Intrinsic value of Sucampo Pharmaceuticals Cl A - SCMP

Previous Close

$18.00

  Intrinsic Value

$8.93

stock screener

  Rating & Target

str. sell

-50%

Previous close

$18.00

 
Intrinsic value

$8.93

 
Up/down potential

-50%

 
Rating

str. sell

We calculate the intrinsic value of SCMP 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  50.33
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  230
  242
  254
  268
  281
  296
  311
  327
  344
  361
  379
  399
  419
  440
  462
  485
  510
  536
  563
  591
  621
  652
  684
  719
  755
  793
  832
  874
  918
  964
  1,012
Variable operating expenses, $m
 
  172
  181
  190
  199
  209
  219
  230
  241
  253
  266
  272
  285
  300
  315
  331
  347
  365
  383
  403
  423
  444
  466
  490
  514
  540
  567
  596
  625
  657
  690
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
  190
  172
  181
  190
  199
  209
  219
  230
  241
  253
  266
  272
  285
  300
  315
  331
  347
  365
  383
  403
  423
  444
  466
  490
  514
  540
  567
  596
  625
  657
  690
Operating income, $m
  40
  70
  74
  78
  82
  87
  92
  97
  102
  108
  114
  127
  133
  140
  147
  155
  163
  171
  179
  188
  198
  208
  218
  229
  241
  253
  265
  279
  293
  307
  323
EBITDA, $m
  86
  106
  111
  117
  123
  129
  136
  143
  150
  157
  165
  174
  183
  192
  202
  212
  222
  234
  245
  258
  271
  284
  299
  314
  329
  346
  363
  381
  400
  420
  442
Interest expense (income), $m
  20
  22
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  33
  35
  36
  39
  41
  43
  45
  48
  51
  53
  56
  59
  63
  66
  69
  73
  77
  81
  86
Earnings before tax, $m
  14
  48
  56
  59
  62
  65
  69
  72
  76
  80
  84
  96
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
  170
  178
  187
  196
  205
  216
  226
  237
Tax expense, $m
  -4
  13
  15
  16
  17
  18
  19
  20
  21
  22
  23
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
Net income, $m
  18
  35
  41
  43
  45
  48
  50
  53
  56
  59
  62
  70
  74
  77
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  136
  143
  150
  157
  165
  173

