Intrinsic value of Shire ADR - SHPG

Previous Close

$155.28

  Intrinsic Value

$208.13

stock screener

  Rating & Target

buy

+34%

  Value-price divergence*

-61%

Previous close

$155.28

 
Intrinsic value

$208.13

 
Up/down potential

+34%

 
Rating

buy

 
Value-price divergence*

-61%

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

We calculate the intrinsic value of SHPG 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 47.4

 

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, %
  77.61
  54.20
  49.28
  44.85
  40.87
  37.28
  34.05
  31.15
  28.53
  26.18
  24.06
  22.15
  20.44
  18.90
  17.51
  16.26
  15.13
  14.12
  13.21
  12.38
  11.65
  10.98
  10.38
  9.85
  9.36
  8.92
  8.53
  8.18
  7.86
  7.57
  7.32
Revenue, $m
  11,397
  17,574
  26,235
  38,002
  53,532
  73,488
  98,512
  129,196
  166,058
  209,531
  259,946
  317,537
  382,440
  454,704
  534,305
  621,158
  715,138
  816,094
  923,860
  1,038,277
  1,159,197
  1,286,495
  1,420,077
  1,559,884
  1,705,898
  1,858,142
  2,016,679
  2,181,620
  2,353,117
  2,531,362
  2,716,592
Variable operating expenses, $m
 
  12,721
  18,108
  25,428
  35,088
  47,502
  63,068
  82,155
  105,085
  132,127
  163,487
  197,523
  237,896
  282,847
  332,362
  386,389
  444,849
  507,648
  574,684
  645,857
  721,074
  800,259
  883,354
  970,321
  1,061,148
  1,155,850
  1,254,468
  1,357,069
  1,463,748
  1,574,625
  1,689,846
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
  10,434
  12,721
  18,108
  25,428
  35,088
  47,502
  63,068
  82,155
  105,085
  132,127
  163,487
  197,523
  237,896
  282,847
  332,362
  386,389
  444,849
  507,648
  574,684
  645,857
  721,074
  800,259
  883,354
  970,321
  1,061,148
  1,155,850
  1,254,468
  1,357,069
  1,463,748
  1,574,625
  1,689,846
Operating income, $m
  963
  4,853
  8,127
  12,574
  18,444
  25,986
  35,444
  47,041
  60,974
  77,404
  96,459
  120,014
  144,545
  171,857
  201,942
  234,769
  270,289
  308,445
  349,176
  392,421
  438,123
  486,235
  536,723
  589,564
  644,750
  702,291
  762,211
  824,551
  889,369
  956,738
  1,026,746
EBITDA, $m
  2,429
  8,220
  12,271
  17,775
  25,040
  34,374
  46,080
  60,432
  77,674
  98,009
  121,591
  148,529
  178,888
  212,690
  249,923
  290,549
  334,509
  381,731
  432,139
  485,658
  542,218
  601,763
  664,246
  729,642
  797,940
  869,152
  943,309
  1,020,461
  1,100,679
  1,184,054
  1,270,696
Interest expense (income), $m
  284
  785
  1,503
  2,505
  3,865
  5,661
  7,969
  10,863
  14,411
  18,674
  23,702
  29,532
  36,192
  43,697
  52,054
  61,260
  71,304
  82,172
  93,847
  106,309
  119,541
  133,524
  148,245
  163,693
  179,861
  196,747
  214,352
  232,686
  251,761
  271,593
  292,206
Earnings before tax, $m
  486
  4,069
  6,624
  10,069
  14,578
  20,325
  27,475
  36,178
  46,562
  58,730
  72,757
  90,482
  108,353
  128,160
  149,888
  173,509
  198,986
  226,274
  255,330
  286,111
  318,582
  352,711
  388,478
  425,871
  464,889
  505,545
  547,859
  591,865
  637,608
  685,145
  734,540
Tax expense, $m
  -126
  1,098
  1,788
  2,719
  3,936
  5,488
  7,418
  9,768
  12,572
  15,857
  19,644
  24,430
  29,255
  34,603
  40,470
  46,848
  53,726
  61,094
  68,939
  77,250
  86,017
  95,232
  104,889
  114,985
  125,520
  136,497
  147,922
  159,804
  172,154
  184,989
  198,326
Net income, $m
  327
  2,970
  4,835
  7,351
  10,642
  14,837
  20,057
  26,410
  33,990
  42,873
  53,113
  66,052
  79,098
  93,557
  109,418
  126,662
  145,259
  165,180
  186,391
  208,861
  232,565
  257,479
  283,589
  310,886
  339,369
  369,048
  399,937
  432,061
  465,454
  500,156
  536,214

