Intrinsic value of Alkermes plc - ALKS

Previous Close

$33.96

  Intrinsic Value

$7.95

stock screener

  Rating & Target

str. sell

-77%

Previous close

$33.96

 
Intrinsic value

$7.95

 
Up/down potential

-77%

 
Rating

str. sell

We calculate the intrinsic value of ALKS 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 5.3

 

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, %
  14.70
  13.73
  12.86
  12.07
  11.36
  10.73
  10.15
  9.64
  9.18
  8.76
  8.38
  8.04
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
Revenue, $m
  1,255
  1,427
  1,611
  1,805
  2,010
  2,226
  2,452
  2,688
  2,935
  3,192
  3,459
  3,738
  4,027
  4,328
  4,640
  4,965
  5,302
  5,653
  6,018
  6,398
  6,793
  7,205
  7,634
  8,081
  8,548
  9,035
  9,543
  10,074
  10,629
  11,209
Variable operating expenses, $m
  932
  1,055
  1,187
  1,326
  1,474
  1,628
  1,791
  1,960
  2,137
  2,322
  2,483
  2,682
  2,890
  3,106
  3,330
  3,563
  3,805
  4,057
  4,319
  4,591
  4,875
  5,171
  5,478
  5,800
  6,134
  6,484
  6,849
  7,230
  7,628
  8,044
Fixed operating expenses, $m
  393
  402
  411
  420
  429
  439
  448
  458
  468
  479
  489
  500
  511
  522
  534
  545
  557
  570
  582
  595
  608
  621
  635
  649
  663
  678
  693
  708
  724
  740
Total operating expenses, $m
  1,325
  1,457
  1,598
  1,746
  1,903
  2,067
  2,239
  2,418
  2,605
  2,801
  2,972
  3,182
  3,401
  3,628
  3,864
  4,108
  4,362
  4,627
  4,901
  5,186
  5,483
  5,792
  6,113
  6,449
  6,797
  7,162
  7,542
  7,938
  8,352
  8,784
Operating income, $m
  -70
  -30
  13
  59
  107
  159
  213
  270
  329
  392
  488
  555
  626
  700
  776
  856
  940
  1,026
  1,117
  1,211
  1,310
  1,413
  1,520
  1,633
  1,750
  1,873
  2,001
  2,136
  2,277
  2,425
EBITDA, $m
  49
  101
  157
  217
  280
  347
  417
  490
  567
  648
  731
  819
  910
  1,005
  1,104
  1,206
  1,313
  1,425
  1,541
  1,662
  1,789
  1,921
  2,058
  2,202
  2,353
  2,510
  2,674
  2,846
  3,027
  3,215
Interest expense (income), $m
  12
  15
  21
  26
  32
  39
  45
  52
  60
  68
  76
  84
  93
  102
  111
  121
  131
  142
  153
  165
  176
  189
  202
  215
  229
  244
  259
  275
  292
  309
  327
Earnings before tax, $m
  -86
  -51
  -14
  26
  69
  113
  160
  210
  262
  316
  404
  463
  524
  588
  655
  725
  798
  873
  952
  1,035
  1,121
  1,211
  1,305
  1,403
  1,506
  1,614
  1,726
  1,844
  1,968
  2,098
Tax expense, $m
  0
  0
  0
  7
  19
  31
  43
  57
  71
  85
  109
  125
  142
  159
  177
  196
  215
  236
  257
  279
  303
  327
  352
  379
  407
  436
  466
  498
  531
  566
Net income, $m
  -86
  -51
  -14
  19
  50
  83
  117
  153
  191
  231
  295
  338
  383
  430
  478
  529
  582
  638
  695
  755
  818
  884
  953
  1,024
  1,099
  1,178
  1,260
  1,346
  1,437
  1,531

