Intrinsic value of Anika Therapeutics - ANIK

Previous Close

$42.11

  Intrinsic Value

$52.40

stock screener

  Rating & Target

buy

+24%

Previous close

$42.11

 
Intrinsic value

$52.40

 
Up/down potential

+24%

 
Rating

buy

We calculate the intrinsic value of ANIK 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 0.6

 

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, %
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  124
  135
  147
  160
  173
  186
  200
  215
  230
  245
  262
  278
  296
  314
  334
  353
  374
  396
  418
  442
  467
  492
  519
  547
  577
  608
  640
  674
  709
  746
Variable operating expenses, $m
  63
  69
  75
  81
  87
  94
  101
  108
  115
  123
  129
  138
  146
  155
  165
  175
  185
  196
  207
  218
  231
  243
  257
  271
  285
  300
  316
  333
  350
  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
  63
  69
  75
  81
  87
  94
  101
  108
  115
  123
  129
  138
  146
  155
  165
  175
  185
  196
  207
  218
  231
  243
  257
  271
  285
  300
  316
  333
  350
  369
Operating income, $m
  61
  67
  73
  79
  85
  92
  99
  107
  114
  122
  132
  141
  150
  159
  169
  179
  189
  200
  212
  224
  236
  249
  263
  277
  292
  307
  324
  341
  359
  377
EBITDA, $m
  71
  77
  84
  91
  98
  106
  114
  122
  131
  140
  149
  159
  169
  179
  190
  201
  213
  225
  238
  252
  266
  280
  296
  312
  329
  346
  364
  384
  404
  425
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  61
  67
  72
  79
  85
  92
  99
  106
  113
  121
  131
  140
  148
  157
  167
  177
  187
  198
  209
  221
  233
  246
  259
  273
  288
  303
  319
  336
  353
  372
Tax expense, $m
  16
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  53
  56
  60
  63
  66
  70
  74
  78
  82
  86
  91
  95
  100
Net income, $m
  44
  49
  53
  57
  62
  67
  72
  77
  83
  88
  96
  102
  108
  115
  122
  129
  137
  144
  153
  161
  170
  179
  189
  199
  210
  221
  233
  245
  258
  271

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
  151
  165
  180
  195
  211
  227
  244
  262
  280
  299
  319
  340
  362
  384
  407
  432
  457
  483
  511
  540
  570
  601
  634
  668
  704
  742
  781
  822
  866
  911
Adjusted assets (=assets-cash), $m
  151
  165
  180
  195
  211
  227
  244
  262
  280
  299
  319
  340
  362
  384
  407
  432
  457
  483
  511
  540
  570
  601
  634
  668
  704
  742
  781
  822
  866
  911
Revenue / Adjusted assets
  0.821
  0.818
  0.817
  0.821
  0.820
  0.819
  0.820
  0.821
  0.821
  0.819
  0.821
  0.818
  0.818
  0.818
  0.821
  0.817
  0.818
  0.820
  0.818
  0.819
  0.819
  0.819
  0.819
  0.819
  0.820
  0.819
  0.819
  0.820
  0.819
  0.819
Average production assets, $m
  79
  86
  94
  102
  110
  119
  128
  137
  146
  156
  167
  178
  189
  201
  213
  225
  239
  253
  267
  282
  298
  314
  331
  349
  368
  388
  408
  430
  452
  476
Working capital, $m
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  42
  45
  48
  51
  53
  56
  60
  63
  66
  70
  74
  78
  82
  86
  91
  96
  101
Total debt, $m
  1
  3
  5
  7
  9
  12
  14
  17
  19
  22
  24
  27
  30
  33
  37
  40
  43
  47
  51
  55
  59
  63
  68
  73
  78
  83
  88
  94
  100
  106
Total liabilities, $m
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  74
  79
  83
  87
  92
  97
  102
  108
  113
  119
  126
Total equity, $m
  130
  143
  155
  168
  182
  196
  211
  226
  242
  258
  275
  293
  312
  331
  351
  372
  394
  417
  440
  465
  491
  518
  547
  576
  607
  639
  673
  709
  746
  785
Total liabilities and equity, $m
  151
  166
  180
  195
  211
  227
  245
  262
  281
  299
  319
  340
  362
  384
  407
  432
  457
  484
  511
  539
  570
  601
  634
  668
  704
  741
  781
  822
  865
  911
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.080
  0.090
  0.090
  0.100
  0.100
  0.100
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.140
Adjusted equity ratio
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  49
  53
  57
  62
  67
  72
  77
  83
  88
  96
  102
  108
  115
  122
  129
  137
  144
  153
  161
  170
  179
  189
  199
  210
  221
  233
  245
  258
  271
Depreciation, amort., depletion, $m
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
Funds from operations, $m
  54
  59
  64
  69
  75
  81
  87
  93
  99
  106
  112
  120
  127
  135
  143
  152
  160
  170
  179
  189
  200
  211
  222
  234
  247
  260
  274
  288
  303
  319
Change in working capital, $m
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  53
  58
  63
  68
  73
  79
  85
  91
  97
  104
  110
  117
  125
  132
  141
  149
  158
  167
  176
  186
  197
  207
  219
  231
  243
  256
  269
  284
  299
  314
Maintenance CAPEX, $m
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
New CAPEX, $m
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -14
  -15
  -17
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -39
  -42
  -44
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -69
Free cash flow, $m
  39
  42
  46
  50
  55
  59
  64
  69
  74
  79
  84
  90
  96
  102
  108
  115
  122
  129
  137
  144
  153
  161
  170
  179
  189
  199
  210
  221
  233
  245
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
Total cash flow (excl. dividends), $m
  40
  44
  48
  53
  57
  62
  66
  71
  76
  82
  87
  93
  99
  105
  112
  118
  125
  133
  140
  148
  157
  166
  175
  184
  194
  205
  216
  227
  239
  251
Retained Cash Flow (-), $m
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
Prev. year cash balance distribution, $m
  144
  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
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  33
  34
  36
Cash available for distribution, $m
  173
  32
  36
  40
  43
  47
  52
  56
  61
  65
  70
  75
  80
  86
  91
  97
  104
  110
  117
  124
  131
  138
  146
  155
  163
  172
  182
  191
  202
  213
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
  165
  30
  31
  33
  34
  34
  35
  35
  35
  34
  33
  32
  30
  29
  27
  25
  23
  20
  18
  16
  14
  11
  10
  8
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  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
  100.0