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  198
  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
  521
  340
  357
  376
  395
  416
  437
  459
  482
  507
  533
  560
  588
  618
  649
  682
  716
  752
  790
  830
  872
  915
  961
  1,010
  1,060
  1,113
  1,169
  1,228
  1,289
  1,354
  1,422
Adjusted assets (=assets-cash), $m
  323
  340
  357
  376
  395
  416
  437
  459
  482
  507
  533
  560
  588
  618
  649
  682
  716
  752
  790
  830
  872
  915
  961
  1,010
  1,060
  1,113
  1,169
  1,228
  1,289
  1,354
  1,422
Revenue / Adjusted assets
  0.712
  0.712
  0.711
  0.713
  0.711
  0.712
  0.712
  0.712
  0.714
  0.712
  0.711
  0.713
  0.713
  0.712
  0.712
  0.711
  0.712
  0.713
  0.713
  0.712
  0.712
  0.713
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
  0.712
Average production assets, $m
  135
  142
  149
  157
  165
  174
  183
  192
  202
  212
  223
  234
  246
  258
  271
  285
  299
  314
  330
  347
  364
  383
  402
  422
  443
  465
  489
  513
  539
  566
  594
Working capital, $m
  275
  81
  85
  90
  94
  99
  104
  109
  115
  121
  127
  134
  140
  147
  155
  163
  171
  179
  188
  198
  208
  218
  229
  241
  253
  266
  279
  293
  308
  323
  339
Total debt, $m
  291
  243
  259
  275
  293
  311
  330
  350
  371
  393
  416
  441
  466
  493
  521
  551
  582
  614
  648
  684
  721
  761
  802
  846
  891
  939
  989
  1,042
  1,097
  1,156
  1,217
Total liabilities, $m
  354
  306
  322
  338
  356
  374
  393
  413
  434
  456
  479
  504
  529
  556
  584
  614
  645
  677
  711
  747
  784
  824
  865
  909
  954
  1,002
  1,052
  1,105
  1,160
  1,219
  1,280
Total equity, $m
  167
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
  96
  101
  106
  111
  117
  123
  129
  135
  142
Total liabilities and equity, $m
  521
  340
  358
  376
  396
  416
  437
  459
  482
  507
  532
  560
  588
  618
  649
  682
  717
  752
  790
  830
  871
  916
  961
  1,010
  1,060
  1,113
  1,169
  1,228
  1,289
  1,354
  1,422
Debt-to-equity ratio
  1.743
  7.150
  7.240
  7.320
  7.410
  7.480
  7.560
  7.630
  7.690
  7.760
  7.820
  7.870
  7.930
  7.980
  8.030
  8.080
  8.120
  8.160
  8.200
  8.240
  8.280
  8.310
  8.340
  8.380
  8.410
  8.430
  8.460
  8.490
  8.510
  8.530
  8.560
Adjusted equity ratio
  -0.096
  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
  18
  35
  41
  43
  45
  48
  50
  53
  56
  59
  62
  70
  74
  77
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  136
  143
  150
  157
  165
  173
Depreciation, amort., depletion, $m
  46
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  103
  108
  113
  119
Funds from operations, $m
  -30
  71
  78
  82
  86
  90
  94
  99
  103
  108
  114
  117
  123
  129
  135
  142
  149
  156
  164
  172
  180
  189
  199
  208
  219
  229
  241
  253
  265
  278
  292
Change in working capital, $m
  -38
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
Cash from operations, $m
  8
  67
  74
  77
  81
  85
  89
  93
  98
  102
  107
  111
  116
  122
  128
  134
  141
  147
  155
  162
  170
  179
  188
  197
  207
  217
  227
  239
  250
  263
  276
Maintenance CAPEX, $m
  0
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -113
New CAPEX, $m
  -1
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Cash from investing activities, $m
  -2
  -34
  -35
  -38
  -39
  -41
  -44
  -46
  -48
  -50
  -53
  -56
  -59
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -86
  -91
  -96
  -100
  -105
  -111
  -116
  -122
  -129
  -135
  -141
Free cash flow, $m
  6
  33
  38
  40
  41
  43
  45
  47
  50
  52
  54
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
Issuance/(repayment) of debt, $m
  21
  -48
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  38
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
Issuance/(repurchase) of shares, $m
  6
  30
  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  
  71
  -18
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  38
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
Total cash flow (excl. dividends), $m
  90
  15
  54
  56
  59
  62
  64
  67
  71
  74
  77
  79
  83
  87
  91
  96
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  161
  169
  177
  186
  195
Retained Cash Flow (-), $m
  -81
  -65
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
Prev. year cash balance distribution, $m
 
  198
  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
 
  148
  52
  54
  57
  60
  62
  65
  68
  71
  75
  76
  80
  84
  88
  92
  97
  101
  106
  111
  117
  123
  129
  135
  141
  148
  156
  163
  171
  180
  189
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  141
  47
  47
  46
  46
  45
  43
  42
  40
  38
  35
  33
  31
  28
  26
  23
  21
  18
  16
  14
  11
  10
  8
  6
  5
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Sucampo Pharmaceuticals, Inc. is a biopharmaceutical company. The Company is focused on the development and commercialization of pharmaceutical products. Its primary focus areas are gastroenterology, ophthalmology and oncology-related disorders. Its product candidates include VTS-270, Lubiprostone (AMITIZA), Unoprostone is opropyl (RESCULA) and CPP-1X/sulindac combination product. VTS-270 is an investigational drug under clinical study for the treatment of Niemann-Pick Disease Type C-1, an ultra-orphan, progressive and fatal disease. AMITIZA is a ClC-2 chloride channel activator, which has been approved for three indications that cover distinct patient types: chronic idiopathic constipation, irritable bowel syndrome with constipation, and opioid-induced constipation. RESCULA is a Big Potassium channel activator used to lower intraocular pressure. CPP-1X/sulindac combination product is meant for the treatment of familial adenomatous polyposis (FAP).

