Intrinsic value of Theravance Biopharma - TBPH

Previous Close

$27.40

  Intrinsic Value

$1.76

stock screener

  Rating & Target

str. sell

-94%

  Value-price divergence*

0%

Previous close

$27.40

 
Intrinsic value

$1.76

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of TBPH 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 1.4

 

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, %
  16.67
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  49
  50
  51
  52
  54
  56
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  85
  88
  92
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  161
Variable operating expenses, $m
 
  53
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Fixed operating expenses, $m
 
  188
  192
  197
  202
  207
  212
  218
  223
  229
  234
  240
  246
  252
  259
  265
  272
  278
  285
  293
  300
  307
  315
  323
  331
  339
  348
  356
  365
  374
  384
Total operating expenses, $m
  229
  241
  246
  253
  259
  266
  273
  281
  288
  297
  304
  313
  322
  331
  341
  351
  362
  372
  383
  395
  407
  419
  432
  446
  460
  474
  489
  504
  520
  537
  555
Operating income, $m
  -180
  -191
  -195
  -200
  -205
  -210
  -216
  -221
  -227
  -232
  -238
  -244
  -250
  -257
  -263
  -270
  -277
  -284
  -291
  -298
  -306
  -314
  -322
  -330
  -338
  -347
  -356
  -365
  -374
  -384
  -394
EBITDA, $m
  -177
  -190
  -194
  -199
  -204
  -209
  -215
  -220
  -226
  -231
  -237
  -243
  -249
  -255
  -262
  -268
  -275
  -282
  -289
  -297
  -304
  -312
  -320
  -328
  -336
  -345
  -353
  -362
  -371
  -381
  -391
Interest expense (income), $m
  0
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Earnings before tax, $m
  -181
  -198
  -203
  -209
  -214
  -219
  -225
  -231
  -237
  -243
  -249
  -256
  -262
  -269
  -276
  -284
  -291
  -299
  -307
  -315
  -324
  -332
  -341
  -351
  -360
  -370
  -380
  -390
  -401
  -412
  -423
Tax expense, $m
  10
  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
Net income, $m
  -191
  -198
  -203
  -209
  -214
  -219
  -225
  -231
  -237
  -243
  -249
  -256
  -262
  -269
  -276
  -284
  -291
  -299
  -307
  -315
  -324
  -332
  -341
  -351
  -360
  -370
  -380
  -390
  -401
  -412
  -423

