Intrinsic value of Amphastar Pharmaceuticals, Inc. - AMPH

Previous Close

$20.72

  Intrinsic Value

$0.82

stock screener

  Rating & Target

str. sell

-96%

Previous close

$20.72

 
Intrinsic value

$0.82

 
Up/down potential

-96%

 
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 1.0

 

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, %
  30.40
  27.86
  25.57
  23.52
  21.66
  20.00
  18.50
  17.15
  15.93
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
Revenue, $m
  313
  400
  502
  621
  755
  906
  1,074
  1,258
  1,458
  1,675
  1,907
  2,154
  2,416
  2,693
  2,984
  3,290
  3,609
  3,942
  4,290
  4,651
  5,028
  5,419
  5,825
  6,247
  6,686
  7,143
  7,617
  8,110
  8,624
  9,158
Variable operating expenses, $m
  288
  363
  452
  553
  669
  800
  944
  1,103
  1,276
  1,463
  1,645
  1,858
  2,084
  2,323
  2,574
  2,838
  3,113
  3,401
  3,700
  4,012
  4,337
  4,674
  5,025
  5,389
  5,768
  6,161
  6,570
  6,996
  7,439
  7,900
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
  288
  363
  452
  553
  669
  800
  944
  1,103
  1,276
  1,463
  1,645
  1,858
  2,084
  2,323
  2,574
  2,838
  3,113
  3,401
  3,700
  4,012
  4,337
  4,674
  5,025
  5,389
  5,768
  6,161
  6,570
  6,996
  7,439
  7,900
Operating income, $m
  25
  37
  51
  67
  86
  106
  129
  155
  182
  212
  262
  296
  332
  370
  410
  452
  496
  542
  589
  639
  691
  745
  800
  859
  919
  982
  1,047
  1,115
  1,185
  1,258
EBITDA, $m
  58
  74
  93
  114
  139
  167
  198
  232
  269
  308
  351
  397
  445
  496
  549
  606
  664
  726
  790
  856
  926
  998
  1,073
  1,150
  1,231
  1,315
  1,402
  1,493
  1,588
  1,686
Interest expense (income), $m
  2
  3
  4
  7
  9
  12
  15
  19
  23
  28
  33
  38
  44
  50
  57
  64
  71
  79
  87
  95
  104
  113
  122
  132
  142
  153
  164
  175
  187
  199
  212
Earnings before tax, $m
  22
  33
  44
  58
  74
  91
  110
  131
  154
  179
  224
  252
  282
  313
  346
  381
  417
  455
  494
  535
  578
  622
  668
  716
  766
  818
  871
  927
  986
  1,046
Tax expense, $m
  6
  9
  12
  16
  20
  25
  30
  35
  42
  48
  60
  68
  76
  85
  93
  103
  113
  123
  133
  145
  156
  168
  180
  193
  207
  221
  235
  250
  266
  282
Net income, $m
  16
  24
  32
  42
  54
  66
  80
  96
  113
  131
  163
  184
  206
  229
  253
  278
  304
  332
  361
  391
  422
  454
  488
  523
  559
  597
  636
  677
  719
  764

