Intrinsic value of Amphastar Pharmaceuticals - AMPH

Previous Close

$18.53

  Intrinsic Value

$1.57

stock screener

  Rating & Target

str. sell

-92%

Previous close

$18.53

 
Intrinsic value

$1.57

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of AMPH 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 0.9

 

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, %
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  262
  284
  308
  332
  357
  384
  411
  439
  469
  500
  532
  565
  600
  636
  673
  712
  753
  796
  841
  887
  936
  987
  1,040
  1,096
  1,154
  1,215
  1,279
  1,346
  1,416
  1,489
Variable operating expenses, $m
  245
  266
  287
  310
  333
  357
  382
  408
  436
  464
  489
  519
  551
  584
  619
  655
  693
  732
  773
  816
  860
  907
  956
  1,007
  1,061
  1,117
  1,176
  1,237
  1,302
  1,369
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
  245
  266
  287
  310
  333
  357
  382
  408
  436
  464
  489
  519
  551
  584
  619
  655
  693
  732
  773
  816
  860
  907
  956
  1,007
  1,061
  1,117
  1,176
  1,237
  1,302
  1,369
Operating income, $m
  17
  18
  20
  22
  24
  26
  29
  31
  33
  36
  43
  46
  48
  51
  54
  58
  61
  64
  68
  72
  76
  80
  84
  89
  93
  98
  103
  109
  114
  120
EBITDA, $m
  33
  36
  39
  42
  46
  49
  52
  56
  60
  64
  68
  72
  76
  81
  86
  91
  96
  102
  107
  113
  119
  126
  133
  140
  147
  155
  163
  172
  181
  190
Interest expense (income), $m
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
Earnings before tax, $m
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  34
  36
  38
  40
  42
  44
  47
  49
  51
  54
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
Tax expense, $m
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Net income, $m
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  61
  65

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
  483
  525
  568
  613
  659
  708
  758
  811
  865
  922
  981
  1,042
  1,106
  1,173
  1,242
  1,315
  1,390
  1,469
  1,551
  1,637
  1,727
  1,821
  1,919
  2,022
  2,129
  2,242
  2,360
  2,483
  2,612
  2,748
Adjusted assets (=assets-cash), $m
  483
  525
  568
  613
  659
  708
  758
  811
  865
  922
  981
  1,042
  1,106
  1,173
  1,242
  1,315
  1,390
  1,469
  1,551
  1,637
  1,727
  1,821
  1,919
  2,022
  2,129
  2,242
  2,360
  2,483
  2,612
  2,748
Revenue / Adjusted assets
  0.542
  0.541
  0.542
  0.542
  0.542
  0.542
  0.542
  0.541
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.541
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
  0.542
Average production assets, $m
  210
  229
  247
  267
  287
  309
  330
  353
  377
  402
  427
  454
  482
  511
  541
  573
  606
  640
  676
  713
  752
  793
  836
  881
  928
  977
  1,028
  1,082
  1,138
  1,197
Working capital, $m
  59
  65
  70
  75
  81
  87
  93
  100
  106
  113
  121
  128
  136
  144
  153
  162
  171
  181
  191
  201
  212
  224
  236
  249
  262
  276
  290
  306
  321
  338
Total debt, $m
  57
  68
  79
  90
  102
  114
  126
  140
  153
  168
  182
  198
  214
  231
  248
  266
  285
  305
  325
  347
  370
  393
  418
  444
  471
  499
  528
  559
  592
  626
Total liabilities, $m
  121
  132
  143
  154
  166
  178
  190
  204
  217
  231
  246
  262
  278
  294
  312
  330
  349
  369
  389
  411
  433
  457
  482
  507
  534
  563
  592
  623
  656
  690
Total equity, $m
  362
  393
  425
  459
  494
  530
  568
  607
  648
  691
  735
  781
  829
  878
  930
  985
  1,041
  1,100
  1,162
  1,226
  1,293
  1,364
  1,437
  1,514
  1,595
  1,679
  1,767
  1,860
  1,957
  2,058
Total liabilities and equity, $m
  483
  525
  568
  613
  660
  708
  758
  811
  865
  922
  981
  1,043
  1,107
  1,172
  1,242
  1,315
  1,390
  1,469
  1,551
  1,637
  1,726
  1,821
  1,919
  2,021
  2,129
  2,242
  2,359
  2,483
  2,613
  2,748
Debt-to-equity ratio
  0.160
  0.170
  0.180
  0.200
  0.210
  0.210
  0.220
  0.230
  0.240
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749
  0.749

