Intrinsic value of Cerus Corporation - CERS

Previous Close

$6.16

  Intrinsic Value

$0.14

stock screener

  Rating & Target

str. sell

-98%

Previous close

$6.16

 
Intrinsic value

$0.14

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of CERS 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 0.8

 

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, %
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  83
  89
  97
  104
  112
  120
  128
  137
  146
  155
  165
  175
  186
  197
  208
  220
  233
  246
  260
  274
  289
  304
  321
  338
  356
  375
  394
  415
  436
  459
Variable operating expenses, $m
  74
  80
  86
  93
  100
  107
  114
  122
  130
  138
  146
  155
  164
  174
  184
  195
  206
  218
  230
  242
  255
  269
  284
  299
  315
  331
  349
  367
  386
  406
Fixed operating expenses, $m
  65
  67
  68
  70
  71
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
  108
  110
  113
  115
  118
  120
  123
Total operating expenses, $m
  139
  147
  154
  163
  171
  180
  189
  198
  208
  218
  227
  238
  249
  261
  273
  286
  299
  313
  327
  341
  356
  372
  390
  407
  425
  444
  464
  485
  506
  529
Operating income, $m
  -57
  -57
  -58
  -59
  -59
  -60
  -61
  -61
  -62
  -62
  -62
  -63
  -63
  -64
  -65
  -65
  -66
  -66
  -67
  -67
  -68
  -68
  -69
  -69
  -69
  -69
  -70
  -70
  -70
  -70
EBITDA, $m
  -55
  -55
  -56
  -56
  -57
  -57
  -58
  -58
  -59
  -59
  -60
  -60
  -61
  -61
  -61
  -62
  -62
  -62
  -63
  -63
  -63
  -63
  -63
  -64
  -64
  -64
  -63
  -63
  -63
  -63
Interest expense (income), $m
  1
  4
  5
  6
  7
  8
  8
  9
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
Earnings before tax, $m
  -61
  -62
  -64
  -65
  -67
  -68
  -70
  -72
  -73
  -75
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -97
  -99
  -101
  -104
  -106
  -108
  -111
  -114
  -116
  -119
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
  -61
  -62
  -64
  -65
  -67
  -68
  -70
  -72
  -73
  -75
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -97
  -99
  -101
  -104
  -106
  -108
  -111
  -114
  -116
  -119

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
  96
  104
  112
  120
  129
  139
  148
  158
  169
  180
  191
  203
  215
  228
  241
  255
  270
  285
  301
  317
  334
  352
  371
  391
  412
  433
  456
  480
  505
  531
Adjusted assets (=assets-cash), $m
  96
  104
  112
  120
  129
  139
  148
  158
  169
  180
  191
  203
  215
  228
  241
  255
  270
  285
  301
  317
  334
  352
  371
  391
  412
  433
  456
  480
  505
  531
Revenue / Adjusted assets
  0.865
  0.856
  0.866
  0.867
  0.868
  0.863
  0.865
  0.867
  0.864
  0.861
  0.864
  0.862
  0.865
  0.864
  0.863
  0.863
  0.863
  0.863
  0.864
  0.864
  0.865
  0.864
  0.865
  0.864
  0.864
  0.866
  0.864
  0.865
  0.863
  0.864
Average production assets, $m
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
Working capital, $m
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
  -110
Total debt, $m
  36
  42
  49
  56
  63
  71
  79
  87
  95
  104
  113
  123
  133
  143
  154
  165
  177
  189
  202
  215
  229
  244
  259
  275
  292
  309
  327
  347
  367
  388
Total liabilities, $m
  77
  84
  90
  97
  105
  112
  120
  128
  136
  145
  154
  164
  174
  184
  195
  206
  218
  230
  243
  256
  270
  285
  300
  316
  333
  350
  369
  388
  408
  429
Total equity, $m
  18
  20
  21
  23
  25
  27
  28
  30
  32
  35
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  88
  92
  97
  102
Total liabilities and equity, $m
  95
  104
  111
  120
  130
  139
  148
  158
  168
  180
  191
  203
  215
  228
  241
  255
  270
  285
  301
  317
  334
  353
  371
  391
  412
  433
  457
  480
  505
  531
Debt-to-equity ratio
  1.960
  2.140
  2.290
  2.430
  2.550
  2.660
  2.760
  2.850
  2.940
  3.010
  3.080
  3.150
  3.210
  3.270
  3.320
  3.370
  3.410
  3.450
  3.490
  3.530
  3.570
  3.600
  3.630
  3.660
  3.690
  3.710
  3.740
  3.760
  3.780
  3.800
Adjusted equity ratio
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -61
  -62
  -64
  -65
  -67
  -68
  -70
  -72
  -73
  -75
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -97
  -99
  -101
  -104
  -106
  -108
  -111
  -114
  -116
  -119
Depreciation, amort., depletion, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Funds from operations, $m
  -59
  -60
  -61
  -63
  -64
  -66
  -67
  -69
  -70
  -72
  -74
  -75
  -77
  -79
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -96
  -98
  -100
  -103
  -105
  -107
  -109
  -112
Change in working capital, $m
  -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
  -4
  -5
  -5
  -5
  -5
Cash from operations, $m
  -57
  -58
  -60
  -61
  -62
  -64
  -65
  -67
  -68
  -70
  -71
  -73
  -74
  -76
  -78
  -79
  -81
  -83
  -85
  -87
  -88
  -90
  -92
  -94
  -96
  -98
  -100
  -102
  -104
  -106
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -9
  -9
Free cash flow, $m
  -59
  -60
  -62
  -63
  -65
  -66
  -68
  -69
  -71
  -73
  -74
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -96
  -98
  -101
  -103
  -105
  -108
  -110
  -113
  -115
Issuance/(repayment) of debt, $m
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
Issuance/(repurchase) of shares, $m
  62
  64
  65
  67
  68
  70
  72
  74
  75
  77
  78
  80
  82
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  107
  110
  113
  115
  118
  121
  124
Cash from financing (excl. dividends), $m  
  68
  70
  72
  74
  75
  78
  80
  82
  83
  86
  87
  90
  92
  94
  97
  99
  103
  105
  108
  110
  114
  117
  120
  123
  127
  131
  133
  137
  141
  145
Total cash flow (excl. dividends), $m
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Retained Cash Flow (-), $m
  -62
  -64
  -65
  -67
  -68
  -70
  -72
  -74
  -75
  -77
  -78
  -80
  -82
  -84
  -86
  -88
  -91
  -93
  -95
  -97
  -100
  -102
  -105
  -107
  -110
  -113
  -115
  -118
  -121
  -124
Prev. year cash balance distribution, $m
  68
  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
  15
  -54
  -55
  -56
  -57
  -59
  -60
  -61
  -63
  -64
  -65
  -67
  -68
  -70
  -71
  -72
  -74
  -75
  -77
  -78
  -80
  -81
  -83
  -85
  -86
  -88
  -89
  -91
  -92
  -94
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
  14
  -49
  -48
  -46
  -44
  -43
  -40
  -38
  -36
  -34
  -31
  -28
  -26
  -23
  -21
  -18
  -16
  -14
  -12
  -10
  -8
  -7
  -5
  -4
  -3
  -3
  -2
  -1
  -1
  -1
Current shareholders' claim on cash, %
  73.1
  54.2
  40.8
  31.1
  24.0
  18.7
  14.7
  11.7
  9.4
  7.6
  6.2
  5.1
  4.2
  3.5
  2.9
  2.4
  2.0
  1.7
  1.5
  1.3
  1.1
  0.9
  0.8
  0.7
  0.6
  0.5
  0.5
  0.4
  0.4
  0.3