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
  1,862
  2,117
  2,390
  2,678
  2,982
  3,302
  3,638
  3,988
  4,354
  4,736
  5,133
  5,545
  5,975
  6,421
  6,884
  7,366
  7,867
  8,387
  8,929
  9,492
  10,079
  10,690
  11,326
  11,990
  12,682
  13,404
  14,159
  14,946
  15,770
  16,630
Adjusted assets (=assets-cash), $m
  1,862
  2,117
  2,390
  2,678
  2,982
  3,302
  3,638
  3,988
  4,354
  4,736
  5,133
  5,545
  5,975
  6,421
  6,884
  7,366
  7,867
  8,387
  8,929
  9,492
  10,079
  10,690
  11,326
  11,990
  12,682
  13,404
  14,159
  14,946
  15,770
  16,630
Revenue / Adjusted assets
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
Average production assets, $m
  522
  594
  670
  751
  836
  926
  1,020
  1,118
  1,221
  1,328
  1,439
  1,555
  1,675
  1,800
  1,930
  2,065
  2,206
  2,352
  2,503
  2,661
  2,826
  2,997
  3,176
  3,362
  3,556
  3,758
  3,970
  4,191
  4,422
  4,663
Working capital, $m
  123
  140
  158
  177
  197
  218
  240
  263
  288
  313
  339
  366
  395
  424
  455
  487
  520
  554
  590
  627
  666
  706
  748
  792
  838
  885
  935
  987
  1,042
  1,098
Total debt, $m
  375
  477
  587
  702
  824
  953
  1,087
  1,228
  1,374
  1,527
  1,687
  1,852
  2,024
  2,203
  2,389
  2,582
  2,783
  2,992
  3,209
  3,435
  3,670
  3,915
  4,170
  4,436
  4,714
  5,004
  5,306
  5,622
  5,952
  6,297
Total liabilities, $m
  747
  849
  958
  1,074
  1,196
  1,324
  1,459
  1,599
  1,746
  1,899
  2,058
  2,224
  2,396
  2,575
  2,761
  2,954
  3,155
  3,363
  3,580
  3,806
  4,042
  4,286
  4,542
  4,808
  5,085
  5,375
  5,678
  5,994
  6,324
  6,669
Total equity, $m
  1,115
  1,268
  1,431
  1,604
  1,786
  1,978
  2,179
  2,389
  2,608
  2,837
  3,074
  3,322
  3,579
  3,846
  4,124
  4,412
  4,712
  5,024
  5,348
  5,686
  6,037
  6,403
  6,784
  7,182
  7,597
  8,029
  8,481
  8,953
  9,446
  9,961
Total liabilities and equity, $m
  1,862
  2,117
  2,389
  2,678
  2,982
  3,302
  3,638
  3,988
  4,354
  4,736
  5,132
  5,546
  5,975
  6,421
  6,885
  7,366
  7,867
  8,387
  8,928
  9,492
  10,079
  10,689
  11,326
  11,990
  12,682
  13,404
  14,159
  14,947
  15,770
  16,630
Debt-to-equity ratio
  0.340
  0.380
  0.410
  0.440
  0.460
  0.480
  0.500
  0.510
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.630
  0.630
  0.630
  0.630
Adjusted equity ratio
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -86
  -51
  -14
  19
  50
  83
  117
  153
  191
  231
  295
  338
  383
  430
  478
  529
  582
  638
  695
  755
  818
  884
  953
  1,024
  1,099
  1,178
  1,260
  1,346
  1,437
  1,531
Depreciation, amort., depletion, $m
  119
  132
  145
  158
  173
  188
  204
  221
  238
  256
  244
  264
  284
  305
  327
  350
  374
  399
  424
  451
  479
  508
  538
  570
  603
  637
  673
  710
  749
  790
Funds from operations, $m
  34
  81
  131
  177
  223
  271
  321
  374
  429
  487
  539
  601
  667
  735
  805
  879
  956
  1,036
  1,120
  1,207
  1,297
  1,392
  1,491
  1,594
  1,702
  1,815
  1,933
  2,057
  2,186
  2,322
Change in working capital, $m
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
Cash from operations, $m
  18
  64
  113
  158
  203
  250
  299
  351
  405
  462
  512
  574
  638
  705
  775
  847
  923
  1,002
  1,084
  1,169
  1,259
  1,352
  1,449
  1,550
  1,656
  1,767
  1,883
  2,005
  2,132
  2,265
Maintenance CAPEX, $m
  -77
  -88
  -101
  -114
  -127
  -142
  -157
  -173
  -190
  -207
  -225
  -244
  -264
  -284
  -305
  -327
  -350
  -374
  -399
  -424
  -451
  -479
  -508
  -538
  -570
  -603
  -637
  -673
  -710
  -749
New CAPEX, $m
  -66
  -72
  -76
  -81
  -85
  -90
  -94
  -98
  -103
  -107
  -111
  -116
  -120
  -125
  -130
  -135
  -140
  -146
  -152
  -158
  -164
  -171
  -178
  -186
  -194
  -203
  -211
  -221
  -231
  -241
Cash from investing activities, $m
  -143
  -160
  -177
  -195
  -212
  -232
  -251
  -271
  -293
  -314
  -336
  -360
  -384
  -409
  -435
  -462
  -490
  -520
  -551
  -582
  -615
  -650
  -686
  -724
  -764
  -806
  -848
  -894
  -941
  -990
Free cash flow, $m
  -125
  -96
  -64
  -36
  -10
  18
  48
  79
  113
  148
  176
  214
  254
  296
  340
  385
  433
  482
  533
  587
  643
  701
  762
  826
  892
  962
  1,035
  1,111
  1,191
  1,274
Issuance/(repayment) of debt, $m
  96
  103
  109
  116
  122
  128
  134
  141
  147
  153
  159
  166
  172
  179
  186
  193
  201
  209
  217
  226
  235
  245
  255
  266
  278
  290
  302
  316
  330
  345
Issuance/(repurchase) of shares, $m
  229
  204
  177
  154
  132
  109
  84
  57
  28
  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  
  325
  307
  286
  270
  254
  237
  218
  198
  175
  153
  159
  166
  172
  179
  186
  193
  201
  209
  217
  226
  235
  245
  255
  266
  278
  290
  302
  316
  330
  345
Total cash flow (excl. dividends), $m
  199
  210
  222
  233
  244
  255
  266
  277
  288
  301
  335
  380
  426
  475
  526
  578
  633
  691
  751
  813
  878
  946
  1,018
  1,092
  1,170
  1,252
  1,337
  1,427
  1,521
  1,619
Retained Cash Flow (-), $m
  -229
  -204
  -177
  -173
  -182
  -192
  -201
  -210
  -219
  -228
  -238
  -247
  -257
  -267
  -278
  -289
  -300
  -312
  -324
  -337
  -351
  -366
  -381
  -398
  -415
  -433
  -452
  -472
  -493
  -515
Prev. year cash balance distribution, $m
  200
  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
  170
  6
  45
  60
  62
  64
  65
  67
  68
  72
  97
  133
  169
  208
  248
  290
  333
  379
  426
  475
  527
  580
  636
  695
  755
  819
  885
  955
  1,028
  1,104
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
  163
  6
  39
  50
  48
  46
  44
  42
  39
  38
  46
  57
  64
  70
  73
  74
  73
  70
  66
  60
  54
  48
  42
  35
  29
  24
  19
  15
  11
  8
Current shareholders' claim on cash, %
  95.1
  91.4
  88.6
  86.6
  85.0
  83.9
  83.1
  82.6
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4
  82.4