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  61
  65
Depreciation, amort., depletion, $m
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
Funds from operations, $m
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
  99
  105
  110
  116
  121
  128
  134
Change in working capital, $m
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
Cash from operations, $m
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  42
  45
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
  117
Maintenance CAPEX, $m
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
New CAPEX, $m
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
Cash from investing activities, $m
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -85
  -89
  -94
  -98
  -103
  -108
  -114
  -119
  -125
Free cash flow, $m
  -7
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -8
Issuance/(repayment) of debt, $m
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
Issuance/(repurchase) of shares, $m
  19
  20
  20
  20
  21
  21
  21
  22
  22
  22
  19
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
Cash from financing (excl. dividends), $m  
  29
  30
  31
  31
  33
  33
  34
  35
  36
  36
  34
  35
  36
  38
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  63
  65
  67
  71
Total cash flow (excl. dividends), $m
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
Retained Cash Flow (-), $m
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -70
  -74
  -77
  -81
  -84
  -88
  -92
  -97
  -102
Prev. year cash balance distribution, $m
  5
  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
  -1
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
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
  -1
  -7
  -7
  -7
  -7
  -7
  -7
  -6
  -6
  -6
  -8
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  97.8
  95.7
  93.8
  92.1
  90.5
  89.0
  87.6
  86.4
  85.2
  84.0
  83.1
  82.3
  81.4
  80.6
  79.9
  79.1
  78.4
  77.8
  77.1
  76.5
  75.8
  75.2
  74.6
  74.1
  73.5
  72.9
  72.4
  71.9
  71.3
  70.8

Amphastar Pharmaceuticals, Inc. is a specialty pharmaceutical company. The Company focuses primarily on developing, manufacturing, marketing and selling generic and injectable, inhalation and intranasal products. The Company has two segments: finished pharmaceutical products and active pharmaceutical ingredients (API) products. The finished pharmaceutical products segment manufactures, markets and distributes enoxaparin, Cortrosyn, Amphadase, naloxone, lidocaine jelly, as well as various other critical and non-critical care drugs. The API segment manufactures and distributes recombinant human insulin and porcine insulin. The Company also manufactures and sells insulin API. As of December 31, 2016, the Company manufactured and sold 19 products. As of December 31, 2016, the Company developed a portfolio of 15 generic abbreviated new drug applications (ANDAs) three generic biosimilar product candidates and six injectable and inhalation product candidates.

FINANCIAL RATIOS  of  Amphastar Pharmaceuticals (AMPH)

Valuation Ratios
P/E Ratio 77.9
Price to Sales 3.4
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 22
Price to Free Cash Flow 47.6
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio 15
Current Ratio 0
LT Debt to Equity 10%
Total Debt to Equity 11.6%
Interest Coverage 9
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. -0%
Return On Total Capital 3.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity 3.5%
Return On Equity - 3 Yr. Avg. -0.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 40.8%
Gross Margin - 3 Yr. Avg. 31.9%
EBITDA Margin 12.5%
EBITDA Margin - 3 Yr. Avg. 4.8%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. -1.6%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. -2.2%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. -0.7%
Effective Tax Rate 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 45.2%
Payout Ratio 0%

AMPH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMPH stock intrinsic value calculation we used $240.175 million for the last fiscal year's total revenue generated by Amphastar Pharmaceuticals. The default revenue input number comes from 0001 income statement of Amphastar Pharmaceuticals. 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 AMPH stock valuation model: a) initial revenue growth rate of 9% 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 AMPH is calculated based on our internal credit rating of Amphastar Pharmaceuticals, 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 Amphastar Pharmaceuticals.
    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 AMPH stock the variable cost ratio is equal to 93.8%.

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 AMPH 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 Amphastar Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Amphastar Pharmaceuticals. 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 AMPH 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 AMPH are equal to 80.4%.

Life of production assets of 17.2 years is the average useful life of capital assets used in Amphastar Pharmaceuticals 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 AMPH is equal to 22.7%. 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 - $337.329 million for Amphastar Pharmaceuticals - 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 46.614 million for Amphastar Pharmaceuticals 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 Amphastar Pharmaceuticals at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ Amphastar: 2Q Earnings Snapshot   [07:04PM  Associated Press]
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▶ Amphastar: 1Q Earnings Snapshot   [May-09-18 06:23PM  Associated Press]
▶ Amphastar beats Street 4Q forecasts   [Mar-12-18 04:29PM  Associated Press]
▶ Best Growth Stock Picks   [Mar-07-18 11:02AM  Simply Wall St.]
▶ Mallinckrodt PLC (MNK) Jumps: Stock Rises 15.3%   [Feb-28-18 08:56AM  Zacks]
▶ Amphastar beats Street 3Q forecasts   [04:32PM  Associated Press]
▶ Amphastar beats 2Q profit forecasts   [Aug-09-17 09:52PM  Associated Press]
▶ Jury nixes Momenta patent case that sought $938M in damages   [03:00PM  American City Business Journals]

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