Intrinsic value of Cambrex - CBM

Previous Close

$62.20

  Intrinsic Value

$54.53

stock screener

  Rating & Target

hold

-12%

Previous close

$62.20

 
Intrinsic value

$54.53

 
Up/down potential

-12%

 
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 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 2.1

 

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, %
  13.00
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  604
  678
  755
  837
  923
  1,013
  1,106
  1,204
  1,306
  1,412
  1,522
  1,636
  1,755
  1,878
  2,006
  2,140
  2,278
  2,423
  2,573
  2,729
  2,892
  3,062
  3,239
  3,424
  3,617
  3,819
  4,030
  4,250
  4,480
  4,721
Variable operating expenses, $m
  410
  459
  511
  566
  623
  684
  746
  812
  880
  950
  1,018
  1,095
  1,174
  1,257
  1,343
  1,432
  1,525
  1,621
  1,722
  1,827
  1,936
  2,049
  2,168
  2,292
  2,421
  2,556
  2,697
  2,844
  2,998
  3,160
Fixed operating expenses, $m
  31
  31
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  41
  42
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  54
  55
  56
  58
Total operating expenses, $m
  441
  490
  543
  599
  656
  718
  781
  848
  916
  987
  1,056
  1,134
  1,214
  1,298
  1,385
  1,474
  1,568
  1,665
  1,767
  1,873
  1,983
  2,097
  2,217
  2,343
  2,473
  2,609
  2,751
  2,899
  3,054
  3,218
Operating income, $m
  163
  187
  212
  238
  266
  295
  325
  357
  390
  424
  465
  502
  541
  580
  622
  665
  710
  757
  806
  856
  909
  964
  1,022
  1,082
  1,145
  1,210
  1,279
  1,351
  1,426
  1,504
EBITDA, $m
  202
  229
  258
  289
  321
  355
  390
  427
  466
  505
  547
  590
  635
  681
  730
  780
  832
  887
  944
  1,003
  1,065
  1,129
  1,196
  1,266
  1,339
  1,415
  1,495
  1,579
  1,666
  1,757
Interest expense (income), $m
  0
  0
  1
  3
  4
  6
  8
  9
  11
  13
  15
  17
  20
  22
  24
  27
  29
  32
  35
  37
  40
  43
  47
  50
  54
  57
  61
  65
  69
  74
  78
Earnings before tax, $m
  163
  186
  209
  234
  260
  287
  316
  346
  376
  409
  448
  483
  519
  556
  595
  636
  678
  722
  768
  816
  866
  918
  972
  1,029
  1,088
  1,149
  1,214
  1,281
  1,352
  1,426
Tax expense, $m
  44
  50
  56
  63
  70
  78
  85
  93
  102
  110
  121
  130
  140
  150
  161
  172
  183
  195
  207
  220
  234
  248
  262
  278
  294
  310
  328
  346
  365
  385
Net income, $m
  119
  136
  153
  171
  190
  210
  231
  252
  275
  298
  327
  352
  379
  406
  435
  464
  495
  527
  561
  596
  632
  670
  710
  751
  794
  839
  886
  935
  987
  1,041

