Intrinsic value of Cambrex - CBM

Previous Close

$56.05

  Intrinsic Value

$50.77

stock screener

  Rating & Target

hold

-9%

Previous close

$56.05

 
Intrinsic value

$50.77

 
Up/down potential

-9%

 
Rating

hold

We calculate the intrinsic value of CBM 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 1.8

 

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, %
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
Revenue, $m
  582
  631
  682
  736
  792
  849
  910
  972
  1,037
  1,104
  1,175
  1,248
  1,324
  1,403
  1,486
  1,572
  1,662
  1,756
  1,854
  1,957
  2,064
  2,176
  2,293
  2,415
  2,544
  2,678
  2,819
  2,966
  3,120
  3,282
Variable operating expenses, $m
  390
  423
  457
  492
  529
  567
  607
  649
  691
  736
  777
  825
  876
  928
  983
  1,040
  1,099
  1,161
  1,226
  1,294
  1,365
  1,439
  1,516
  1,597
  1,682
  1,771
  1,864
  1,961
  2,064
  2,171
Fixed operating expenses, $m
  34
  34
  35
  36
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
Total operating expenses, $m
  424
  457
  492
  528
  566
  605
  645
  688
  731
  777
  819
  868
  920
  973
  1,029
  1,087
  1,147
  1,210
  1,276
  1,345
  1,417
  1,492
  1,570
  1,653
  1,739
  1,829
  1,923
  2,022
  2,126
  2,234
Operating income, $m
  158
  174
  190
  208
  226
  244
  264
  284
  305
  327
  356
  380
  405
  430
  458
  486
  515
  546
  578
  612
  647
  684
  722
  762
  805
  849
  895
  944
  995
  1,048
EBITDA, $m
  195
  214
  233
  253
  275
  296
  319
  343
  368
  393
  420
  448
  477
  507
  539
  572
  606
  642
  679
  718
  759
  802
  847
  894
  944
  995
  1,049
  1,106
  1,165
  1,227
Interest expense (income), $m
  0
  0
  1
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
Earnings before tax, $m
  158
  173
  188
  205
  222
  239
  258
  277
  297
  317
  345
  367
  390
  415
  440
  467
  495
  524
  554
  586
  619
  653
  690
  728
  767
  809
  853
  899
  947
  997
Tax expense, $m
  43
  47
  51
  55
  60
  65
  70
  75
  80
  86
  93
  99
  105
  112
  119
  126
  134
  141
  150
  158
  167
  176
  186
  196
  207
  218
  230
  243
  256
  269
Net income, $m
  115
  126
  137
  149
  162
  175
  188
  202
  217
  232
  252
  268
  285
  303
  321
  341
  361
  382
  404
  427
  452
  477
  503
  531
  560
  591
  623
  656
  691
  728