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  542
  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
  67,035
  102,773
  153,419
  222,231
  313,050
  429,755
  576,096
  755,532
  971,102
  1,225,327
  1,520,154
  1,856,943
  2,236,493
  2,659,090
  3,124,590
  3,632,504
  4,182,096
  4,772,477
  5,402,691
  6,071,795
  6,778,928
  7,523,361
  8,304,543
  9,122,131
  9,976,014
  10,866,325
  11,793,446
  12,758,014
  13,760,918
  14,803,289
  15,886,503
Adjusted assets (=assets-cash), $m
  66,493
  102,773
  153,419
  222,231
  313,050
  429,755
  576,096
  755,532
  971,102
  1,225,327
  1,520,154
  1,856,943
  2,236,493
  2,659,090
  3,124,590
  3,632,504
  4,182,096
  4,772,477
  5,402,691
  6,071,795
  6,778,928
  7,523,361
  8,304,543
  9,122,131
  9,976,014
  10,866,325
  11,793,446
  12,758,014
  13,760,918
  14,803,289
  15,886,503
Revenue / Adjusted assets
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
Average production assets, $m
  25,585
  39,454
  58,897
  85,313
  120,178
  164,981
  221,160
  290,045
  372,801
  470,397
  583,579
  712,871
  858,578
  1,020,811
  1,199,515
  1,394,500
  1,605,486
  1,832,130
  2,074,066
  2,330,932
  2,602,397
  2,888,181
  3,188,073
  3,501,941
  3,829,742
  4,171,528
  4,527,445
  4,897,738
  5,282,747
  5,682,909
  6,098,749
Working capital, $m
  -203
  3,585
  5,352
  7,752
  10,920
  14,992
  20,097
  26,356
  33,876
  42,744
  53,029
  64,778
  78,018
  92,760
  108,998
  126,716
  145,888
  166,483
  188,467
  211,809
  236,476
  262,445
  289,696
  318,216
  348,003
  379,061
  411,403
  445,051
  480,036
  516,398
  554,185
Total debt, $m
  22,968
  42,948
  71,563
  110,442
  161,754
  227,693
  310,375
  411,757
  533,554
  677,191
  843,768
  1,034,054
  1,248,500
  1,487,267
  1,750,274
  2,037,246
  2,347,765
  2,681,330
  3,037,401
  3,415,445
  3,814,976
  4,235,580
  4,676,948
  5,138,885
  5,621,329
  6,124,354
  6,648,178
  7,193,159
  7,759,799
  8,348,739
  8,960,755
Total liabilities, $m
  38,087
  58,067
  86,682
  125,561
  176,873
  242,812
  325,494
  426,876
  548,673
  692,310
  858,887
  1,049,173
  1,263,619
  1,502,386
  1,765,393
  2,052,365
  2,362,884
  2,696,449
  3,052,520
  3,430,564
  3,830,095
  4,250,699
  4,692,067
  5,154,004
  5,636,448
  6,139,473
  6,663,297
  7,208,278
  7,774,918
  8,363,858
  8,975,874
Total equity, $m
  28,948
  44,706
  66,737
  96,671
  136,177
  186,944
  250,602
  328,656
  422,429
  533,017
  661,267
  807,770
  972,874
  1,156,704
  1,359,197
  1,580,139
  1,819,212
  2,076,027
  2,350,171
  2,641,231
  2,948,834
  3,272,662
  3,612,476
  3,968,127
  4,339,566
  4,726,851
  5,130,149
  5,549,736
  5,985,999
  6,439,431
  6,910,629
Total liabilities and equity, $m
  67,035
  102,773
  153,419
  222,232
  313,050
  429,756
  576,096
  755,532
  971,102
  1,225,327
  1,520,154
  1,856,943
  2,236,493
  2,659,090
  3,124,590
  3,632,504
  4,182,096
  4,772,476
  5,402,691
  6,071,795
  6,778,929
  7,523,361
  8,304,543
  9,122,131
  9,976,014
  10,866,324
  11,793,446
  12,758,014
  13,760,917
  14,803,289
  15,886,503
Debt-to-equity ratio
  0.793
  0.960
  1.070
  1.140
  1.190
  1.220
  1.240
  1.250
  1.260
  1.270
  1.280
  1.280
  1.280
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
  1.300
Adjusted equity ratio
  0.427
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435
  0.435