FINANCIAL RATIOS  of  Sucampo Pharmaceuticals Cl A (SCMP)

Valuation Ratios
P/E Ratio 43.4
Price to Sales 3.4
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 97.7
Price to Free Cash Flow 111.6
Growth Rates
Sales Growth Rate 50.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -75%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 174.3%
Total Debt to Equity 174.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. 10.3%
Return On Total Capital 4.5%
Ret/ On T. Cap. - 3 Yr. Avg. 10.4%
Return On Equity 14.2%
Return On Equity - 3 Yr. Avg. 24%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 67%
Gross Margin - 3 Yr. Avg. 76.3%
EBITDA Margin 34.8%
EBITDA Margin - 3 Yr. Avg. 33%
Operating Margin 17.4%
Oper. Margin - 3 Yr. Avg. 23.2%
Pre-Tax Margin 6.1%
Pre-Tax Margin - 3 Yr. Avg. 19.4%
Net Profit Margin 7.8%
Net Profit Margin - 3 Yr. Avg. 13.6%
Effective Tax Rate -28.6%
Eff/ Tax Rate - 3 Yr. Avg. 16.1%
Payout Ratio 0%

SCMP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCMP stock intrinsic value calculation we used $230 million for the last fiscal year's total revenue generated by Sucampo Pharmaceuticals Cl A. The default revenue input number comes from 2016 income statement of Sucampo Pharmaceuticals Cl A. 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 SCMP stock valuation model: a) initial revenue growth rate of 5.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.5%, whose default value for SCMP is calculated based on our internal credit rating of Sucampo Pharmaceuticals Cl A, 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 Sucampo Pharmaceuticals Cl A.
    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 SCMP stock the variable cost ratio is equal to 71.3%.

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 SCMP 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 7.4% for Sucampo Pharmaceuticals Cl A.

Corporate tax rate of 27% is the nominal tax rate for Sucampo Pharmaceuticals Cl A. 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 SCMP 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 SCMP are equal to 58.7%.

Life of production assets of 4.4 years is the average useful life of capital assets used in Sucampo Pharmaceuticals Cl A 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 SCMP is equal to 33.5%. 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 - $167 million for Sucampo Pharmaceuticals Cl A - 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 46.702 million for Sucampo Pharmaceuticals Cl A 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 Sucampo Pharmaceuticals Cl A at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ John Paulson Invests in Entertainment Stocks in 4th Quarter   [Feb-20-18 05:17PM  GuruFocus.com]
▶ Sucampo Pharmaceuticals closes on its $1.2B sale to a U.K. company   [Feb-14-18 12:14PM  American City Business Journals]
▶ Kohl's and Sucampo climb while Apple and Qorvo stumble   [Dec-26-17 07:46PM  Associated Press]
▶ Sucampo Pharmaceuticals to be acquired in $1.2B deal   [03:58PM  American City Business Journals]
▶ Mallinckrodt: Maybe This'll Work?   [12:20PM  Barrons.com]
▶ Stocks to Watch: Advanced Micro Devices, Capital One, Apple   [09:38AM  The Wall Street Journal]
▶ Top 10 Stocks Under $20   [Dec-22-17 01:23PM  Zacks]
▶ Sucampo Pharmaceuticals Research Pipeline in December 2017   [Dec-21-17 03:30PM  Market Realist]
▶ New Strong Buy Stocks for December 19th   [Dec-19-17 10:05AM  Zacks]
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Financial statements of SCMP
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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