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
  696
  756
  817
  881
  948
  1,017
  1,089
  1,164
  1,242
  1,323
  1,407
  1,494
  1,586
  1,681
  1,780
  1,883
  1,991
  2,103
  2,220
  2,343
  2,471
  2,606
  2,746
  2,893
  3,046
  3,207
  3,376
  3,552
  3,737
  3,931
Adjusted assets (=assets-cash), $m
  696
  756
  817
  881
  948
  1,017
  1,089
  1,164
  1,242
  1,323
  1,407
  1,494
  1,586
  1,681
  1,780
  1,883
  1,991
  2,103
  2,220
  2,343
  2,471
  2,606
  2,746
  2,893
  3,046
  3,207
  3,376
  3,552
  3,737
  3,931
Revenue / Adjusted assets
  0.836
  0.835
  0.835
  0.835
  0.835
  0.835
  0.836
  0.835
  0.835
  0.834
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
Average production assets, $m
  318
  345
  373
  402
  432
  464
  497
  531
  566
  603
  641
  681
  723
  766
  811
  858
  908
  959
  1,012
  1,068
  1,127
  1,188
  1,252
  1,319
  1,389
  1,462
  1,539
  1,619
  1,704
  1,792
Working capital, $m
  113
  122
  132
  143
  154
  165
  176
  189
  201
  214
  228
  242
  257
  272
  288
  305
  322
  341
  360
  380
  400
  422
  445
  469
  493
  520
  547
  575
  605
  637
Total debt, $m
  18
  36
  55
  74
  95
  116
  138
  161
  184
  209
  235
  262
  290
  319
  349
  381
  414
  448
  484
  521
  561
  602
  645
  690
  737
  786
  837
  891
  948
  1,007
Total liabilities, $m
  213
  231
  250
  270
  290
  311
  333
  356
  380
  405
  430
  457
  485
  514
  545
  576
  609
  644
  679
  717
  756
  797
  840
  885
  932
  981
  1,033
  1,087
  1,143
  1,203
Total equity, $m
  483
  524
  567
  612
  658
  706
  756
  808
  862
  918
  976
  1,037
  1,100
  1,166
  1,235
  1,307
  1,381
  1,460
  1,541
  1,626
  1,715
  1,808
  1,906
  2,008
  2,114
  2,226
  2,343
  2,465
  2,593
  2,728
Total liabilities and equity, $m
  696
  755
  817
  882
  948
  1,017
  1,089
  1,164
  1,242
  1,323
  1,406
  1,494
  1,585
  1,680
  1,780
  1,883
  1,990
  2,104
  2,220
  2,343
  2,471
  2,605
  2,746
  2,893
  3,046
  3,207
  3,376
  3,552
  3,736
  3,931
Debt-to-equity ratio
  0.040
  0.070
  0.100
  0.120
  0.140
  0.160
  0.180
  0.200
  0.210
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.330
  0.330
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
Adjusted equity ratio
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694
  0.694

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  115
  126
  137
  149
  162
  175
  188
  202
  217
  232
  252
  268
  285
  303
  321
  341
  361
  382
  404
  427
  452
  477
  503
  531
  560
  591
  623
  656
  691
  728
Depreciation, amort., depletion, $m
  37
  40
  43
  46
  49
  52
  55
  59
  62
  66
  64
  68
  72
  77
  81
  86
  91
  96
  101
  107
  113
  119
  125
  132
  139
  146
  154
  162
  170
  179
Funds from operations, $m
  152
  166
  180
  195
  211
  227
  243
  261
  279
  298
  316
  336
  357
  379
  403
  427
  452
  478
  506
  534
  564
  596
  629
  663
  699
  737
  776
  818
  861
  907
Change in working capital, $m
  9
  10
  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
  29
  30
  31
Cash from operations, $m
  143
  157
  170
  185
  200
  216
  232
  249
  266
  285
  302
  322
  343
  364
  387
  410
  434
  460
  487
  514
  544
  574
  606
  639
  674
  711
  749
  789
  831
  876
Maintenance CAPEX, $m
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -77
  -81
  -86
  -91
  -96
  -101
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -170
New CAPEX, $m
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
Cash from investing activities, $m
  -55
  -59
  -62
  -66
  -70
  -75
  -79
  -84
  -88
  -94
  -98
  -104
  -110
  -115
  -122
  -128
  -135
  -142
  -150
  -157
  -165
  -174
  -183
  -192
  -202
  -212
  -223
  -234
  -246
  -258
Free cash flow, $m
  89
  98
  108
  118
  129
  141
  153
  165
  178
  191
  203
  218
  233
  248
  265
  282
  299
  318
  337
  357
  378
  400
  423
  447
  472
  499
  526
  555
  585
  617
Issuance/(repayment) of debt, $m
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
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  
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
Total cash flow (excl. dividends), $m
  106
  116
  127
  138
  150
  162
  175
  188
  202
  216
  229
  245
  261
  278
  295
  313
  332
  352
  373
  395
  417
  441
  466
  492
  519
  548
  578
  609
  642
  676
Retained Cash Flow (-), $m
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -122
  -128
  -134
Prev. year cash balance distribution, $m
  101
  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
  9
  10
  11
  12
  13
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  50
  53
Cash available for distribution, $m
  168
  75
  84
  94
  103
  114
  125
  136
  148
  160
  171
  184
  197
  212
  226
  242
  258
  274
  292
  310
  328
  348
  369
  390
  413
  436
  461
  487
  514
  542
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
  161
  68
  73
  77
  80
  83
  84
  85
  85
  84
  81
  78
  75
  71
  66
  61
  56
  50
  45
  39
  34
  29
  24
  20
  16
  13
  10
  8
  6
  4
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
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  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
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  100.0
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  100.0