Alkermes plc is a biopharmaceutical company. The Company is engaged in the researching, developing and commercializing pharmaceutical products that are designed to address medical needs of patients in therapeutic areas. The Company has a portfolio of marketed drug products and a clinical pipeline of products that address central nervous system (CNS) disorders, such as schizophrenia, depression, addiction and multiple sclerosis (MS). The Company's products include ARISTADA, VIVITROL, INVEGA SUSTENNA, XEPLION, INVEGA TRINZA, TREVICTA, RISPERDAL CONSTA, AMPYRA, FAMPYRA, BYDUREON, Aripiprazole lauroxil, ALKS 5461, ALKS 3831, ALKS 8700, ALKS 6428, ALKS 4230 and ALKS 7119. The Company's product platforms include injectable extended-release microsphere technology, LinkeRx technology, NanoCrystal technology and oral controlled release (OCR) technology. ARISTADA is an extended-release intramuscular injectable suspension for the treatment of schizophrenia.

FINANCIAL RATIOS  of  Alkermes plc (ALKS)

Valuation Ratios
P/E Ratio -24.9
Price to Sales 6.9
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow -80.9
Price to Free Cash Flow -47.9
Growth Rates
Sales Growth Rate 18.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17%
Cap. Spend. - 3 Yr. Gr. Rate 18.3%
Financial Strength
Quick Ratio 166
Current Ratio 0
LT Debt to Equity 23.2%
Total Debt to Equity 23.5%
Interest Coverage -17
Management Effectiveness
Return On Assets -11%
Ret/ On Assets - 3 Yr. Avg. -7.5%
Return On Total Capital -13.2%
Ret/ On T. Cap. - 3 Yr. Avg. -9.4%
Return On Equity -16.5%
Return On Equity - 3 Yr. Avg. -11.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 82.3%
Gross Margin - 3 Yr. Avg. 77.2%
EBITDA Margin -14.5%
EBITDA Margin - 3 Yr. Avg. -6.3%
Operating Margin -27.9%
Oper. Margin - 3 Yr. Avg. -25.9%
Pre-Tax Margin -28.7%
Pre-Tax Margin - 3 Yr. Avg. -22.2%
Net Profit Margin -27.9%
Net Profit Margin - 3 Yr. Avg. -23%
Effective Tax Rate 2.8%
Eff/ Tax Rate - 3 Yr. Avg. -37.6%
Payout Ratio 0%

ALKS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALKS stock intrinsic value calculation we used $1094 million for the last fiscal year's total revenue generated by Alkermes plc. The default revenue input number comes from 0001 income statement of Alkermes plc. 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 ALKS stock valuation model: a) initial revenue growth rate of 14.7% 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 ALKS is calculated based on our internal credit rating of Alkermes plc, 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 Alkermes plc.
    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 ALKS stock the variable cost ratio is equal to 74.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $385 million in the base year in the intrinsic value calculation for ALKS 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 5.5% for Alkermes plc.

Corporate tax rate of 27% is the nominal tax rate for Alkermes plc. 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 ALKS 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 ALKS are equal to 41.6%.

Life of production assets of 5.9 years is the average useful life of capital assets used in Alkermes plc 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 ALKS is equal to 9.8%. 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 - $1171.285 million for Alkermes plc - 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 156.085 million for Alkermes plc 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 Alkermes plc at the current share price and the inputted number of shares is $5.3 billion.

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