Intrinsic value of Celgene - CELG

Previous Close

$109.41

  Intrinsic Value

$60.77

stock screener

  Rating & Target

sell

-44%

Previous close

$109.41

 
Intrinsic value

$60.77

 
Up/down potential

-44%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CELG 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 2016), $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 85.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  21.32
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  11,229
  13,329
  15,639
  18,156
  20,877
  23,798
  26,913
  30,218
  33,709
  37,382
  41,235
  45,267
  49,476
  53,864
  58,433
  63,186
  68,128
  73,264
  78,601
  84,147
  89,912
  95,905
  102,138
  108,623
  115,373
  122,403
  129,727
  137,361
  145,324
  153,632
  162,305
Variable operating expenses, $m
 
  9,159
  10,662
  12,300
  14,071
  15,971
  17,998
  20,148
  22,420
  24,810
  27,317
  29,454
  32,192
  35,048
  38,021
  41,113
  44,329
  47,670
  51,143
  54,752
  58,503
  62,402
  66,458
  70,677
  75,069
  79,643
  84,409
  89,376
  94,557
  99,963
  105,606
Fixed operating expenses, $m
 
  660
  677
  694
  711
  729
  747
  766
  785
  804
  824
  845
  866
  888
  910
  933
  956
  980
  1,004
  1,030
  1,055
  1,082
  1,109
  1,136
  1,165
  1,194
  1,224
  1,254
  1,286
  1,318
  1,351
Total operating expenses, $m
  8,419
  9,819
  11,339
  12,994
  14,782
  16,700
  18,745
  20,914
  23,205
  25,614
  28,141
  30,299
  33,058
  35,936
  38,931
  42,046
  45,285
  48,650
  52,147
  55,782
  59,558
  63,484
  67,567
  71,813
  76,234
  80,837
  85,633
  90,630
  95,843
  101,281
  106,957
Operating income, $m
  2,810
  3,510
  4,300
  5,162
  6,096
  7,098
  8,168
  9,304
  10,504
  11,768
  13,094
  14,968
  16,418
  17,929
  19,503
  21,140
  22,843
  24,614
  26,454
  28,366
  30,354
  32,421
  34,572
  36,809
  39,139
  41,565
  44,094
  46,731
  49,481
  52,351
  55,348
EBITDA, $m
  3,315
  4,435
  5,302
  6,247
  7,270
  8,368
  9,541
  10,786
  12,101
  13,486
  14,939
  16,459
  18,047
  19,703
  21,427
  23,221
  25,087
  27,027
  29,042
  31,137
  33,315
  35,580
  37,935
  40,387
  42,939
  45,597
  48,366
  51,254
  54,267
  57,411
  60,693
Interest expense (income), $m
  527
  510
  529
  667
  817
  980
  1,154
  1,340
  1,537
  1,745
  1,965
  2,194
  2,435
  2,686
  2,948
  3,221
  3,504
  3,799
  4,106
  4,424
  4,755
  5,099
  5,457
  5,829
  6,216
  6,619
  7,038
  7,475
  7,931
  8,406
  8,902
Earnings before tax, $m
  2,373
  2,999
  3,771
  4,495
  5,278
  6,119
  7,014
  7,964
  8,967
  10,023
  11,129
  12,774
  13,983
  15,243
  16,555
  17,920
  19,339
  20,814
  22,348
  23,942
  25,599
  27,322
  29,115
  30,980
  32,923
  34,947
  37,056
  39,255
  41,550
  43,945
  46,446
Tax expense, $m
  374
  810
  1,018
  1,214
  1,425
  1,652
  1,894
  2,150
  2,421
  2,706
  3,005
  3,449
  3,775
  4,116
  4,470
  4,838
  5,222
  5,620
  6,034
  6,464
  6,912
  7,377
  7,861
  8,365
  8,889
  9,436
  10,005
  10,599
  11,218
  11,865
  12,540
Net income, $m
  1,999
  2,190
  2,753
  3,282
  3,853
  4,467
  5,120
  5,814
  6,546
  7,317
  8,124
  9,325
  10,207
  11,127
  12,085
  13,081
  14,117
  15,194
  16,314
  17,477
  18,687
  19,945
  21,254
  22,616
  24,034
  25,511
  27,051
  28,656
  30,331
  32,080
  33,905

