Intrinsic value of Xencor - XNCR

Previous Close

$19.94

  Intrinsic Value

$7.11

stock screener

  Rating & Target

str. sell

-64%

  Value-price divergence*

+384%

Previous close

$19.94

 
Intrinsic value

$7.11

 
Up/down potential

-64%

 
Rating

str. sell

 
Value-price divergence*

+384%

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

We calculate the intrinsic value of XNCR 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 0.9

 

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, %
  214.29
  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
  88
  90
  92
  94
  97
  100
  103
  106
  110
  114
  119
  123
  128
  134
  139
  146
  152
  159
  166
  173
  181
  190
  199
  208
  218
  228
  239
  250
  263
  275
  289
Variable operating expenses, $m
 
  30
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
Fixed operating expenses, $m
 
  39
  40
  41
  42
  43
  44
  45
  46
  47
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
  69
  70
  72
  74
  76
  78
  80
Total operating expenses, $m
  65
  69
  70
  72
  74
  76
  78
  80
  82
  85
  88
  91
  93
  96
  100
  103
  106
  110
  114
  118
  122
  127
  131
  136
  141
  145
  151
  157
  163
  169
  175
Operating income, $m
  23
  21
  22
  22
  23
  24
  25
  26
  28
  29
  31
  33
  35
  37
  40
  42
  45
  48
  52
  55
  59
  63
  68
  72
  77
  82
  88
  94
  100
  107
  114
EBITDA, $m
  24
  22
  23
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  39
  41
  44
  47
  50
  54
  57
  61
  65
  70
  75
  80
  85
  91
  97
  103
  110
  117
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  9
Earnings before tax, $m
  25
  21
  22
  22
  23
  23
  24
  25
  27
  28
  30
  31
  33
  35
  38
  40
  43
  46
  49
  52
  55
  59
  63
  67
  72
  76
  81
  87
  93
  99
  105
Tax expense, $m
  1
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
Net income, $m
  24
  15
  16
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  31
  33
  35
  38
  40
  43
  46
  49
  52
  56
  59
  63
  68
  72
  77

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  130
  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
  429
  305
  312
  320
  329
  339
  350
  362
  375
  389
  404
  420
  437
  455
  474
  495
  517
  540
  564
  589
  617
  645
  675
  707
  741
  776
  813
  852
  893
  936
  982
Adjusted assets (=assets-cash), $m
  299
  305
  312
  320
  329
  339
  350
  362
  375
  389
  404
  420
  437
  455
  474
  495
  517
  540
  564
  589
  617
  645
  675
  707
  741
  776
  813
  852
  893
  936
  982
Revenue / Adjusted assets
  0.294
  0.295
  0.295
  0.294
  0.295
  0.295
  0.294
  0.293
  0.293
  0.293
  0.295
  0.293
  0.293
  0.295
  0.293
  0.295
  0.294
  0.294
  0.294
  0.294
  0.293
  0.295
  0.295
  0.294
  0.294
  0.294
  0.294
  0.293
  0.295
  0.294
  0.294
Average production assets, $m
  13
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
Working capital, $m
  36
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
Total debt, $m
  0
  3
  5
  8
  12
  16
  20
  24
  29
  35
  41
  47
  53
  60
  68
  76
  84
  93
  102
  112
  122
  133
  145
  157
  170
  184
  198
  213
  229
  245
  263
Total liabilities, $m
  115
  118
  120
  123
  127
  131
  135
  139
  144
  150
  156
  162
  168
  175
  183
  191
  199
  208
  217
  227
  237
  248
  260
  272
  285
  299
  313
  328
  344
  360
  378
Total equity, $m
  314
  188
  192
  197
  203
  209
  215
  223
  231
  239
  248
  258
  269
  280
  292
  304
  318
  332
  347
  363
  379
  397
  415
  435
  455
  477
  500
  524
  549
  576
  604
Total liabilities and equity, $m
  429
  306
  312
  320
  330
  340
  350
  362
  375
  389
  404
  420
  437
  455
  475
  495
  517
  540
  564
  590
  616
  645
  675
  707
  740
  776
  813
  852
  893
  936
  982
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.040
  0.060
  0.070
  0.090
  0.110
  0.130
  0.150
  0.160
  0.180
  0.200
  0.220
  0.230
  0.250
  0.260
  0.280
  0.290
  0.310
  0.320
  0.340
  0.350
  0.360
  0.370
  0.380
  0.400
  0.410
  0.420
  0.430
  0.440
Adjusted equity ratio
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  15
  16
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  31
  33
  35
  38
  40
  43
  46
  49
  52
  56
  59
  63
  68
  72
  77
Depreciation, amort., depletion, $m
  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
  3
Funds from operations, $m
  155
  16
  17
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  31
  33
  35
  37
  40
  42
  45
  48
  51
  55
  58
  62
  66
  71
  75
  80
Change in working capital, $m
  60
  0
  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
Cash from operations, $m
  95
  17
  17
  17
  18
  19
  19
  20
  21
  22
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
  52
  56
  59
  63
  67
  72
  76
  81
Maintenance CAPEX, $m
  0
  -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
New CAPEX, $m
  -3
  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
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -214
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -5
  -5
  -5
  -5
  -5
Free cash flow, $m
  -119
  15
  16
  16
  16
  17
  18
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  33
  35
  38
  40
  43
  46
  49
  52
  55
  59
  63
  67
  72
  76
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
Issuance/(repurchase) of shares, $m
  128
  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  
  121
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
Total cash flow (excl. dividends), $m
  2
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  42
  45
  47
  51
  54
  57
  61
  65
  69
  73
  78
  83
  88
  94
Retained Cash Flow (-), $m
  -152
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
Prev. year cash balance distribution, $m
 
