Intrinsic value of Aceto - ACET

Previous Close

$3.27

  Intrinsic Value

$29.44

stock screener

  Rating & Target

str. buy

+800%

Previous close

$3.27

 
Intrinsic value

$29.44

 
Up/down potential

+800%

 
Rating

str. buy

We calculate the intrinsic value of ACET 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 2017), $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 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
Revenue, $m
  729
  827
  930
  1,040
  1,155
  1,277
  1,404
  1,536
  1,674
  1,818
  1,968
  2,124
  2,286
  2,455
  2,630
  2,811
  3,000
  3,197
  3,401
  3,614
  3,836
  4,067
  4,307
  4,558
  4,820
  5,093
  5,378
  5,676
  5,988
  6,313
Variable operating expenses, $m
  646
  725
  810
  899
  993
  1,092
  1,195
  1,303
  1,416
  1,533
  1,603
  1,730
  1,861
  1,999
  2,141
  2,289
  2,443
  2,603
  2,769
  2,943
  3,123
  3,311
  3,507
  3,711
  3,924
  4,147
  4,379
  4,622
  4,875
  5,140
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
  646
  725
  810
  899
  993
  1,092
  1,195
  1,303
  1,416
  1,533
  1,603
  1,730
  1,861
  1,999
  2,141
  2,289
  2,443
  2,603
  2,769
  2,943
  3,123
  3,311
  3,507
  3,711
  3,924
  4,147
  4,379
  4,622
  4,875
  5,140
Operating income, $m
  83
  101
  121
  141
  162
  185
  209
  233
  259
  286
  366
  395
  425
  456
  489
  522
  558
  594
  632
  672
  713
  756
  800
  847
  896
  946
  999
  1,055
  1,113
  1,173
EBITDA, $m
  176
  199
  224
  251
  278
  308
  338
  370
  403
  438
  474
  512
  551
  591
  634
  677
  723
  770
  819
  871
  924
  980
  1,038
  1,098
  1,161
  1,227
  1,296
  1,368
  1,443
  1,521
Interest expense (income), $m
  8
  24
  30
  36
  43
  50
  58
  66
  75
  83
  93
  102
  112
  122
  133
  144
  156
  168
  181
  194
  207
  221
  236
  252
  268
  284
  302
  320
  339
  358
  379
Earnings before tax, $m
  60
  72
  84
  98
  112
  127
  142
  159
  176
  193
  264
  283
  302
  323
  344
  366
  389
  413
  438
  464
  491
  519
  549
  579
  611
  645
  680
  716
  754
  794
Tax expense, $m
  16
  19
  23
  26
  30
  34
  38
  43
  47
  52
  71
  76
  82
  87
  93
  99
  105
  112
  118
  125
  133
  140
  148
  156
  165
  174
  184
  193
  204
  214
Net income, $m
  44
  52
  62
  71
  82
  93
  104
  116
  128
  141
  192
  206
  221
  236
  251
  267
  284
  302
  320
  339
  359
  379
  401
  423
  446
  471
  496
  523
  551
  580