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7,970
  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
  28,086
  23,887
  28,026
  32,538
  37,414
  42,648
  48,231
  54,154
  60,410
  66,993
  73,898
  81,123
  88,667
  96,531
  104,719
  113,237
  122,093
  131,297
  140,862
  150,802
  161,133
  171,873
  183,043
  194,665
  206,762
  219,359
  232,485
  246,167
  260,436
  275,326
  290,868
Adjusted assets (=assets-cash), $m
  20,116
  23,887
  28,026
  32,538
  37,414
  42,648
  48,231
  54,154
  60,410
  66,993
  73,898
  81,123
  88,667
  96,531
  104,719
  113,237
  122,093
  131,297
  140,862
  150,802
  161,133
  171,873
  183,043
  194,665
  206,762
  219,359
  232,485
  246,167
  260,436
  275,326
  290,868
Revenue / Adjusted assets
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
Average production assets, $m
  11,090
  13,169
  15,451
  17,938
  20,627
  23,512
  26,590
  29,855
  33,304
  36,933
  40,740
  44,724
  48,882
  53,218
  57,732
  62,428
  67,310
  72,385
  77,658
  83,138
  88,833
  94,754
  100,912
  107,320
  113,989
  120,934
  128,170
  135,713
  143,580
  151,788
  160,357
Working capital, $m
  7,909
  520
  610
  708
  814
  928
  1,050
  1,178
  1,315
  1,458
  1,608
  1,765
  1,930
  2,101
  2,279
  2,464
  2,657
  2,857
  3,065
  3,282
  3,507
  3,740
  3,983
  4,236
  4,500
  4,774
  5,059
  5,357
  5,668
  5,992
  6,330
Total debt, $m
  14,289
  14,300
  18,026
  22,086
  26,475
  31,185
  36,209
  41,540
  47,171
  53,096
  59,310
  65,813
  72,602
  79,680
  87,049
  94,716
  102,686
  110,970
  119,578
  128,524
  137,821
  147,488
  157,541
  168,000
  178,888
  190,225
  202,038
  214,352
  227,195
  240,595
  254,584
Total liabilities, $m
  21,486
  21,498
  25,224
  29,284
  33,673
  38,383
  43,407
  48,738
  54,369
  60,294
  66,508
  73,011
  79,800
  86,878
  94,247
  101,914
  109,884
  118,168
  126,776
  135,722
  145,019
  154,686
  164,739
  175,198
  186,086
  197,423
  209,236
  221,550
  234,393
  247,793
  261,782
Total equity, $m
  6,599
  2,389
  2,803
  3,254
  3,741
  4,265
  4,823
  5,415
  6,041
  6,699
  7,390
  8,112
  8,867
  9,653
  10,472
  11,324
  12,209
  13,130
  14,086
  15,080
  16,113
  17,187
  18,304
  19,466
  20,676
  21,936
  23,248
  24,617
  26,044
  27,533
  29,087
Total liabilities and equity, $m
  28,085
  23,887
  28,027
  32,538
  37,414
  42,648
  48,230
  54,153
  60,410
  66,993
  73,898
  81,123
  88,667
  96,531
  104,719
  113,238
  122,093
  131,298
  140,862
  150,802
  161,132
  171,873
  183,043
  194,664
  206,762
  219,359
  232,484
  246,167
  260,437
  275,326
  290,869
Debt-to-equity ratio
  2.165
  5.990
  6.430
  6.790
  7.080
  7.310
  7.510
  7.670
  7.810
  7.930
  8.030
  8.110
  8.190
  8.250
  8.310
  8.360
  8.410
  8.450
  8.490
  8.520
  8.550
  8.580
  8.610
  8.630
  8.650
  8.670
  8.690
  8.710
  8.720
  8.740
  8.750
Adjusted equity ratio
  -0.068
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,999
  2,190
  2,753
  3,282
  3,853
  4,467
  5,120
  5,814
  6,546
  7,317
  8,124
  9,325
  10,207
  11,127
  12,085
  13,081
  14,117
  15,194
  16,314
  17,477
  18,687
  19,945
  21,254
  22,616
  24,034
  25,511
  27,051
  28,656
  30,331
  32,080
  33,905
Depreciation, amort., depletion, $m
  505
  926
  1,002
  1,085
  1,174
  1,270
  1,373
  1,482
  1,597
  1,718
  1,845
  1,491
  1,629