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
  573
  733
  920
  1,137
  1,383
  1,660
  1,967
  2,304
  2,671
  3,067
  3,492
  3,945
  4,426
  4,933
  5,466
  6,025
  6,610
  7,220
  7,857
  8,519
  9,208
  9,924
  10,669
  11,442
  12,246
  13,082
  13,951
  14,854
  15,794
  16,773
Adjusted assets (=assets-cash), $m
  573
  733
  920
  1,137
  1,383
  1,660
  1,967
  2,304
  2,671
  3,067
  3,492
  3,945
  4,426
  4,933
  5,466
  6,025
  6,610
  7,220
  7,857
  8,519
  9,208
  9,924
  10,669
  11,442
  12,246
  13,082
  13,951
  14,854
  15,794
  16,773
Revenue / Adjusted assets
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
Average production assets, $m
  248
  318
  399
  493
  600
  719
  853
  999
  1,158
  1,330
  1,514
  1,710
  1,919
  2,138
  2,370
  2,612
  2,865
  3,130
  3,406
  3,693
  3,992
  4,302
  4,625
  4,961
  5,309
  5,671
  6,048
  6,440
  6,847
  7,272
Working capital, $m
  71
  91
  114
  141
  171
  206
  244
  286
  331
  380
  433
  489
  549
  611
  677
  747
  819
  895
  974
  1,056
  1,141
  1,230
  1,322
  1,418
  1,518
  1,621
  1,729
  1,841
  1,958
  2,079
Total debt, $m
  81
  122
  169
  224
  286
  356
  434
  519
  612
  712
  820
  934
  1,056
  1,184
  1,319
  1,460
  1,608
  1,763
  1,924
  2,091
  2,266
  2,447
  2,635
  2,831
  3,034
  3,246
  3,466
  3,694
  3,932
  4,180
Total liabilities, $m
  145
  185
  233
  288
  350
  420
  498
  583
  676
  776
  884
  998
  1,120
  1,248
  1,383
  1,524
  1,672
  1,827
  1,988
  2,155
  2,330
  2,511
  2,699
  2,895
  3,098
  3,310
  3,530
  3,758
  3,996
  4,244
Total equity, $m
  428
  547
  687
  849
  1,033
  1,240
  1,469
  1,721
  1,995
  2,291
  2,609
  2,947
  3,306
  3,685
  4,083
  4,501
  4,937
  5,394
  5,869
  6,364
  6,878
  7,413
  7,970
  8,547
  9,148
  9,772
  10,421
  11,096
  11,798
  12,529
Total liabilities and equity, $m
  573
  732
  920
  1,137
  1,383
  1,660
  1,967
  2,304
  2,671
  3,067
  3,493
  3,945
  4,426
  4,933
  5,466
  6,025
  6,609
  7,221
  7,857
  8,519
  9,208
  9,924
  10,669
  11,442
  12,246
  13,082
  13,951
  14,854
  15,794
  16,773
Debt-to-equity ratio
  0.190
  0.220
  0.250
  0.260
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  24
  32
  42
  54
  66
  80
  96
  113
  131
  163
  184
  206
  229
  253
  278
  304
  332
  361
  391
  422
  454
  488
  523
  559
  597
  636
  677
  719
  764
Depreciation, amort., depletion, $m
  33
  37
  42
  47
  53
  60
  68
  77
  86
  96
  89
  101
  113
  126
  139
  154
  169
  184
  200
  217
  235
  253
  272
  292
  312
  334
  356
  379
  403
  428
Funds from operations, $m
  49
  61
  74
  89
  107
  127
  149
  173
  199
  227
  252
  284
  318
  354
  392
  432
  473
  516
  561
  608
  657
  707
  760
  815
  871
  931
  992
  1,056
  1,122
  1,191
Change in working capital, $m
  17
  20
  23
  27
  31
  34
  38
  42
  45
  49
  53
  56
  60
  63
  66
  69
  72
  76
  79
  82
  85
  89
  92
  96
  100
  104
  108
  112
  117
  121
Cash from operations, $m
  32
  41
  51
  63
  77
  93
  111
  131
  153
  178
  200
  228
  259
  291
  326
  362
  401
  441
  482
  526
  571
  619
  668
  719
  772
  827
  884
  944
  1,006
  1,070
Maintenance CAPEX, $m
  -11
  -15
  -19
  -23
  -29
  -35
  -42
  -50
  -59
  -68
  -78
  -89
  -101
  -113
  -126
  -139
  -154
  -169
  -184
  -200
  -217
  -235
  -253
  -272
  -292
  -312
  -334
  -356
  -379
  -403
New CAPEX, $m
  -58
  -69
  -81
  -94
  -107
  -120
  -133
  -146
  -159
  -172
  -184
  -196
  -208
  -220
  -231
  -242
  -254
  -265
  -276
  -287
  -299
  -311
  -323
  -335
  -349
  -362
  -377
  -392
  -408
