379,231
  1,559,981
  1,751,774
  1,954,370
  2,167,564
  2,391,209
  2,625,212
  2,869,551
  3,124,271
  3,389,489
  3,665,397
  3,952,254
  4,250,391
  4,560,207
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
  5,652
  8,407
  12,137
  17,043
  23,330
  31,192
  40,808
  52,334
  65,899
  81,602
  99,511
  119,663
  142,071
  166,725
  193,598
  222,650
  253,834
  287,099
  322,397
  359,682
  398,919
  440,078
  483,144
  528,112
  574,991
  623,802
  674,580
  727,373
  782,242
  839,260
Working capital, $m
  632
  -792
  -1,179
  -1,701
  -2,389
  -3,271
  -4,373
  -5,721
  -7,337
  -9,238
  -11,440
  -13,950
  -16,775
  -19,916
  -23,373
  -27,140
  -31,213
  -35,584
  -40,248
  -45,196
  -50,423
  -55,923
  -61,693
  -67,730
  -74,034
  -80,606
  -87,449
  -94,567
  -101,968
  -109,660
  -117,653
Total debt, $m
  7,200
  13,819
  23,175
  35,841
  52,505
  73,854
  100,553
  133,208
  172,352
  218,420
  271,747
  332,563
  401,000
  477,098
  560,824
  652,084
  750,745
  856,645
  969,613
  1,089,484
  1,216,106
  1,349,353
  1,489,130
  1,635,382
  1,788,094
  1,947,294
  2,113,056
  2,285,498
  2,464,783
  2,651,119
  2,844,754
Total liabilities, $m
  12,575
  19,194
  28,550
  41,216
  57,880
  79,229
  105,928
  138,583
  177,727
  223,795
  277,122
  337,938
  406,375
  482,473
  566,199
  657,459
  756,120
  862,020
  974,988
  1,094,859
  1,221,481
  1,354,728
  1,494,505
  1,640,757
  1,793,469
  1,952,669
  2,118,431
  2,290,873
  2,470,158
  2,656,494
  2,850,129
Total equity, $m
  8,633
  11,517
  17,130
  24,730
  34,728
  47,538
  63,557
  83,150
  106,636
  134,277
  166,273
  202,763
  243,825
  289,484
  339,719
  394,476
  453,672
  517,212
  584,993
  656,915
  732,889
  812,837
  896,703
  984,454
  1,076,081
  1,171,601
  1,271,059
  1,374,524
  1,482,095
  1,593,896
  1,710,078
Total liabilities and equity, $m
  21,208
  30,711
  45,680
  65,946
  92,608
  126,767
  169,485
  221,733
  284,363
  358,072
  443,395
  540,701
  650,200
  771,957
  905,918
  1,051,935
  1,209,792
  1,379,232
  1,559,981
  1,751,774
  1,954,370
  2,167,565
  2,391,208
  2,625,211
  2,869,550
  3,124,270
  3,389,490
  3,665,397
  3,952,253
  4,250,390
  4,560,207
Debt-to-equity ratio
  0.834
  1.200
  1.350
  1.450
  1.510
  1.550
  1.580
  1.600
  1.620
  1.630
  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
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
  1,094
  1,926
  3,046
  4,510
  6,374
  8,692
  11,513
  14,877
  18,818
  23,361
  29,305
  35,092
  41,506
  48,542
  56,192
  64,443
  73,281
  82,693
  92,664
  103,183
  114,240
  125,829
  137,945
  150,589
  163,763
  177,475
  191,737
  206,562
  221,968
  237,977
Depreciation, amort., depletion, $m
  289
  1,261
  1,353
  1,477
  1,641
  1,850
  2,112
  2,433
  2,817
  3,269
  3,793
  3,317
  3,989
  4,736
  5,558
  6,453
  7,422
  8,461
  9,570
  10,747
  11,989
  13,297
  14,669
  16,105
  17,604
  19,166
  20,793
  22,486
  24,246
  26,075
  27,975
Funds from operations, $m
  1,072
  2,355
  3,279
  4,523
  6,150
  8,224
  10,805
  13,946
  17,694
  22,088
  27,154
  32,622
  39,081
  46,242
  54,100
  62,645
  71,864
  81,742
  92,263
  103,411
  115,173
  127,538
  140,498
  154,050
  168,192
  182,929
  198,269
  214,223
  230,807
  248,043
  265,952
Change in working capital, $m
  212
  -276
  -386
  -523
  -688
  -881
  -1,102
  -1,348
  -1,616
  -1,902
  -2,201
  -2,511
  -2,825
  -3,141
  -3,456
  -3,767
  -4,073
  -4,372
  -4,663
  -4,948
  -5,227
  -5,500
  -5,770
  -6,037
  -6,304
  -6,572
  -6,843
  -7,118
  -7,401
  -7,692
  -7,993
Cash from operations, $m
  860
  5,751
  3,665
  5,046
  6,838
  9,105
  11,907
  15,294
  19,310
  23,989
  29,355
  35,133
  41,906
  49,383
  57,556
  66,412
  75,937
  86,114
  96,926
  108,359
  120,400
  133,038
  146,268
  160,087
  174,496
  189,501
  205,112