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  327
  2,970
  4,835
  7,351
  10,642
  14,837
  20,057
  26,410
  33,990
  42,873
  53,113
  66,052
  79,098
  93,557
  109,418
  126,662
  145,259
  165,180
  186,391
  208,861
  232,565
  257,479
  283,589
  310,886
  339,369
  369,048
  399,937
  432,061
  465,454
  500,156
  536,214
Depreciation, amort., depletion, $m
  1,466
  3,367
  4,145
  5,201
  6,596
  8,388
  10,635
  13,391
  16,701
  20,605
  25,132
  28,515
  34,343
  40,832
  47,981
  55,780
  64,219
  73,285
  82,963
  93,237
  104,096
  115,527
  127,523
  140,078
  153,190
  166,861
  181,098
  195,910
  211,310
  227,316
  243,950
Funds from operations, $m
  2,413
  6,337
  8,980
  12,552
  17,238
  23,225
  30,692
  39,801
  50,691
  63,477
  78,245
  94,567
  113,441
  134,389
  157,399
  182,442
  209,479
  238,465
  269,353
  302,099
  336,661
  373,006
  411,112
  450,963
  492,559
  535,909
  581,035
  627,971
  676,764
  727,472
  780,164
Change in working capital, $m
  -246
  1,260
  1,767
  2,400
  3,168
  4,071
  5,105
  6,259
  7,520
  8,868
  10,285
  11,749
  13,240
  14,742
  16,238
  17,718
  19,172
  20,595
  21,984
  23,341
  24,668
  25,969
  27,251
  28,521
  29,787
  31,058
  32,342
  33,648
  34,985
  36,362
  37,787
Cash from operations, $m
  2,659
  5,077
  7,213
  10,152
  14,070
  19,154
  25,587
  33,541
  43,171
  54,609
  67,960
  82,818
  100,200
  119,647
  141,160
  164,724
  190,307
  217,870
  247,369
  278,758
  311,993
  347,038
  383,861
  422,443
  462,772
  504,851
  548,693
  594,323
  641,779
  691,110
  742,377
Maintenance CAPEX, $m
  0
  -1,023
  -1,578
  -2,356
  -3,413
  -4,807
  -6,599
  -8,846
  -11,602
  -14,912
  -18,816
  -23,343
  -28,515
  -34,343
  -40,832
  -47,981
  -55,780
  -64,219
  -73,285
  -82,963
  -93,237
  -104,096
  -115,527
  -127,523
  -140,078
  -153,190
  -166,861
  -181,098
  -195,910
  -211,310
  -227,316
New CAPEX, $m
  -649
  -13,870
  -19,443
  -26,416
  -34,865
  -44,803
  -56,179
  -68,885
  -82,756
  -97,596
  -113,183
  -129,292
  -145,707
  -162,233
  -178,703
  -194,986
  -210,986
  -226,644
  -241,936
  -256,866
  -271,465
  -285,784
  -299,892
  -313,868
  -327,801
  -341,786
  -355,917
  -370,293
  -385,010
  -400,161
  -415,840
Cash from investing activities, $m
  -18,092
  -14,893
  -21,021
  -28,772
  -38,278
  -49,610
  -62,778
  -77,731