Anika Therapeutics, Inc. is an orthopedic medicines company. The Company is engaged in developing, manufacturing and commercializing products based on its hyaluronic acid (HA) technology. The Company's orthopedic medicine portfolio includes ORTHOVISC, MONOVISC, and CINGAL, which alleviate pain and restore joint function by replenishing depleted HA, and HYALOFAST, a solid HA-based scaffold to aid cartilage repair and regeneration. The Company's therapeutic offerings consist of products in the areas, including Orthobiologics, which includes viscosupplementation and regenerative orthopedic products; Dermal, which includes wound care products; Surgical, which includes products used to prevent post-surgical adhesions, and Other, which includes the Company's ophthalmic and veterinary products. The Company also offers products made from HA based on two other technologies: HYAFF, which is a solid form of HA, and ACP gel, an autocross-linked polymer of HA.

FINANCIAL RATIOS  of  Anika Therapeutics (ANIK)

Valuation Ratios
P/E Ratio 18.7
Price to Sales 6
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 25.7
Price to Free Cash Flow 61.6
Growth Rates
Sales Growth Rate 10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 55.6%
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 13.9%
Ret/ On Assets - 3 Yr. Avg. 16.7%
Return On Total Capital 15.2%
Ret/ On T. Cap. - 3 Yr. Avg. 18.4%
Return On Equity 15.2%
Return On Equity - 3 Yr. Avg. 18.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 76.7%
Gross Margin - 3 Yr. Avg. 78.1%
EBITDA Margin 53.4%
EBITDA Margin - 3 Yr. Avg. 57.5%
Operating Margin 48.5%
Oper. Margin - 3 Yr. Avg. 52.9%
Pre-Tax Margin 49.5%
Pre-Tax Margin - 3 Yr. Avg. 53.2%
Net Profit Margin 32%
Net Profit Margin - 3 Yr. Avg. 33.7%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 0%

ANIK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANIK stock intrinsic value calculation we used $113 million for the last fiscal year's total revenue generated by Anika Therapeutics. The default revenue input number comes from 2017 income statement of Anika Therapeutics. 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 ANIK stock valuation model: a) initial revenue growth rate of 9.7% 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 ANIK is calculated based on our internal credit rating of Anika Therapeutics, 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 Anika Therapeutics.
    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 ANIK stock the variable cost ratio is equal to 51.1%.

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 ANIK 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 Anika Therapeutics.

Corporate tax rate of 27% is the nominal tax rate for Anika Therapeutics. 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 ANIK stock is equal to 5.1%.

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 ANIK are equal to 63.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Anika Therapeutics 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 ANIK is equal to 13.5%. 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 - $263 million for Anika Therapeutics - 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 15 million for Anika Therapeutics 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 Anika Therapeutics at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Anika: 2Q Earnings Snapshot   [Jul-26-18 05:03AM  Associated Press]
▶ Anika Reports Second Quarter 2018 Financial Results   [Jul-25-18 04:05PM  Business Wire]
▶ Anika: 1Q Earnings Snapshot   [May-02-18 06:19PM  Associated Press]
▶ New Strong Sell Stocks for April 16th   [Apr-16-18 07:33AM  Zacks]
▶ New Strong Sell Stocks for April 2nd   [Apr-02-18 04:33AM  Zacks]
▶ Joseph Darling Named CEO and Director of Anika Therapeutics   [Mar-05-18 04:02PM  GlobeNewswire]
▶ Anika Therapeutics, Inc. to Host Earnings Call   [Feb-22-18 07:40AM  ACCESSWIRE]
▶ Anika posts 4Q profit   [Feb-21-18 05:41PM  Associated Press]
▶ 7 Quality Stocks With High Business Predictability Ratings   [Dec-14-17 03:21PM  GuruFocus.com]
▶ Anika posts 3Q profit   [Oct-25-17 05:35PM  Associated Press]
▶ Anika Announces Appointment of Joseph Darling as President   [Jul-27-17 08:05AM  Business Wire]
▶ Anika posts 2Q profit   [Jul-26-17 11:12PM  Associated Press]
▶ Anika pays former medical chief $350K to thwart possible lawsuit   [12:40PM  American City Business Journals]
▶ Here Comes a Big Breakout For Alibaba   [Jun-20-17 06:30AM  TheStreet.com]
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