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  1,186
  1,344
  1,513
  1,691
  1,879
  2,076
  2,282
  2,498
  2,723
  2,957
  3,201
  3,454
  3,718
  3,991
  4,276
  4,571
  4,879
  5,198
  5,531
  5,877
  6,237
  6,612
  7,004
  7,412
  7,837
  8,281
  8,745
  9,230
  9,736
  10,266
Adjusted assets (=assets-cash), $m
  1,186
  1,344
  1,513
  1,691
  1,879
  2,076
  2,282
  2,498
  2,723
  2,957
  3,201
  3,454
  3,718
  3,991
  4,276
  4,571
  4,879
  5,198
  5,531
  5,877
  6,237
  6,612
  7,004
  7,412
  7,837
  8,281
  8,745
  9,230
  9,736
  10,266
Revenue / Adjusted assets
  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
Average production assets, $m
  402
  456
  513
  573
  637
  703
  773
  846
  923
  1,002
  1,085
  1,170
  1,260
  1,352
  1,449
  1,549
  1,653
  1,762
  1,874
  1,991
  2,114
  2,241
  2,373
  2,512
  2,656
  2,806
  2,963
  3,128
  3,299
  3,479
Working capital, $m
  53
  60
  68
  76
  84
  93
  102
  112
  122
  133
  144
  155
  167
  179
  192
  205
  219
  233
  248
  264
  280
  297
  314
  333
  352
  372
  393
  414
  437
  461
Total debt, $m
  444
  540
  643
  752
  866
  987
  1,113
  1,244
  1,381
  1,524
  1,673
  1,827
  1,988
  2,155
  2,329
  2,509
  2,697
  2,891
  3,094
  3,305
  3,525
  3,754
  3,993
  4,242
  4,501
  4,772
  5,055
  5,351
  5,660
  5,982
Total liabilities, $m
  723
  820
  923
  1,031
  1,146
  1,266
  1,392
  1,524
  1,661
  1,804
  1,952
  2,107
  2,268
  2,435
  2,608
  2,789
  2,976
  3,171
  3,374
  3,585
  3,805
  4,034
  4,272
  4,521
  4,781
  5,052
  5,335
  5,630
  5,939
  6,262
Total equity, $m
  462
  524
  590
  659
  733
  810
  890
  974
  1,062
  1,153
  1,248
  1,347
  1,450
  1,557
  1,668
  1,783
  1,903
  2,027
  2,157
  2,292
  2,432
  2,579
  2,731
  2,891
  3,056
  3,230
  3,411
  3,600
  3,797
  4,004
Total liabilities and equity, $m
  1,185
  1,344
  1,513
  1,690
  1,879
  2,076
  2,282
  2,498
  2,723
  2,957
  3,200
  3,454
  3,718
  3,992
  4,276
  4,572
  4,879
  5,198
  5,531
  5,877
  6,237
  6,613
  7,003
  7,412
  7,837
  8,282
  8,746
  9,230
  9,736
  10,266
Debt-to-equity ratio
  0.960
  1.030
  1.090
  1.140
  1.180
  1.220
  1.250
  1.280
  1.300
  1.320
  1.340
  1.360
  1.370
  1.380
  1.400
  1.410
  1.420
  1.430
  1.430
  1.440
  1.450
  1.460
  1.460
  1.470
  1.470
  1.480
  1.480
  1.490
  1.490
  1.490
Adjusted equity ratio
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  52
  62
  71
  82
  93
  104
  116
  128
  141
  192
  206
  221
  236
  251
  267
  284
  302
  320
  339
  359
  379
  401
  423
  446
  471
  496
  523
  551
  580
Depreciation, amort., depletion, $m
  92
  98
  103
  110
  116
  123
  130
  137
  144
  152
  108
  117
  126
  135
  145
  155
  165
  176
  187
  199
  211
  224
  237
  251
  266
  281
  296
  313
  330
  348
Funds from operations, $m
  136
  150
  165
  181
  198
  215
  234
  253
  273
  293
  301
  323
  347
  371
  396
  422
  450
  478
  507
  538
  570
  603
  638
  674
  712
  751
  792
  835
  880
  927
Change in working capital, $m
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  129
  143
  158
  173
  189
  206
  224
  243
  263
  283
  290
  312
  335
  359
  383
  409
  436
  464
  492
  523
  554
  586
  620
  656
  693
  731
  772
  814
  858
  904
Maintenance CAPEX, $m
  -35
  -40
  -46
  -51
  -57
  -64
  -70
  -77
  -85
  -92
  -100
  -108
  -117
  -126
  -135
  -145
  -155
  -165
  -176
  -187
  -199
  -211
  -224
  -237
  -251
  -266
  -281
  -296
  -313
  -330
New CAPEX, $m
  -50
  -54
  -57
  -60
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -133
  -138
  -144
  -151
  -157
  -164
  -172
  -179
Cash from investing activities, $m
  -85
  -94
  -103
  -111
  -121
  -131
  -140
  -150
  -161
  -171
  -183
  -194
  -206
  -219
  -231
  -245
  -259
  -273
  -289
  -304
  -321
  -338
  -357
  -375
  -395
  -417
  -438
  -460
  -485
  -509
Free cash flow, $m
  44
  49
  55
  61
  68
  76
  84
  93
  102
  111
  107
  118
  129
  140
  152
  164
  177
  190
  204
  218
  233
  248
  264
  280
  297
  315
  334
  353
  373
  394
Issuance/(repayment) of debt, $m
  90
  97
  103
  109
  115
  120
  126
  132
  137
  143
  149
  155
  161
  167
  174
  180
  187
  195
  203
  211
  220
  229
  239
  249
  260
  271
  283
  296
  309
  323
Issuance/(repurchase) of shares, $m
  14
  9
  4
  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  
  104
  106
  107
  109
  115
  120
  126
  132
  137
  143
  149
  155
  161
  167
  174
  180
  187
  195
  203
  211
  220
  229
  239
  249
  260
  271
  283
  296
  309
  323
Total cash flow (excl. dividends), $m
  148
  155
  162
  170
  183
  196
  210
  224
  239
  254
  256
  272
  289
  307
  325
  344
  364
  385
  406
  429
  452
  477
  502
  529
  557
  586
  617
  649
  682
  717
Retained Cash Flow (-), $m
  -57
  -62
  -66
  -69
  -73
  -77
  -80
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -141
  -146
  -153
  -159
  -166
  -173
  -181
  -189
  -197
  -206
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
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
Cash available for distribution, $m
  91
  93
  96
  101
  110
  119
  129
  140
  151
  163
  161
  173
  187
  200
  214
  229
  244
  260
  277
  294
  312
  330
  350
  370
  391
  413
  436
  460
  485
  511
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  85
  81
  77
  73
  72
  71
  68
  65
  62
  57
  48
  44
  39
  34
  30
  25
  21
  17
  14
  11
  8
  6
  5
  3
  2
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  95.3
  92.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6
  91.6