  -94,358
  -112,508
  -131,999
  -152,635
  -174,222
  -196,576
  -219,535
  -242,967
  -266,766
  -290,863
  -315,221
  -339,829
  -364,702
  -389,880
  -415,419
  -441,391
  -467,879
  -494,976
  -522,778
  -551,391
  -580,920
  -611,471
  -643,156
Free cash flow, $m
  -15,433
  -9,816
  -13,808
  -18,621
  -24,208
  -30,456
  -37,192
  -44,190
  -51,187
  -57,899
  -64,039
  -69,817
  -74,022
  -76,929
  -78,375
  -78,242
  -76,459
  -72,993
  -67,852
  -61,071
  -52,709
  -42,842
  -31,558
  -18,948
  -5,107
  9,876
  25,915
  42,932
  60,860
  79,639
  99,221
Issuance/(repayment) of debt, $m
  16,039
  20,522
  28,615
  38,879
  51,313
  65,939
  82,683
  101,381
  121,797
  143,637
  166,577
  190,286
  214,446
  238,767
  263,007
  286,971
  310,520
  333,565
  356,071
  378,044
  399,530
  420,605
  441,368
  461,937
  482,444
  503,025
  523,823
  544,981
  566,640
  588,940
  612,016
Issuance/(repurchase) of shares, $m
  129
  12,788
  17,196
  22,582
  28,864
  35,930
  43,601
  51,645
  59,783
  67,715
  75,137
  80,451
  86,007
  90,273
  93,074
  94,281
  93,813
  91,636
  87,752
  82,199
  75,038
  66,349
  56,225
  44,765
  32,070
  18,237
  3,361
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  15,997
  33,310
  45,811
  61,461
  80,177
  101,869
  126,284
  153,026
  181,580
  211,352
  241,714
  270,737
  300,453
  329,040
  356,081
  381,252
  404,333
  425,201
  443,823
  460,243
  474,568
  486,954
  497,593
  506,702
  514,514
  521,262
  527,184
  544,981
  566,640
  588,940
  612,016
Total cash flow (excl. dividends), $m
  564
  23,494
  32,003
  42,840
  55,969
  71,413
  89,092
  108,836
  130,393
  153,453
  177,676
  200,921
  226,430
  252,112
  277,706
  303,010
  327,874
  352,207
  375,971
  399,172
  421,859
  444,111
  466,035
  487,754
  509,407
  531,138
  553,099
  587,913
  627,500
  668,579
  711,236
Retained Cash Flow (-), $m
  -19,119
  -15,758
  -22,031
  -29,933
  -39,506
  -50,767
  -63,658
  -78,055
  -93,773
  -110,588
  -128,250
  -146,504
  -165,104
  -183,830
  -202,492
  -220,943
  -239,073
  -256,816
  -274,143
  -291,061
  -307,603
  -323,828
  -339,814
  -355,651
  -371,439
  -387,285
  -403,298
  -419,587
  -436,263
  -453,432
  -471,198
Prev. year cash balance distribution, $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 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
 