  1,774
  1,924
  2,081
  2,244
  2,413
  2,589
  2,771
  2,961
  3,158
  3,364
  3,577
  3,800
  4,031
  4,272
  4,524
  4,786
  5,060
  5,345
Funds from operations, $m
  4,522
  3,115
  3,754
  4,366
  5,027
  5,737
  6,493
  7,296
  8,143
  9,034
  9,969
  10,816
  11,837
  12,901
  14,009
  15,162
  16,361
  17,607
  18,902
  20,249
  21,648
  23,103
  24,617
  26,193
  27,833
  29,542
  31,323
  33,180
  35,117
  37,139
  39,251
Change in working capital, $m
  546
  82
  90
  98
  106
  114
  121
  129
  136
  143
  150
  157
  164
  171
  178
  185
  193
  200
  208
  216
  225
  234
  243
  253
  263
  274
  286
  298
  311
  324
  338
Cash from operations, $m
  3,976
  3,033
  3,664
  4,268
  4,921
  5,623
  6,372
  7,167
  8,007
  8,891
  9,819
  10,658
  11,673
  12,730
  13,831
  14,977
  16,168
  17,407
  18,694
  20,032
  21,423
  22,870
  24,374
  25,940
  27,570
  29,268
  31,037
  32,882
  34,807
  36,815
  38,912
Maintenance CAPEX, $m
  0
  -370
  -439
  -515
  -598
  -688
  -784
  -886
  -995
  -1,110
  -1,231
  -1,358
  -1,491
  -1,629
  -1,774
  -1,924
  -2,081
  -2,244
  -2,413
  -2,589
  -2,771
  -2,961
  -3,158
  -3,364
  -3,577
  -3,800
  -4,031
  -4,272
  -4,524
  -4,786
  -5,060
New CAPEX, $m
  -236
  -2,079
  -2,282
  -2,487
  -2,688
  -2,885
  -3,078
  -3,265
  -3,449
  -3,629
  -3,807
  -3,983
  -4,159
  -4,336
  -4,514
  -4,696
  -4,882
  -5,074
  -5,273
  -5,480
  -5,695
  -5,921
  -6,158
  -6,407
  -6,669
  -6,945
  -7,236
  -7,543
  -7,867
  -8,208
  -8,569
Cash from investing activities, $m
  -1,002
  -2,449
  -2,721
  -3,002
  -3,286
  -3,573
  -3,862
  -4,151
  -4,444
  -4,739
  -5,038
  -5,341
  -5,650
  -5,965
  -6,288
  -6,620
  -6,963
  -7,318
  -7,686
  -8,069
  -8,466
  -8,882
  -9,316
  -9,771
  -10,246
  -10,745
  -11,267
  -11,815
  -12,391
  -12,994
  -13,629
Free cash flow, $m
  2,974
  585
  943
  1,266
  1,635
  2,050
  2,510
  3,015
  3,563
  4,152
  4,781
  5,317
  6,023
  6,765
  7,543
  8,356
  9,205
  10,089
  11,008
  11,964
  12,957
  13,987
  15,058
  16,169
  17,324
  18,523
  19,770
  21,067
  22,416
  23,821
  25,284
Issuance/(repayment) of debt, $m
  0
  512
  3,726
  4,060
  4,389
  4,710
  5,024
  5,331
  5,631
  5,925
  6,215
  6,502
  6,789
  7,078
  7,369
  7,666
  7,970
  8,284
  8,608
  8,946
  9,298
  9,666
  10,053
  10,459
  10,887
  11,338
  11,813
  12,314
  12,842
  13,400
  13,989
Issuance/(repurchase) of shares, $m
  -1,793
  1,069
  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  
  -1,646
  1,581
  3,726
  4,060
  4,389
  4,710
  5,024
  5,331
  5,631
  5,925
  6,215
  6,502
  6,789
  7,078
  7,369
  7,666
  7,970
  8,284
  8,608
  8,946
  9,298
  9,666
  10,053
  10,459
  10,887
  11,338
  11,813
  12,314
  12,842
  13,400
  13,989
Total cash flow (excl. dividends), $m
  1,290
  2,166
  4,669
  5,326
  6,024
  6,760
  7,535
  8,346
  9,193
  10,076
  10,996
  11,820
  12,812
  13,843
  14,912
  16,023
  17,175
  18,373
  19,617
  20,910
  22,254
  23,654
  25,111
  26,629
  28,211
  29,861
  31,583
  33,381
  35,259
  37,221
  39,272
Retained Cash Flow (-), $m
  -680
  -3,259
  -414
  -451
  -488
  -523
  -558
  -592
  -626
  -658
  -691
  -722
  -754
  -786
  -819
  -852
  -886
  -920
  -956
  -994
  -1,033
  -1,074
  -1,117
  -1,162
  -1,210
  -1,260
  -1,313
  -1,368
  -1,427
  -1,489
  -1,554
Prev. year cash balance distribution, $m
 