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  501
  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
  639
  352
  360
  369
  380
  391
  404
  418
  432
  449
  466
  484
  504
  525
  547
  571
  596
  622
  650
  680
  711
  744
  779
  815
  854
  894
  937
  982
  1,030
  1,079
  1,132
Adjusted assets (=assets-cash), $m
  138
  352
  360
  369
  380
  391
  404
  418
  432
  449
  466
  484
  504
  525
  547
  571
  596
  622
  650
  680
  711
  744
  779
  815
  854
  894
  937
  982
  1,030
  1,079
  1,132
Revenue / Adjusted assets
  0.355
  0.142
  0.142
  0.141
  0.142
  0.143
  0.141
  0.141
  0.141
  0.143
  0.142
  0.143
  0.143
  0.143
  0.143
  0.142
  0.143
  0.141
  0.142
  0.143
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
  0.142
Average production assets, $m
  10
  10
  10
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  24
  25
  26
  27
  28
  30
  31
Working capital, $m
  480
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Total debt, $m
  223
  229
  236
  243
  252
  262
  272
  284
  296
  310
  324
  340
  356
  374
  392
  412
  433
  455
  479
  504
  530
  557
  586
  617
  649
  683
  719
  757
  797
  839
  883
Total liabilities, $m
  289
  295
  302
  309
  318
  328
  338
  350
  362
  376
  390
  406
  422
  440
  458
  478
  499
  521
  545
  570
  596
  623
  652
  683
  715
  749
  785
  823
  863
  905
  949
Total equity, $m
  350
  57
  58
  60
  62
  63
  65
  68
  70
  73
  75
  78
  82
  85
  89
  92
  96
  101
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  183
Total liabilities and equity, $m
  639
  352
  360
  369
  380
  391
  403
  418
  432
  449
  465
  484
  504
  525
  547
  570
  595
  622
  650
  680
  711
  743
  778
  815
  853
  894
  937
  982
  1,030
  1,080
  1,132
Debt-to-equity ratio
  0.637
  4.020
  4.040
  4.070
  4.100
  4.130
  4.160
  4.200
  4.230
  4.260
  4.300
  4.330
  4.360
  4.400
  4.430
  4.460
  4.490
  4.520
  4.550
  4.570
  4.600
  4.630
  4.650
  4.670
  4.700
  4.720
  4.740
  4.760
  4.780
  4.800
  4.810
Adjusted equity ratio
  -1.094
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -191
  -198
  -203
  -209
  -214
  -219
  -225
  -231
  -237
  -243
  -249
  -256
  -262
  -269
  -276
  -284
  -291
  -299
  -307
  -315
  -324
  -332
  -341
  -351
  -360
  -370
  -380
  -390
  -401
  -412
  -423
Depreciation, amort., depletion, $m
  3
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
Funds from operations, $m
  -52
  -197
  -202
  -208
  -213
  -218
  -224
  -230
  -235
  -242
  -248
  -254
  -261
  -268
  -275
  -282
  -290
  -297
  -305
  -313
  -322
  -330
  -339
  -348
  -358
  -367
  -377
  -387
  -398
  -409
  -420
Change in working capital, $m
  47
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  -99
  -197
  -202
  -207
  -213
  -218
  -224
  -229
  -235
  -241
  -248
  -254
  -261
  -268
  -275
  -282
  -289
  -297
  -305
  -313
  -321
  -330
  -339
  -348
  -357
  -367
  -377
  -387
  -397
  -408
  -419
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
New CAPEX, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -148
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Free cash flow, $m
  -247
  -199
  -203
  -209
  -214
  -219
  -225
  -231
  -237
  -243
  -249
  -256
  -263
  -270
  -277
  -284
  -292
  -299
  -307
  -316
  -324
  -333
  -342
  -351
  -360
  -370
  -380
  -391
  -401
  -412
  -424
Issuance/(repayment) of debt, $m
  223
  6
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
Issuance/(repurchase) of shares, $m
  254
  200
  205
  210
  215
  221
  227
  233
  239
  245
  252
  259
  266
  273
  280
  288
  295
  303
  312
  320
  329
  338
  347
  356
  366
  376
  387
  397
  408
  420
  432
Cash from financing (excl. dividends), $m  
  479
  206
  212
  218
  224
  231
  238
  245
  251
  258
  266
  274
  282
  291
  299
  308
  316
  325
  335
  345
  355
  366
  376
  387
  398
  410
  423
  435
  448
  462
  476
Total cash flow (excl. dividends), $m
  232
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
  49
  52
Retained Cash Flow (-), $m
  -107
  -200
  -205
  -210
  -215
  -221
  -227
  -233
  -239
  -245
  -252
  -259
  -266
  -273
  -280
  -288
  -295
  -303
  -312
  -320
  -329
  -338
  -347
  -356
  -366
  -376
  -387
  -397
  -408
  -420
  -432
Prev. year cash balance distribution, $m
 
  294
  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
 
  102
  -197
  -201
  -205
  -210
  -214
  -219
  -224
  -230
  -235
  -240
  -246
  -252
  -258
  -264
  -271
  -277
  -284
  -291
  -298
  -305
  -313
  -320
  -328
  -336
  -344
  -353
  -362
  -370
  -380
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  98
  -180
  -175
  -169
  -163
  -156
  -148
  -140
  -132
  -123
  -114
  -105
  -96
  -87
  -78
  -69
  -60
  -52
  -45
  -38
  -32
  -26
  -21
  -17
  -13
  -10
  -8
  -6
  -4
  -3
Current shareholders' claim on cash, %
  100
  52.1
  27.1
  14.1
  7.3
  3.8
  2.0
  1.0
  0.5
  0.3
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0