  7,736
  9,972
  12,907
  16,463
  20,646
  25,434
  30,782
  36,620
  42,866
  49,426
  54,417
  61,326
  68,282
  75,214
  82,067
  88,801
  95,392
  101,828
  108,112
  114,256
  120,283
  126,221
  132,103
  137,968
  143,853
  149,801
  168,326
  191,237
  215,147
  240,038
Discount rate, %
 
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
 
  7,163
  8,486
  10,016
  11,552
  12,981
  14,193
  15,090
  15,599
  15,684
  15,342
  14,144
  13,162
  11,923
  10,520
  9,043
  7,575
  6,183
  4,918
  3,810
  2,875
  2,112
  1,509
  1,048
  707
  463
  294
  195
  127
  79
  47
Current shareholders' claim on cash, %
  100
  78.8
  63.8
  52.9
  44.7
  38.5
  33.7
  30.0
  27.0
  24.6
  22.6
  21.0
  19.8
  18.7
  17.8
  17.1
  16.5
  16.0
  15.6
  15.3
  15.0
  14.8
  14.7
  14.6
  14.5
  14.4
  14.4
  14.4
  14.4
  14.4
  14.4

Shire plc is a biotech company focused on serving people with rare diseases and other specialized conditions. The Company's segment is engaged in research, development, licensing, manufacturing, marketing, distribution and sale of specialist medicines. It focuses its development resources on projects in various therapeutic areas (TAs), including Neuroscience, Ophthalmology, Hematology, Oncology, Immunology, Gastrointestinal (GI)/Metabolic/Endocrinology Diseases. Its Hematology products include ADVATE (Antihemophilic Factor (Recombinant)), ADYNOVATE/ADYNOVI (Antihemophilic Factor (Recombinant), PEGylated)), RIXUBIS (Coagulation Factor IX (Recombinant)), VONVENDI (von Willebrand factor (Recombinant)) and FEIBA (Anti-Inhibitor Coagulant Complex). Its Genetic Diseases products include CINRYZE (C1 esterase inhibitor (human)), FIRAZYR (icatibant), ELAPRASE (idursulfase), REPLAGAL (agalsidase alfa) and VPRIV (velaglucerase alfa).

FINANCIAL RATIOS  of  Shire ADR (SHPG)

Valuation Ratios
P/E Ratio 433.2
Price to Sales 12.4
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 53.3
Price to Free Cash Flow 70.5
Growth Rates
Sales Growth Rate 77.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 464.3%
Cap. Spend. - 3 Yr. Gr. Rate 32.8%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 68.7%
Total Debt to Equity 79.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 13.8%
Return On Total Capital 1%
Ret/ On T. Cap. - 3 Yr. Avg. 19.8%
Return On Equity 1.7%
Return On Equity - 3 Yr. Avg. 21.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 66.5%
Gross Margin - 3 Yr. Avg. 78.9%
EBITDA Margin 19.6%
EBITDA Margin - 3 Yr. Avg. 38%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. 28.6%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. 27.1%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 26.6%
Effective Tax Rate -25.9%
Eff/ Tax Rate - 3 Yr. Avg. -7%
Payout Ratio 52.3%

SHPG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SHPG stock intrinsic value calculation we used $11397 million for the last fiscal year's total revenue generated by Shire ADR. The default revenue input number comes from 2016 income statement of Shire ADR. 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 SHPG stock valuation model: a) initial revenue growth rate of 54.2% 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 8%, whose default value for SHPG is calculated based on our internal credit rating of Shire ADR, 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 Shire ADR.
    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 SHPG stock the variable cost ratio is equal to 77.9%.

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 SHPG 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 Shire ADR.

Corporate tax rate of 27% is the nominal tax rate for Shire ADR. 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 SHPG 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 SHPG are equal to 224.5%.

Life of production assets of 25 years is the average useful life of capital assets used in Shire ADR 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 SHPG is equal to 20.4%. 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 - $28948 million for Shire ADR - 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 305.463 million for Shire ADR 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 Shire ADR at the current share price and the inputted number of shares is $47.4 billion.

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AMGN Amgen 181.90 97.73  sell
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COMPANY NEWS

