Intrinsic value of Cerecor Inc. - CERC

Previous Close

$5.34

  Intrinsic Value

$0.17

stock screener

  Rating & Target

str. sell

-97%

Previous close

$5.34

 
Intrinsic value

$0.17

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of CERC 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 0.2

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  29
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
Variable operating expenses, $m
  426
  436
  447
  460
  474
  489
  506
  524
  543
  564
  587
  610
  636
  663
  691
  721
  754
  787
  823
  861
  901
  943
  987
  1,034
  1,083
  1,135
  1,190
  1,247
  1,308
  1,371
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
  426
  436
  447
  460
  474
  489
  506
  524
  543
  564
  587
  610
  636
  663
  691
  721
  754
  787
  823
  861
  901
  943
  987
  1,034
  1,083
  1,135
  1,190
  1,247
  1,308
  1,371
Operating income, $m
  -398
  -407
  -417
  -429
  -442
  -456
  -472
  -489
  -507
  -526
  -547
  -569
  -593
  -618
  -645
  -673
  -703
  -735
  -768
  -803
  -841
  -880
  -921
  -965
  -1,011
  -1,059
  -1,110
  -1,164
  -1,220
  -1,279
EBITDA, $m
  -398
  -407
  -417
  -429
  -442
  -456
  -472
  -488
  -507
  -526
  -547
  -569
  -593
  -618
  -644
  -673
  -703
  -734
  -768
  -803
  -840
  -879
  -921
  -964
  -1,010
  -1,059
  -1,109
  -1,163
  -1,219
  -1,278
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
Earnings before tax, $m
  -398
  -407
  -417
  -429
  -442
  -457
  -472
  -489
  -507
  -527
  -548
  -570
  -593
  -619
  -645
  -674
  -704
  -735
  -769
  -804
  -841
  -881
  -922
  -966
  -1,012
  -1,061
  -1,112
  -1,165
  -1,222
  -1,281
Tax expense, $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
Net income, $m
  -398
  -407
  -417
  -429
  -442
  -457
  -472
  -489
  -507
  -527
  -548
  -570
  -593
  -619
  -645
  -674
  -704
  -735
  -769
  -804
  -841
  -881
  -922
  -966
  -1,012
  -1,061
  -1,112
  -1,165
  -1,222
  -1,281