Theravance Biopharma, Inc., a diversified biopharmaceutical company, discovers, develops, and commercializes human therapeutics. The company offers VIBATIV (telavancin), a bactericidal, once-daily injectable antibiotic to treat patients with infections due to Staphylococcus aureus and other Gram-positive bacteria. Its product candidates include Revefenacin (TD-4208), an investigational long acting muscarinic antagonist, which is in Phase III clinical study for the treatment of chronic obstructive pulmonary disease; neprilysin (NEP) inhibitor program that is in Phase I clinical study to develop selective NEP inhibitors for the treatment of cardiovascular and renal diseases; and GI-targeted pan-Janus kinanse inhibitor program, which is in Phase I clinical study for inflammatory intestinal diseases. The company’s product candidates also comprise Axelopran, an investigational, once-daily, and oral peripherally active mu opioid receptor antagonist that is in Phase II clinical trial for opioid induced constipation; Velusetrag, an oral and investigational medicine, which is in Phase II study for gastrointestinal motility disorders; and TD-6450, an internally discovered multivalent NS5A inhibitor that is in Phase II study. In addition, it focuses on various drug development programs, including the combination of fluticasone furoate, umeclidinium, and vilanterol; the Inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist program, as monotherapy; and in combination with other therapeutically active components, such as an inhaled corticosteroid. Theravance Biopharma, Inc. was incorporated in 2013 and is based in George Town, the Cayman Islands.

FINANCIAL RATIOS  of  Theravance Biopharma (TBPH)

Valuation Ratios
P/E Ratio -7.6
Price to Sales 29.5
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow -14.6
Price to Free Cash Flow -14.3
Growth Rates
Sales Growth Rate 16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 63.7%
Total Debt to Equity 63.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -40.7%
Ret/ On Assets - 3 Yr. Avg. -76.1%
Return On Total Capital -46.8%
Ret/ On T. Cap. - 3 Yr. Avg. -96.2%
Return On Equity -64.4%
Return On Equity - 3 Yr. Avg. -102.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 93.9%
Gross Margin - 3 Yr. Avg. 82.9%
EBITDA Margin -363.3%
EBITDA Margin - 3 Yr. Avg. -895.7%
Operating Margin -367.3%
Oper. Margin - 3 Yr. Avg. -911.3%
Pre-Tax Margin -369.4%
Pre-Tax Margin - 3 Yr. Avg. -908.4%
Net Profit Margin -389.8%
Net Profit Margin - 3 Yr. Avg. -932.7%
Effective Tax Rate -5.5%
Eff/ Tax Rate - 3 Yr. Avg. -2.9%
Payout Ratio 0%

TBPH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TBPH stock intrinsic value calculation we used $49 million for the last fiscal year's total revenue generated by Theravance Biopharma. The default revenue input number comes from 2016 income statement of Theravance Biopharma. 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 TBPH stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for TBPH is calculated based on our internal credit rating of Theravance Biopharma, 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 Theravance Biopharma.
    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 TBPH stock the variable cost ratio is equal to 106.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $183 million in the base year in the intrinsic value calculation for TBPH 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 Theravance Biopharma.

Corporate tax rate of 27% is the nominal tax rate for Theravance Biopharma. 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 TBPH 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 TBPH are equal to 19.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Theravance Biopharma 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 TBPH is equal to -10%. 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 - $350 million for Theravance Biopharma - 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 49.72 million for Theravance Biopharma 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 Theravance Biopharma at the current share price and the inputted number of shares is $1.4 billion.

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COMPANY NEWS

▶ Theravance Bio reports 1Q loss   [May-09-17 06:02PM  Associated Press]
▶ Theravance Bio reports 4Q loss   [Feb-27-17 06:04PM  Associated Press]
▶ Why Theravance Biopharma Inc Shares Tumbled 19.5% Today   [Oct-27-16 05:19PM  at Motley Fool]
Stock chart of TBPH Financial statements of TBPH
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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