Intrinsic value of Aduro Biotech - ADRO

Previous Close

$3.20

  Intrinsic Value

$1.18

stock screener

  Rating & Target

str. sell

-63%

Previous close

$3.20

 
Intrinsic value

$1.18

 
Up/down potential

-63%

 
Rating

str. sell

We calculate the intrinsic value of ADRO 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 0001), $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 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  18
  18
  18
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  57
Variable operating expenses, $m
  42
  43
  44
  45
  47
  48
  49
  51
  53
  55
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  123
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
  42
  43
  44
  45
  47
  48
  49
  51
  53
  55
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  123
Operating income, $m
  -25
  -25
  -26
  -26
  -27
  -28
  -29
  -29
  -30
  -31
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
EBITDA, $m
  -18
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
Interest expense (income), $m
  0
  0
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  14
Earnings before tax, $m
  -25
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
Tax expense, $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
Net income, $m
  -25
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80

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
  166
  170
  174
  179
  184
  190
  197
  204
  211
  220
  228
  237
  247
  258
  269
  281
  293
  306
  320
  335
  351
  367
  384
  402
  422
  442
  463
  485
  509
  533
Adjusted assets (=assets-cash), $m
  166
  170
  174
  179
  184
  190
  197
  204
  211
  220
  228
  237
  247
  258
  269
  281
  293
  306
  320
  335
  351
  367
  384
  402
  422
  442
  463
  485
  509
  533
Revenue / Adjusted assets
  0.108
  0.106
  0.103
  0.106
  0.109
  0.105
  0.107
  0.108
  0.104
  0.105
  0.105
  0.105
  0.105
  0.105
  0.108
  0.107
  0.106
  0.105
  0.106
  0.107
  0.105
  0.106
  0.107
  0.107
  0.107
  0.106
  0.106
  0.105
  0.106
  0.107
Average production assets, $m
  49
  50
  52
  53
  55
  56
  58
  60
  63
  65
  68
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
Working capital, $m
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
Total debt, $m
  -58
  -55
  -51
  -47
  -42
  -36
  -31
  -24
  -17
  -10
  -2
  6
  15
  24
  34
  45
  56
  68
  81
  94
  108
  123
  138
  154
  172
  190
  209
  229
  250
  272
Total liabilities, $m
  149
  153
  157
  161
  166
  171
  177
  183
  190
  198
  205
  214
  223
  232
  242
  253
  264
  276
  288
  302
  315
  330
  346
  362
  379
  398
  417
  437
  458
  480
Total equity, $m
  17
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  49
  51
  53
Total liabilities and equity, $m
  166
  170
  174
  179
  184
  190
  197
  203
  211
  220
  228
  238
  248
  258
  269
  281
  293
  307
  320
  336
  350
  367
  384
  402
  421
  442
  463
  486
  509
  533
Debt-to-equity ratio
  -3.520
  -3.240
  -2.930
  -2.600
  -2.260
  -1.910
  -1.550
  -1.190
  -0.820
  -0.460
  -0.100
  0.250
  0.600
  0.940
  1.280
  1.600
  1.920
  2.220
  2.520
  2.800
  3.080
  3.340
  3.590
  3.840
  4.070
  4.300
  4.510
  4.720
  4.920
  5.110
Adjusted equity ratio
  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
  -25
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
Depreciation, amort., depletion, $m
  7
  7
  7
  7
  7
  7
  7
  8
  8
  8
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
Funds from operations, $m
  -18
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -71
Change in working capital, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Cash from operations, $m
  -17
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -34
  -37
  -39
  -41
  -43
  -46
  -49
  -51
  -54
  -58
  -61
  -64
  -68
Maintenance CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
New CAPEX, $m
  -2
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Cash from investing activities, $m
  -5
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
Free cash flow, $m
  -22
  -19
  -20
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -54
  -58
  -61
  -64
  -68
  -72
  -76
  -80
  -84
Issuance/(repayment) of debt, $m
  -58
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $m
  89
  22
  23
  24
  25
  26
  27
  29
  30
  31
  29
  31
  32
  34
  36
  38
  40
  43
  45
  48
  51
  53
  56
  60
  63
  67
  70
  74
  78
  83
Cash from financing (excl. dividends), $m  
  31
  25
  27
  28
  30
  31
  33
  35
  37
  38
  37
  39
  41
  43
  46
  49
  51
  55
  58
  61
  65
  68
  72
  76
  80
  85
  89
  94
  99
  105
Total cash flow (excl. dividends), $m
  9
  7
  8
  8
  8
  9
  9
  10
  10
  11
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
Retained Cash Flow (-), $m
  -89
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -78
  -83
Prev. year cash balance distribution, $m
  285
  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
  205
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
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
  196
  -14
  -14
  -13
  -13
  -12
  -12
  -12
  -11
  -11
  -10
  -10
  -9
  -9
  -8
  -7
  -7
  -6
  -5
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  50.0
  22.0
  9.6
  4.2
  1.8
  0.8
  0.3
  0.1
  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
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Aduro Biotech, Inc. is an immunotherapy company, which focuses on the discovery, development and commercialization of therapies that manage the treatment of various diseases, including cancer. The Company's product candidates from its Live, Attenuated, Double-Deleted (LADD) Listeria monocytogenes, Stimulator of Interferon Genes Pathway Activator, and B-select monoclonal antibody platforms are designed to stimulate and/or regulate innate and adaptive immune responses, either as single agents or in combination with conventional therapies, as well as other immunotherapies. Its LADD technology platform is being developed as a treatment for multiple indications, including mesothelioma, ovarian, gastric, lung and prostate cancers. Its LADD product candidate is CRS-207, which is being developed as a treatment for multiple indications, including mesothelioma, ovarian and gastric cancers. ADU-214 and ADU-741 are product candidates in development for lung and prostate cancers, respectively.