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
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
  140
Adjusted assets (=assets-cash), $m
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
  140
Revenue / Adjusted assets
  0.659
  0.644
  0.652
  0.660
  0.653
  0.660
  0.654
  0.648
  0.643
  0.655
  0.650
  0.651
  0.662
  0.647
  0.648
  0.649
  0.649
  0.654
  0.655
  0.659
  0.652
  0.649
  0.653
  0.651
  0.658
  0.655
  0.656
  0.656
  0.657
  0.657
Average production assets, $m
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Working capital, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
Total debt, $m
  0
  1
  1
  1
  2
  3
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
Total liabilities, $m
  15
  16
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
Total equity, $m
  28
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
Total liabilities and equity, $m
  43
  45
  46
  47
  49
  50
  52
  54
  55
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  117
  122
  128
  134
  140
Debt-to-equity ratio
  0.010
  0.020
  0.040
  0.050
  0.060
  0.080
  0.090
  0.110
  0.120
  0.140
  0.150
  0.170
  0.180
  0.200
  0.210
  0.230
  0.240
  0.250
  0.260
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.360
  0.370
Adjusted equity ratio
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -398
  -407
  -417
  -429
  -442
  -457
  -472
  -489
  -507
  -527
  -548
  -570
  -593
  -619
  -645
  -674
  -704
  -735
  -769
  -804
  -841
  -881
  -922
  -966
  -1,012
  -1,061
  -1,112
  -1,165
  -1,222
  -1,281
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Funds from operations, $m
  -398
  -407
  -417
  -429
  -442
  -456
  -472
  -489
  -507
  -526
  -547
  -569
  -593
  -618
  -645
  -673
  -703
  -735
  -768
  -804
  -841
  -880
  -922
  -965
  -1,011
  -1,060
  -1,111
  -1,164
  -1,221
  -1,280
Change in working capital, $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 operations, $m
  -397
  -407
  -417
  -429
  -442
  -456
  -472
  -489
  -507
  -526
  -547
  -569
  -593
  -618
  -645
  -673
  -703
  -735
  -768
  -803
  -841
  -880
  -921
  -965
  -1,011
  -1,059
  -1,110
  -1,164
  -1,220
  -1,280
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Free cash flow, $m
  -398
  -407
  -418
  -429
  -442
  -457
  -472
  -489
  -507
  -527
  -548
  -570
  -594
  -619
  -646
  -674
  -704
  -736
  -769
  -805
  -842
  -881
  -923
  -967
  -1,013
  -1,061
  -1,112
  -1,166
  -1,222
  -1,282
Issuance/(repayment) of debt, $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Issuance/(repurchase) of shares, $m
  398
  408
  418
  430
  443
  458
  473
  490
  508
  528
  549
  571
  595
  620
  647
  676
  706
  738
  771
  807
  844
  884
  925
  969
  1,015
  1,064
  1,115
  1,169
  1,226
  1,285
Cash from financing (excl. dividends), $m  
  398
  408
  418
  430
  443
  459
  474
  491
  509
  529
  550
  572
  596
  621
  648
  677
  707
  739
  772
  808
  845
  886
  927
  971
  1,017
  1,066
  1,117
  1,171
  1,228
  1,287
Total cash flow (excl. dividends), $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Retained Cash Flow (-), $m
  -398
  -408
  -418
  -430
  -443
  -458
  -473
  -490
  -508
  -528
  -549
  -571
  -595
  -620
  -647
  -676
  -706
  -738
  -771
  -807
  -844
  -884
  -925
  -969
  -1,015
  -1,064
  -1,115
  -1,169
  -1,226
  -1,285
Prev. year cash balance distribution, $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 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
  -398
  -407
  -417
  -429
  -442
  -456
  -472
  -489
  -507
  -526
  -547
  -569
  -593
  -618
  -645
  -673
  -703
  -735
  -768
  -803
  -841
  -880
  -921
  -965
  -1,011
  -1,059
  -1,110
  -1,164
  -1,220
  -1,280
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
  -381
  -372
  -363
  -353
  -343
  -331
  -319
  -305
  -291
  -276
  -260
  -243
  -225
  -207
  -189
  -171
  -153
  -135
  -118
  -102
  -87
  -73
  -60
  -49
  -39
  -31
  -24
  -18
  -13
  -10
Current shareholders' claim on cash, %
  35.4
  12.5
  4.4
  1.5
  0.5
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Cerecor, Inc. is a clinical stage biopharmaceutical company. The Company is engaged in developing drug candidates for patients with neurological and psychiatric disorders. The Company has a portfolio of clinical and preclinical compounds that it is developing for a range of indications, including CERC-301, which is an adjunctive treatment for major depressive disorder (MDD); CERC-501, which is for substance use disorders and adjunctive treatment of MDD, and CERC-406, which is for the treatment of cognitive impairment. The Company owns the rights to its COMTi platform. Catechol O methyltransferase (COMT) is an enzyme critical for the inactivation and metabolism of dopamine and its inhibition in the brain has applicability in treating subjects with neuropsychiatric conditions, including MDD, schizophrenia, Parkinson's disease and pathological gambling. Its COMTi platform comprises COMT inhibitors with selectivity for membrane bound COMT, which is the dominant form of COMT.

FINANCIAL RATIOS  of  Cerecor Inc. (CERC)

Valuation Ratios
P/E Ratio -3.1
Price to Sales 50.4
Price to Book 0
Price to Tangible Book
Price to Cash Flow -3.4
Price to Free Cash Flow -3.4
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -114.3%
Ret/ On Assets - 3 Yr. Avg. -118.5%
Return On Total Capital -152.4%
Ret/ On T. Cap. - 3 Yr. Avg. -171.6%
Return On Equity -246.2%
Return On Equity - 3 Yr. Avg. -393.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -1600%
EBITDA Margin - 3 Yr. Avg. -533.3%
Operating Margin -1600%
Oper. Margin - 3 Yr. Avg. -533.3%
Pre-Tax Margin -1600%
Pre-Tax Margin - 3 Yr. Avg. -533.3%
Net Profit Margin -1600%
Net Profit Margin - 3 Yr. Avg. -533.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CERC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CERC stock intrinsic value calculation we used $28 million for the last fiscal year's total revenue generated by Cerecor Inc.. The default revenue input number comes from 0001 income statement of Cerecor 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 CERC stock valuation model: a) initial revenue growth rate of 2% 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 CERC is calculated based on our internal credit rating of Cerecor 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 Cerecor 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 CERC stock the variable cost ratio is equal to 1492.9%.

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 CERC 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 Cerecor Inc..

Corporate tax rate of 27% is the nominal tax rate for Cerecor 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 CERC 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 CERC are equal to 28.7%.

Life of production assets of 37.7 years is the average useful life of capital assets used in Cerecor 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 CERC is equal to -10.3%. 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 - $27.859608 million for Cerecor 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 40.836 million for Cerecor 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 Cerecor Inc. at the current share price and the inputted number of shares is $0.2 billion.

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