  7,469
  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
 
  6,376
  4,255
  4,875
  5,536
  6,237
  6,976
  7,753
  8,567
  9,418
  10,305
  11,097
  12,058
  13,056
  14,094
  15,171
  16,290
  17,452
  18,660
  19,916
  21,221
  22,580
  23,994
  25,467
  27,001
  28,601
  30,271
  32,013
  33,832
  35,732
  37,718
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  6,090
  3,864
  4,189
  4,479
  4,724
  4,919
  5,056
  5,133
  5,147
  5,098
  4,929
  4,768
  4,553
  4,293
  3,994
  3,665
  3,317
  2,959
  2,600
  2,249
  1,914
  1,601
  1,316
  1,061
  840
  651
  493
  366
  265
  187
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Celgene Corporation is an integrated global biopharmaceutical company. The Company, together with its subsidiaries, is engaged in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through solutions in protein homeostasis, immuno-oncology, epigenetics, immunology and neuro-inflammation. Its commercial-stage products include REVLIMID (lenalidomide), POMALYST/IMNOVID (pomalidomide), OTEZLA (apremilast), ABRAXANE (paclitaxel albumin-bound particles for injectable suspension), VIDAZA, azacitidine for injection (generic version of VIDAZA) and THALOMID (thalidomide). Its clinical trial activity includes trials across the disease areas of hematology, solid tumors, and inflammation and immunology. The Company also markets ISTODAX, which is an epigenetic modifier. The Company is also evaluating AG-221 (enasidenib) in combination with VIDAZA in newly diagnosed acute myeloid leukemia with isocitrate dehydrogenase-2 mutations.

FINANCIAL RATIOS  of  Celgene (CELG)

Valuation Ratios
P/E Ratio 42.6
Price to Sales 7.6
Price to Book 12.9
Price to Tangible Book
Price to Cash Flow 21.4
Price to Free Cash Flow 22.8
Growth Rates
Sales Growth Rate 21.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.5%
Cap. Spend. - 3 Yr. Gr. Rate 11.2%
Financial Strength
Quick Ratio 16
Current Ratio 0.2
LT Debt to Equity 208.9%
Total Debt to Equity 216.5%
Interest Coverage 6
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. 10.4%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 31.9%
Return On Equity - 3 Yr. Avg. 30.2%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 96.1%
Gross Margin - 3 Yr. Avg. 95.5%
EBITDA Margin 30.3%
EBITDA Margin - 3 Yr. Avg. 32.3%
Operating Margin 25%
Oper. Margin - 3 Yr. Avg. 27.2%
Pre-Tax Margin 21.1%
Pre-Tax Margin - 3 Yr. Avg. 24.4%
Net Profit Margin 17.8%
Net Profit Margin - 3 Yr. Avg. 20.4%
Effective Tax Rate 15.8%
Eff/ Tax Rate - 3 Yr. Avg. 16.9%
Payout Ratio 0%

CELG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CELG stock intrinsic value calculation we used $11229 million for the last fiscal year's total revenue generated by Celgene. The default revenue input number comes from 2016 income statement of Celgene. 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 CELG stock valuation model: a) initial revenue growth rate of 18.7% 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 4.7%, whose default value for CELG is calculated based on our internal credit rating of Celgene, 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 Celgene.
    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 CELG stock the variable cost ratio is equal to 69.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $644 million in the base year in the intrinsic value calculation for CELG 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 3.7% for Celgene.

Corporate tax rate of 27% is the nominal tax rate for Celgene. 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 CELG 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 CELG are equal to 98.8%.

Life of production assets of 31.6 years is the average useful life of capital assets used in Celgene 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 CELG is equal to 3.9%. 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 - $6599 million for Celgene - 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 782.329 million for Celgene 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 Celgene at the current share price and the inputted number of shares is $85.6 billion.

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COMPANY NEWS

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Financial statements of CELG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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