Cambrex Corporation (Cambrex) is a life sciences company. It provides products and services for the development and commercialization of generic therapeutics. It operates through four segments, which are manufacturing facilities that have been aggregated as a single segment. Its manufacturing facilities are owned by the subsidiaries, including Cambrex Charles City, Inc., Cambrex Karlskoga AB and Cambrex Profarmaco Milano S.r.l. Its products consist of active pharmaceutical ingredients (APIs) and pharmaceutical intermediates. It delivers services, such as custom organic synthesis and process development; current good manufacturing practices (cGMP) manufacturing of API and intermediates from grams to hundreds of kilograms; cGMP analytical services; controlled substance research and development (R&D) and manufacture, Schedule II-V, and contract research. It has API R&D and cGMP facilities in the United States and Europe. It supplies over 90 generic APIs.

FINANCIAL RATIOS  of  Cambrex (CBM)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 3.7
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 14.7
Price to Free Cash Flow 24.8
Growth Rates
Sales Growth Rate 13.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.4%
Cap. Spend. - 3 Yr. Gr. Rate -2.6%
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 14.7%
Ret/ On Assets - 3 Yr. Avg. 13%
Return On Total Capital 22%
Ret/ On T. Cap. - 3 Yr. Avg. 19.5%
Return On Equity 22.9%
Return On Equity - 3 Yr. Avg. 22.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 41.5%
Gross Margin - 3 Yr. Avg. 38.5%
EBITDA Margin 31.2%
EBITDA Margin - 3 Yr. Avg. 25.5%
Operating Margin 26.3%
Oper. Margin - 3 Yr. Avg. 20.5%
Pre-Tax Margin 26.1%
Pre-Tax Margin - 3 Yr. Avg. 19.7%
Net Profit Margin 16.7%
Net Profit Margin - 3 Yr. Avg. 15%
Effective Tax Rate 32%
Eff/ Tax Rate - 3 Yr. Avg. 14.2%
Payout Ratio 0%

CBM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CBM stock intrinsic value calculation we used $534 million for the last fiscal year's total revenue generated by Cambrex. The default revenue input number comes from 2017 income statement of Cambrex. 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 CBM stock valuation model: a) initial revenue growth rate of 8.9% 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 CBM is calculated based on our internal credit rating of Cambrex, 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 Cambrex.
    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 CBM stock the variable cost ratio is equal to 67.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $33 million in the base year in the intrinsic value calculation for CBM 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 Cambrex.

Corporate tax rate of 27% is the nominal tax rate for Cambrex. 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 CBM stock is equal to 1.7%.

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 CBM are equal to 54.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Cambrex 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 CBM is equal to 19.4%. 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 - $545 million for Cambrex - 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 33 million for Cambrex 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 Cambrex at the current share price and the inputted number of shares is $1.8 billion.

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COMPANY NEWS

▶ Cambrex: 1Q Earnings Snapshot   [May-03-18 10:03AM  Associated Press]
▶ Cleantech Building Materials: Notice of AGM   [Apr-03-18 12:18PM  GlobeNewswire]
▶ Cleantech Building Materials: Application to Wiener Börse   [Mar-19-18 03:06AM  GlobeNewswire]
▶ 3 Top Biotech Stocks to Buy in February   [Feb-18-18 06:00AM  Motley Fool]
▶ Is It Time To Buy Cambrex Corporation (NYSE:CBM)?   [Feb-08-18 12:32PM  Simply Wall St.]
▶ Cambrex beats 4Q profit forecasts   [10:50AM  Associated Press]
▶ ETFs with exposure to Cambrex Corp. : December 5, 2017   [Dec-05-17 12:28PM  Capital Cube]
▶ Cambrex posts 3Q profit   [07:07AM  Associated Press]
▶ ETFs with exposure to Cambrex Corp. : August 21, 2017   [Aug-21-17 03:53PM  Capital Cube]
▶ 3 Top Stocks You Can Buy on Sale   [Aug-19-17 08:08AM  Motley Fool]
▶ Cambrex posts 2Q profit   [Aug-04-17 10:03PM  Associated Press]
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