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
  723
  812
  905
  1,003
  1,105
  1,213
  1,325
  1,442
  1,564
  1,691
  1,822
  1,959
  2,101
  2,249
  2,403
  2,562
  2,729
  2,901
  3,081
  3,269
  3,464
  3,667
  3,880
  4,101
  4,332
  4,574
  4,826
  5,090
  5,366
  5,654
Adjusted assets (=assets-cash), $m
  723
  812
  905
  1,003
  1,105
  1,213
  1,325
  1,442
  1,564
  1,691
  1,822
  1,959
  2,101
  2,249
  2,403
  2,562
  2,729
  2,901
  3,081
  3,269
  3,464
  3,667
  3,880
  4,101
  4,332
  4,574
  4,826
  5,090
  5,366
  5,654
Revenue / Adjusted assets
  0.835
  0.835
  0.834
  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
  0.835
  0.835
  0.835
  0.835
  0.835
  0.835
Average production assets, $m
  298
  335
  373
  414
  456
  500
  547
  595
  645
  697
  752
  808
  867
  928
  991
  1,057
  1,125
  1,197
  1,271
  1,348
  1,429
  1,513
  1,600
  1,692
  1,787
  1,887
  1,991
  2,100
  2,213
  2,332
Working capital, $m
  177
  199
  221
  245
  270
  297
  324
  353
  383
  414
  446
  479
  514
  550
  588
  627
  668
  710
  754
  800
  847
  897
  949
  1,003
  1,060
  1,119
  1,181
  1,245
  1,313
  1,383
Total debt, $m
  26
  53
  81
  111
  143
  175
  210
  246
  283
  322
  362
  404
  447
  493
  540
  588
  639
  692
  747
  804
  864
  927
  991
  1,059
  1,130
  1,204
  1,281
  1,362
  1,446
  1,534
Total liabilities, $m
  221
  248
  277
  307
  338
  371
  405
  441
  479
  517
  558
  599
  643
  688
  735
  784
  835
  888
  943
  1,000
  1,060
  1,122
  1,187
  1,255
  1,326
  1,400
  1,477
  1,558
  1,642
  1,730
Total equity, $m
  502
  563
  628
  696
  767
  842
  920
  1,001
  1,085
  1,173
  1,265
  1,360
  1,458
  1,561
  1,667
  1,778
  1,894
  2,014
  2,138
  2,268
  2,404
  2,545
  2,692
  2,846
  3,007
  3,174
  3,349
  3,532
  3,724
  3,924
Total liabilities and equity, $m
  723
  811
  905
  1,003
  1,105
  1,213
  1,325
  1,442
  1,564
  1,690
  1,823
  1,959
  2,101
  2,249
  2,402
  2,562
  2,729
  2,902
  3,081
  3,268
  3,464
  3,667
  3,879
  4,101
  4,333
  4,574
  4,826
  5,090
  5,366
  5,654
Debt-to-equity ratio
  0.050
  0.090
  0.130
  0.160
  0.190
  0.210
  0.230
  0.250
  0.260
  0.270
  0.290
  0.300
  0.310
  0.320
  0.320
  0.330
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
  0.390
  0.390
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
  119
  136
  153
  171
  190
  210
  231
  252
  275
  298
  327
  352
  379
  406
  435
  464
  495
  527
  561
  596
  632
  670
  710
  751
  794
  839
  886
  935
  987
  1,041
Depreciation, amort., depletion, $m
  38
  42
  46
  51
  55
  60
  65
  70
  76
  82
  82
  88
  94
  101
  108
  115
  122
  130
  138
  147
  155
  164
  174
  184
  194
  205
  216
  228
  241
  254
Funds from operations, $m
  157
  178
  199
  222
  245
  270
  296
  323
  351
  380
  409
  440
  473
  507
  542
  579
  618
  657
  699
  742
  787
  834
  883
  935
  988
  1,044
  1,103
  1,164
  1,228
  1,294
Change in working capital, $m
  20
  22
  23
  24
  25
  26
  27
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  67
  71
Cash from operations, $m
  137
  156
  176
  198
  220
  244
  268
  294
  321
  349
  376
  407
  438
  471
  505
  540
  577
  615
  655
  696
  740
  785
  832
  881
  932
  985
  1,041
  1,099
  1,160
  1,224
Maintenance CAPEX, $m
  -29
  -32
  -36
  -41
  -45
  -50
  -54
  -59
  -65
  -70
  -76
  -82
  -88
  -94
  -101
  -108
  -115
  -122
  -130
  -138
  -147
  -155
  -164
  -174
  -184
  -194
  -205
  -216
  -228
  -241
New CAPEX, $m
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -81
  -84
  -88
  -91
  -95
  -100
  -104
  -109
  -114
  -119
Cash from investing activities, $m
  -63
  -68
  -74
  -81
  -87
  -94
  -100
  -107
  -115
  -122
  -130
  -138
  -147
  -155
  -164
  -174
  -184
  -193
  -204
  -215
  -228
  -239
  -252
  -265
  -279
  -294
  -309
  -325
  -342
  -360
Free cash flow, $m
  74
  87
  101
  117
  133
  150
  168
  186
  206
  226
  246
  268
  292
  316
  341
  367
  393
  422
  451
  481
  513
  545
  580
  615
  652
  691
  732
  774
  818
  864
Issuance/(repayment) of debt, $m
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
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  
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
Total cash flow (excl. dividends), $m
  99
  114
  130
  147
  164
  183
  202
  222
  243
  265
  287
  310
  335
  361
  388
  415
  444
  474
  506
  538
  572
  608
  645
  683
  723
  765
  809
  855
  902
  953
Retained Cash Flow (-), $m
  -58
  -61
  -65
  -68
  -71
  -75
  -78
  -81
  -85
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -141
  -147
  -154
  -160
  -168
  -175
  -183
  -191
  -200
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
  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
  142
  53
  65
  79
  93
  108
  124
  141
  159
  177
  195
  215
  236
  258
  281
  305
  329
  354
  381
  408
  437
  466
  497
  529
  563
  597
  634
  672
  711
  752
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
  137
  49
  57
  65
  72
  78
  84
  88
  91
  93
  93
  92
  90
  87
  82
  77
  72
  65
  59
  52
  45
  39
  33
  27
  22
  17
  14
  10
  8
  6
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

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 24.5
Price to Sales 4.1
Price to Book 5
Price to Tangible Book
Price to Cash Flow 16.4
Price to Free Cash Flow 27.6
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 $534.456 million for the last fiscal year's total revenue generated by Cambrex. The default revenue input number comes from 0001 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 13% 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 68%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $30 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 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 CBM are equal to 49.4%.

Life of production assets of 9.2 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 29.3%. 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 - $544.864 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 33.258 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 $2.1 billion.

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COMPANY NEWS

▶ Cambrex Completes Acquisition of Halo Pharma   [Sep-12-18 08:45AM  GlobeNewswire]
▶ Cambrex (CBM): Moving Average Crossover Alert   [Aug-09-18 08:05AM  Zacks]
▶ 3 Top Biotech Stocks to Buy in August   [Aug-08-18 04:18PM  Motley Fool]
▶ Cambrex: 2Q Earnings Snapshot   [Aug-02-18 10:09AM  Associated Press]
▶ [$$] Cambrex to Buy Halo Pharma for $425 Million   [Jul-23-18 01:08PM  The Wall Street Journal]
▶ 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]

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