  130
  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
 
  144
  14
  14
  14
  15
  15
  16
  16
  17
  18
  19
  20
  22
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  51
  54
  58
  62
  66
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
 
  138
  13
  12
  12
  11
  11
  11
  10
  10
  10
  9
  9
  8
  8
  7
  7
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
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
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Xencor, Inc., a clinical-stage biopharmaceutical company, focuses on discovery and development of engineered monoclonal antibodies to treat severe and life-threatening diseases with unmet medical needs. It develops its antibody product candidates to treat autoimmune and allergic diseases, cancer, and other conditions. The company’s product candidates include XmAb5871, an immune inhibitor, which is in Phase II clinical trials for the treatment of autoimmune diseases; XmAb7195, an immune inhibitor that is in Phase I clinical for use in treating asthma and allergic diseases; XmAb14045, a bispecific oncology candidate, which is under preclinical trials for the treatment of acute myeloid leukemia; and XmAb13676, a bispecific oncology candidate that is under preclinical trials for the treatment of B-cell malignancies. Its product candidates also comprise XmAb5574/MOR208, which is in Phase II clinical trials for the treatment of non-Hodgkin lymphomas and chronic lymphocytic leukemia; and XmAb13551 that is in preclinical trials used for the treatment of multiple myeloma. The company has license agreement with Amgen Inc. and MorphoSys Ag to develop and commercialize bispecific antibody product candidates; and development and manufacturing services agreement with Catalent Pharma Solutions LLC. Xencor, Inc. was founded in 1997 and is headquartered in Monrovia, California.

FINANCIAL RATIOS  of  Xencor (XNCR)

Valuation Ratios
P/E Ratio 38.7
Price to Sales 10.6
Price to Book 3
Price to Tangible Book
Price to Cash Flow 9.8
Price to Free Cash Flow 10.1
Growth Rates
Sales Growth Rate 214.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. -8.7%
Return On Total Capital 10.1%
Ret/ On T. Cap. - 3 Yr. Avg. -10.1%
Return On Equity 10.1%
Return On Equity - 3 Yr. Avg. -10.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 29.5%
EBITDA Margin - 3 Yr. Avg. -60.4%
Operating Margin 26.1%
Oper. Margin - 3 Yr. Avg. -66%
Pre-Tax Margin 28.4%
Pre-Tax Margin - 3 Yr. Avg. -65.3%
Net Profit Margin 27.3%
Net Profit Margin - 3 Yr. Avg. -65.7%
Effective Tax Rate 4%
Eff/ Tax Rate - 3 Yr. Avg. 1.3%
Payout Ratio 0%

XNCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XNCR stock intrinsic value calculation we used $88 million for the last fiscal year's total revenue generated by Xencor. The default revenue input number comes from 2016 income statement of Xencor. 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 XNCR 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 XNCR is calculated based on our internal credit rating of Xencor, 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 Xencor.
    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 XNCR stock the variable cost ratio is equal to 33%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $38 million in the base year in the intrinsic value calculation for XNCR 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 Xencor.

Corporate tax rate of 27% is the nominal tax rate for Xencor. 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 XNCR 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 XNCR are equal to 14.2%.

Life of production assets of 12.5 years is the average useful life of capital assets used in Xencor 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 XNCR 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 - $314 million for Xencor - 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 45.779 million for Xencor 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 Xencor at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ Xencor reports 2Q loss   [Aug-07-17 10:55PM  Associated Press]
▶ Xencor to Present at Upcoming Investor Conferences   [Aug-02-17 08:00AM  PR Newswire]
▶ ETFs with exposure to Xencor, Inc. : June 12, 2017   [Jun-12-17 02:36PM  Capital Cube]
▶ Worst-Performing Gurus' Stocks   [May-23-17 05:00PM  GuruFocus.com]
▶ Xencor reports 1Q loss   [May-09-17 05:24PM  Associated Press]
▶ 3 Biotech Stocks to Buy in February   [Feb-17-17 11:11AM  at Motley Fool]
▶ Xencor Inc (XNCR): What Smart Money Thinks about This Stock?   [Dec-04-16 03:53PM  at Insider Monkey]
▶ Xencor's 4.6M-Share Offering Priced at $24 (XNCR)   [Dec-02-16 10:23AM  at Investopedia]
▶ 3 Top Biotech Stocks to Buy in November   [03:47PM  at Motley Fool]
▶ Xencor to Present at Upcoming Investor Conferences   [Oct-31-16 08:00AM  PR Newswire]
▶ This Caused Xencor Inc.'s Stock to Jump 11.6% in August   [Sep-10-16 07:54AM  at Motley Fool]
▶ Xencor to Present at Upcoming Investor Conferences   [Aug-31-16 08:00AM  PR Newswire]
▶ 5 stocks to watch   [Aug-03-16 01:27PM  at MarketWatch]
Stock chart of XNCR Financial statements of XNCR
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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