  221,341
  238,208
  255,734
  273,945
Maintenance CAPEX, $m
  0
  -123
  -188
  -280
  -405
  -568
  -778
  -1,040
  -1,360
  -1,744
  -2,197
  -2,720
  -3,317
  -3,989
  -4,736
  -5,558
  -6,453
  -7,422
  -8,461
  -9,570
  -10,747
  -11,989
  -13,297
  -14,669
  -16,105
  -17,604
  -19,166
  -20,793
  -22,486
  -24,246
  -26,075
New CAPEX, $m
  -164
  -1,976
  -2,755
  -3,730
  -4,907
  -6,287
  -7,862
  -9,616
  -11,526
  -13,565
  -15,703
  -17,908
  -20,152
  -22,408
  -24,654
  -26,873
  -29,052
  -31,184
  -33,265
  -35,298
  -37,286
  -39,236
  -41,159
  -43,066
  -44,968
  -46,879
  -48,811
  -50,778
  -52,793
  -54,869
  -57,019
Cash from investing activities, $m
  1,731
  -2,099
  -2,943
  -4,010
  -5,312
  -6,855
  -8,640
  -10,656
  -12,886
  -15,309
  -17,900
  -20,628
  -23,469
  -26,397
  -29,390
  -32,431
  -35,505
  -38,606
  -41,726
  -44,868
  -48,033
  -51,225
  -54,456
  -57,735
  -61,073
  -64,483
  -67,977
  -71,571
  -75,279
  -79,115
  -83,094
Free cash flow, $m
  2,591
  3,653
  722
  1,036
  1,527
  2,251
  3,267
  4,638
  6,423
  8,679
  11,456
  14,504
  18,437
  22,986
  28,166
  33,982
  40,432
  47,508
  55,200
  63,491
  72,367
  81,812
  91,811
  102,352
  113,423
  125,019
  137,134
  149,770
  162,929
  176,620
  190,852
Issuance/(repayment) of debt, $m
  -1,313
  6,711
  9,355
  12,666
  16,663
  21,350
  26,699
  32,655
  39,143
  46,068
  53,327
  60,817
  68,437
  76,098
  83,726
  91,261
  98,660
  105,900
  112,969
  119,871
  126,622
  133,247
  139,778
  146,252
  152,712
  159,200
  165,762
  172,442
  179,285
  186,336
  193,635
Issuance/(repurchase) of shares, $m
  -1,000
  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  
  -2,284
  6,711
  9,355
  12,666
  16,663
  21,350
  26,699
  32,655
  39,143
  46,068
  53,327
  60,817
  68,437
  76,098
  83,726
  91,261
  98,660
  105,900
  112,969
  119,871
  126,622
  133,247
  139,778
  146,252
  152,712
  159,200
  165,762
  172,442
  179,285
  186,336
  193,635
Total cash flow (excl. dividends), $m
  221
  10,365
  10,077
  13,702
  18,190
  23,600
  29,966
  37,294
  45,567
  54,747
  64,783
  75,321
  86,873
  99,084
  111,892
  125,243
  139,092
  153,408
  168,168
  183,362
  198,989
  215,059
  231,589
  248,604
  266,135
  284,219
  302,896
  322,212
  342,215
  362,955
  384,487
Retained Cash Flow (-), $m
  -9,197
  -4,030
  -5,613
  -7,600
  -9,998
  -12,810
  -16,019
  -19,593
  -23,486
  -27,641
  -31,996
  -36,490
  -41,062
  -45,659
  -50,235
  -54,756
  -59,196
  -63,540
  -67,781
  -71,923
  -75,973
  -79,948
  -83,867
  -87,751
  -91,627
  -95,520
  -99,457
  -103,465
  -107,571
  -111,801
  -116,181
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
 
  7,481
  4,464
  6,102
  8,192
  10,791
  13,947
  17,700
  22,081
  27,107
  32,787
  38,831
  45,811
  53,425
  61,656
  70,486
  79,896
  89,868
  100,387
  111,440
  123,016
  135,111
  147,722
  160,853
  174,508
  188,699
  203,439
  218,747
  234,643
  251,154
  268,306
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
 
  6,946
  3,821
  4,779
  5,822
  6,899
  7,947
  8,901
  9,696
  10,279
  10,608
  10,585
  10,380
  9,920
  9,240
  8,390
  7,426
  6,406
  5,384
  4,408
  3,513
  2,724
  2,054
  1,504
  1,069
  737
  492
  318
  198
  120
  69
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

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 186
Price to Sales 3.1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 24.9
Price to Free Cash Flow 30.7
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 53.6% 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 $20.9 billion.


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COMPANY NEWS

▶ 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 Annual reports 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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