▶ ETFs with exposure to Shire Plc : October 10, 2017   [Oct-10-17 11:49AM  Capital Cube]
▶ Shire plc : Director/PDMR Shareholding   [Oct-05-17 07:02AM  GlobeNewswire]
▶ Shire plc : Director/PDMR Shareholding   [Oct-03-17 07:02AM  GlobeNewswire]
▶ Shire Alleges Allergan Blocked Drug From Medicare Contracts   [01:04AM  The Wall Street Journal]
▶ Shire Alleges Allergan Blocked Drug From Medicare Contracts   [Oct-02-17 02:00PM  The Wall Street Journal]
▶ Shire plc : Total voting rights   [09:02AM  GlobeNewswire]
▶ Should You Sell Shire plc (LSE:SHP) At Ā£37.78?   [Sep-29-17 10:36AM  Simply Wall St.]
▶ Why Allergan is Jumping   [Sep-25-17 11:42AM  Barrons.com]
▶ Is Shire plc (SHPG) a Suitable Value Stock?   [Sep-21-17 09:50AM  Zacks]
▶ Whats Coopermans View on Shire?   [Sep-15-17 07:39AM  Market Realist]
▶ Here's Why Shire PLC Stock Fell 10% in August   [Sep-07-17 01:03PM  Motley Fool]
▶ Shire plc : Total voting rights   [Sep-01-17 06:32AM  GlobeNewswire]
▶ Shire plc : Director/PDMR Shareholding   [Aug-23-17 07:02AM  GlobeNewswire]
▶ Shire chief financial officer joins Boston ag-tech startup   [05:33AM  American City Business Journals]
▶ Shire plc : Director/PDMR Shareholding   [Aug-22-17 11:32AM  GlobeNewswire]
▶ UPDATE: Shire: There Goes the CFO!   [Aug-21-17 01:29PM  Barrons.com]
▶ Shire applies for European approval of potential blockbuster eye drop   [Aug-15-17 06:00AM  American City Business Journals]
▶ Shire plc : Director/PDMR Shareholding   [Aug-09-17 09:17AM  GlobeNewswire]
▶ Shire plc : Half-yearly report   [02:52AM  GlobeNewswire]
▶ Shire's ADHD Spinoff Idea Is Shaky   [Aug-03-17 02:29PM  Bloomberg]
▶ [$$] Shire Mulls Spinning-off or Selling Neuroscience Unit   [09:58AM  The Wall Street Journal]
▶ Shire tops Street 2Q forecasts   [09:42AM  Associated Press]
▶ Shire plc : Total voting rights   [Aug-01-17 07:02AM  GlobeNewswire]
▶ Shire Stock Rising on Takeover Talks   [Jul-26-17 04:29PM  TheStreet.com]
▶ New Strong Sell Stocks for July 20th   [Jul-20-17 11:08AM  Zacks]
▶ Shire plc : Notice of Results   [Jul-18-17 07:02AM  GlobeNewswire]
▶ [$$] Shire boss says share price at odds with drugs pipeline   [Jul-16-17 08:18AM  Financial Times]
▶ Shire plc : Additional Listing   [02:02AM  GlobeNewswire]
▶ Shire plc : Director/PDMR Shareholding   [Jul-03-17 08:32AM  GlobeNewswire]
▶ Shire plc : Total voting rights   [07:01AM  GlobeNewswire]
▶ Biotech Movers: Shire, Bellicum, Organovo   [09:36AM  TheStreet.com]
▶ Shire wins FDA approval for new ADHD drug   [10:25AM  American City Business Journals]
▶ Shire's long-acting ADHD drug wins U.S. approval   [Jun-20-17 07:19PM  Reuters]
▶ Valeant: Stop Looking in the Rearview Mirror!   [Jun-16-17 10:54AM  Barrons.com]
▶ 10 High-Quality Foreign-Stock Bargains   [Jun-14-17 06:00AM  Morningstar]
▶ Down 24.6%, is BioCryst Pharmaceuticals Stock Now a Buy?   [Jun-06-17 12:03PM  Motley Fool]
▶ Key FDA Events to Watch Out for in Jun 2017   [Jun-05-17 07:47AM  Zacks]
▶ Paulson & Co. Hedge Fund Cuts Back on Health Care in Q1   [May-30-17 12:13PM  Investopedia]
▶ Why BioCryst Pharmaceuticals Stock Caught Fire Today   [May-25-17 03:06PM  Motley Fool]
▶ Shire and tiny Lexington biotech say hemophilia drug trial misses mark   [May-22-17 01:05PM  American City Business Journals]
▶ Biotech And Pharma Industry And Stock News   [12:48PM  Investor's Business Daily]
▶ Company News for May 19, 2017   [10:17AM  Zacks]
▶ Drugmaker Leads Industry Gains Thursday On Rare Disease Trial   [May-18-17 05:27PM  Investor's Business Daily]
▶ [$$] Health-Care Investor Agent Capital Seeks $100 Million Fund   [May-16-17 04:55PM  The Wall Street Journal]
Financial statements of SHPG
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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