Cerus Corporation is a biomedical products company. The Company is engaged in developing and commercializing the INTERCEPT Blood System for blood safety. The Company operates through blood safety segment. The Company's INTERCEPT Blood System is based on its technology for controlling biological replication, and is designed to reduce blood-borne pathogens in donated blood components intended for transfusion. The Company's INTERCEPT Blood System is designed to target and inactivate blood-borne pathogens, such as viruses, including human immunodeficiency virus (HIV), West Nile, Severe acute respiratory syndrome (SARS), hepatitis B and C; bacteria and parasites, as well as harmful white blood cells, while preserving the therapeutic properties of platelet, plasma and red blood cell transfusion products. The Company's INTERCEPT Blood System is for use with blood components, including plasma, platelets, and red blood cells.

FINANCIAL RATIOS  of  Cerus Corporation (CERS)

Valuation Ratios
P/E Ratio -10.1
Price to Sales 16.3
Price to Book 11
Price to Tangible Book
Price to Cash Flow -11.8
Price to Free Cash Flow -11.6
Growth Rates
Sales Growth Rate 14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 10
Current Ratio 0.1
LT Debt to Equity 20.7%
Total Debt to Equity 32.8%
Interest Coverage -62
Management Effectiveness
Return On Assets -51.2%
Ret/ On Assets - 3 Yr. Avg. -49%
Return On Total Capital -65.6%
Ret/ On T. Cap. - 3 Yr. Avg. -70.8%
Return On Equity -82.4%
Return On Equity - 3 Yr. Avg. -85.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 48.7%
Gross Margin - 3 Yr. Avg. 40.9%
EBITDA Margin -153.8%
EBITDA Margin - 3 Yr. Avg. -141.4%
Operating Margin -159%
Oper. Margin - 3 Yr. Avg. -154.5%
Pre-Tax Margin -161.5%
Pre-Tax Margin - 3 Yr. Avg. -148.8%
Net Profit Margin -161.5%
Net Profit Margin - 3 Yr. Avg. -144.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 2.2%
Payout Ratio 0%

CERS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CERS stock intrinsic value calculation we used $76 million for the last fiscal year's total revenue generated by Cerus Corporation. The default revenue input number comes from 0001 income statement of Cerus Corporation. 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 CERS stock valuation model: a) initial revenue growth rate of 8.7% 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 CERS is calculated based on our internal credit rating of Cerus Corporation, 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 Cerus Corporation.
    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 CERS stock the variable cost ratio is equal to 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $64 million in the base year in the intrinsic value calculation for CERS 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 13.4% for Cerus Corporation.

Corporate tax rate of 27% is the nominal tax rate for Cerus Corporation. 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 CERS 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 CERS are equal to 7.9%.

Life of production assets of 4.8 years is the average useful life of capital assets used in Cerus Corporation 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 CERS is equal to -24%. 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 - $84.519 million for Cerus Corporation - 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 136.953 million for Cerus Corporation 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 Cerus Corporation at the current share price and the inputted number of shares is $0.8 billion.

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