Aceto Corporation (Aceto) is engaged in the marketing, sales and distribution of finished dosage form generic pharmaceuticals, nutraceutical products, pharmaceutical active ingredients and intermediates, specialty performance chemicals inclusive of agricultural intermediates and agricultural protection products. The Company's business is organized along product lines into three segments: Human Health, Pharmaceutical Ingredients and Performance Chemicals. As of June 30, 2016, it distributed over 1,100 chemical compounds used primarily as finished products or raw materials in the agricultural, coatings and industrial chemical industries. The Human Health segment includes finished dosage form generic drugs and nutraceutical products. As of June 30, 2016, the Pharmaceutical Ingredients segment had two product groups: Active Pharmaceutical Ingredients and Pharmaceutical Intermediates. The Performance Chemicals segment includes specialty chemicals and agricultural protection products.

FINANCIAL RATIOS  of  Aceto (ACET)

Valuation Ratios
P/E Ratio 8.9
Price to Sales 0.2
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 2.5
Growth Rates
Sales Growth Rate 14.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -58.3%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 84%
Total Debt to Equity 87.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 1.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.7%
Return On Equity 3.1%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 22.1%
Gross Margin - 3 Yr. Avg. 24.1%
EBITDA Margin 7.7%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 8.4%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 7.4%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 72.7%

ACET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACET stock intrinsic value calculation we used $638 million for the last fiscal year's total revenue generated by Aceto. The default revenue input number comes from 2017 income statement of Aceto. 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 ACET stock valuation model: a) initial revenue growth rate of 14.3% 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 7.1%, whose default value for ACET is calculated based on our internal credit rating of Aceto, 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 Aceto.
    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 ACET stock the variable cost ratio is equal to 89.6%.

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 ACET 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 6.7% for Aceto.

Corporate tax rate of 27% is the nominal tax rate for Aceto. 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 ACET stock is equal to 1.1%.

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 ACET are equal to 55.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Aceto 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 ACET is equal to 7.3%. 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 - $405 million for Aceto - 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 32 million for Aceto 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 Aceto at the current share price and the inputted number of shares is $0.1 billion.

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