FINANCIAL RATIOS  of  Aduro Biotech (ADRO)

Valuation Ratios
P/E Ratio -2.4
Price to Sales 4.3
Price to Book 1
Price to Tangible Book
Price to Cash Flow -2.5
Price to Free Cash Flow -2
Growth Rates
Sales Growth Rate -30.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
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 -19.8%
Ret/ On Assets - 3 Yr. Avg. -19.2%
Return On Total Capital -37.2%
Ret/ On T. Cap. - 3 Yr. Avg. -35.8%
Return On Equity -37.2%
Return On Equity - 3 Yr. Avg. -35.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -131.4%
EBITDA Margin - 3 Yr. Avg. -104.7%
Operating Margin -141.2%
Oper. Margin - 3 Yr. Avg. -94.5%
Pre-Tax Margin -137.3%
Pre-Tax Margin - 3 Yr. Avg. -107.1%
Net Profit Margin -178.4%
Net Profit Margin - 3 Yr. Avg. -120.9%
Effective Tax Rate -30%
Eff/ Tax Rate - 3 Yr. Avg. -10%
Payout Ratio 0%

ADRO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADRO stock intrinsic value calculation we used $17.239 million for the last fiscal year's total revenue generated by Aduro Biotech. The default revenue input number comes from 0001 income statement of Aduro Biotech. 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 ADRO 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 ADRO is calculated based on our internal credit rating of Aduro Biotech, 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 Aduro Biotech.
    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 ADRO stock the variable cost ratio is equal to 241.2%.

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 ADRO 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 5.4% for Aduro Biotech.

Corporate tax rate of 27% is the nominal tax rate for Aduro Biotech. 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 ADRO 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 ADRO are equal to 279.8%.

Life of production assets of 16.7 years is the average useful life of capital assets used in Aduro Biotech 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 ADRO is equal to -104.9%. 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 - $237.473 million for Aduro Biotech - 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 78.73 million for Aduro Biotech 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 Aduro Biotech at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Why Aduro Biotech Crashed 29.5% Today   [Oct-22-18 05:53PM  Motley Fool]
▶ Aduro Biotech: 2Q Earnings Snapshot   [05:48PM  Associated Press]
▶ Aduro Biotech: 1Q Earnings Snapshot   [May-02-18 05:59PM  Associated Press]
▶ Aduro Biotech reports 4Q loss   [Mar-01-18 04:51PM  Associated Press]
▶ Aduro Biotech Announces Management Changes   [Jan-05-18 08:00AM  GlobeNewswire]
▶ Aduro Biotech Provides Update on CRS-207 Programs   [Dec-12-17 08:00AM  GlobeNewswire]
▶ Aduro Biotech to Host a Program Update Call   [Dec-11-17 04:01PM  GlobeNewswire]
▶ Coal demand in Indonesia is on the upswing: executive   [Nov-06-17 06:50PM  CNBC Videos]
▶ Aduro Biotech reports 3Q loss   [Oct-31-17 06:26PM  Associated Press]
▶ Aduro Biotech reports 2Q loss   [Aug-02-17 10:54PM  Associated Press]
▶ Aduro Biotech, Merck Team on Cancer Drug Trial   [May-17-17 03:18PM  TheStreet.com]
▶ ETFs with exposure to Aduro BioTech, Inc. : May 5, 2017   [May-05-17 03:46PM  Capital Cube]
▶ Aduro Biotech reports 1Q loss   [May-02-17 07:01PM  Associated Press]

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