  -424
Cash from investing activities, $m
  -69
  -84
  -100
  -117
  -136
  -155
  -175
  -196
  -218
  -240
  -262
  -285
  -309
  -333
  -357
  -381
  -408
  -434
  -460
  -487
  -516
  -546
  -576
  -607
  -641
  -674
  -711
  -748
  -787
  -827
Free cash flow, $m
  -37
  -43
  -49
  -55
  -59
  -63
  -65
  -65
  -65
  -62
  -63
  -57
  -50
  -41
  -31
  -19
  -7
  7
  22
  38
  55
  73
  92
  111
  131
  152
  174
  196
  219
  243
Issuance/(repayment) of debt, $m
  34
  40
  47
  55
  62
  70
  78
  85
  93
  100
  108
  115
  122
  128
  135
  141
  148
  154
  161
  168
  174
  181
  188
  196
  203
  211
  220
  229
  238
  248
Issuance/(repurchase) of shares, $m
  83
  96
  108
  119
  130
  140
  149
  156
  162
  165
  154
  155
  153
  150
  146
  140
  132
  124
  114
  104
  93
  81
  68
  55
  41
  27
  13
  0
  0
  0
Cash from financing (excl. dividends), $m  
  117
  136
  155
  174
  192
  210
  227
  241
  255
  265
  262
  270
  275
  278
  281
  281
  280
  278
  275
  272
  267
  262
  256
  251
  244
  238
  233
  229
  238
  248
Total cash flow (excl. dividends), $m
  81
  93
  106
  119
  133
  148
  162
  176
  190
  204
  199
  212
  225
  237
  250
  262
  274
  286
  298
  310
  322
  335
  348
  362
  376
  391
  407
  425
  457
  491
Retained Cash Flow (-), $m
  -100
  -119
  -140
  -162
  -184
  -207
  -229
  -252
  -274
  -296
  -317
  -338
  -359
  -379
  -398
  -418
  -437
  -456
  -475
  -495
  -515
  -535
  -556
  -578
  -601
  -624
  -649
  -675
  -702
  -731
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
  -14
  -26
  -34
  -42
  -51
  -59
  -68
  -76
  -84
  -92
  -119
  -126
  -134
  -141
  -149
  -156
  -163
  -170
  -177
  -185
  -192
  -200
  -208
  -216
  -224
  -233
  -242
  -250
  -245
  -240
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
  -13
  -24
  -30
  -35
  -39
  -43
  -46
  -47
  -48
  -48
  -56
  -54
  -51
  -47
  -44
  -40
  -35
  -31
  -27
  -23
  -20
  -17
  -14
  -11
  -9
  -7
  -5
  -4
  -3
  -2
Current shareholders' claim on cash, %
  91.9
  85.4
  79.9
  75.4
  71.6
  68.4
  65.7
  63.4
  61.4
  59.7
  58.3
  57.1
  56.1
  55.3
  54.5
  53.9
  53.3
  52.9
  52.5
  52.2
  51.9
  51.7
  51.5
  51.4
  51.3
  51.3
  51.3
  51.3
  51.3
  51.3

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, Inc. (AMPH)

Valuation Ratios
P/E Ratio 87.1
Price to Sales 3.8
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 24.6
Price to Free Cash Flow 53.2
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 million for the last fiscal year's total revenue generated by Amphastar Pharmaceuticals, Inc.. The default revenue input number comes from 0001 income statement of Amphastar Pharmaceuticals, Inc.. 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 30.4% 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, Inc., 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, Inc..
    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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Amphastar Pharmaceuticals, Inc.. 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 79.4%.

Life of production assets of 17 years is the average useful life of capital assets used in Amphastar Pharmaceuticals, Inc. 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 - $333.736 million for Amphastar Pharmaceuticals, Inc. - 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 46.631 million for Amphastar Pharmaceuticals, Inc. 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, Inc. at the current share price and the inputted number of shares is $1.0 billion.

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