Intrinsic value of Cumberland Pharmaceuticals Inc. - CPIX

Previous Close

$5.98

  Intrinsic Value

$0.89

stock screener

  Rating & Target

str. sell

-85%

Previous close

$5.98

 
Intrinsic value

$0.89

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of CPIX 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 0.1

 

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, %
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
Revenue, $m
  48
  55
  62
  70
  79
  88
  97
  107
  117
  128
  140
  151
  164
  176
  189
  203
  217
  232
  248
  264
  280
  298
  316
  335
  354
  375
  396
  418
  442
  466
Variable operating expenses, $m
  52
  60
  68
  77
  86
  96
  107
  117
  129
  141
  153
  166
  179
  193
  208
  223
  238
  254
  271
  289
  307
  326
  346
  367
  388
  411
  434
  458
  484
  511
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
  52
  60
  68
  77
  86
  96
  107
  117
  129
  141
  153
  166
  179
  193
  208
  223
  238
  254
  271
  289
  307
  326
  346
  367
  388
  411
  434
  458
  484
  511
Operating income, $m
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
EBITDA, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
Interest expense (income), $m
  0
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
Earnings before tax, $m
  -6
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -42
  -45
  -47
  -50
  -54
  -57
  -60
  -64
  -68
  -72
  -76
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
  -6
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -42
  -45
  -47
  -50
  -54
  -57
  -60
  -64
  -68
  -72
  -76

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
  121
  139
  158
  178
  200
  223
  247
  272
  299
  326
  355
  385
  416
  448
  482
  517
  553
  591
  630
  671
  713
  757
  803
  851
  901
  954
  1,008
  1,065
  1,124
  1,186
Adjusted assets (=assets-cash), $m
  121
  139
  158
  178
  200
  223
  247
  272
  299
  326
  355
  385
  416
  448
  482
  517
  553
  591
  630
  671
  713
  757
  803
  851
  901
  954
  1,008
  1,065
  1,124
  1,186
Revenue / Adjusted assets
  0.397
  0.396
  0.392
  0.393
  0.395
  0.395
  0.393
  0.393
  0.391
  0.393
  0.394
  0.392
  0.394
  0.393
  0.392
  0.393
  0.392
  0.393
  0.394
  0.393
  0.393
  0.394
  0.394
  0.394
  0.393
  0.393
  0.393
  0.392
  0.393
  0.393
Average production assets, $m
  17
  19
  22
  25
  28
  31
  35
  38
  42
  46
  50
  54
  58
  63
  68
  73
  78
  83
  88
  94
  100
  106
  113
  119
  126
  134
  141
  149
  158
  166
Working capital, $m
  -6
  -7
  -7
  -8
  -9
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
Total debt, $m
  29
  39
  49
  60
  72
  85
  98
  112
  126
  141
  157
  173
  190
  208
  226
  245
  265
  285
  307
  329
  352
  376
  401
  427
  454
  483
  512
  543
  576
  609
Total liabilities, $m
  66
  76
  86
  97
  109
  122
  135
  148
  163
  178
  193
  210
  227
  244
  263
  282
  301
  322
  343
  366
  389
  413
  438
  464
  491
  520
  549
  580
  613
  646
Total equity, $m
  55
  63
  72
  81
  91
  101
  112
  124
  136
  148
  162
  175
  189
  204
  219
  235
  252
  269
  287
  305
  325
  345
  366
  387
  410
  434
  459
  484
  511
  540
Total liabilities and equity, $m
  121
  139
  158
  178
  200
  223
  247
  272
  299
  326
  355
  385
  416
  448
  482
  517
  553
  591
  630
  671
  714
  758
  804
  851
  901
  954
  1,008
  1,064
  1,124
  1,186
Debt-to-equity ratio
  0.530
  0.610
  0.690
  0.740
  0.790
  0.830
  0.870
  0.900
  0.930
  0.950
  0.970
  0.990
  1.000
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.080
  1.090
  1.100
  1.100
  1.110
  1.110
  1.120
  1.120
  1.130
  1.130
Adjusted equity ratio
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455
  0.455

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -42
  -45
  -47
  -50
  -54
  -57
  -60
  -64
  -68
  -72
  -76
Depreciation, amort., depletion, $m
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
Funds from operations, $m
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -16
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
Cash from operations, $m
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -16
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -47
  -49
  -52
  -55
Maintenance CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
New CAPEX, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
Cash from investing activities, $m
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -8
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
  -17
  -19
  -19
  -20
  -22
  -23
  -24
  -25
Free cash flow, $m
  -7
  -8
  -10
  -11
  -12
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
Issuance/(repayment) of debt, $m
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
Issuance/(repurchase) of shares, $m
  13
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  39
  42
  45
  47
  51
  54
  57
  60
  64
  68
  71
  75
  80
  84
  89
  93
  99
  104
Cash from financing (excl. dividends), $m  
  22
  25
  27
  30
  33
  35
  38
  41
  43
  47
  50
  53
  56
  60
  63
  66
  71
  75
  78
  82
  87
  92
  96
  101
  107
  112
  119
  124
  131
  138
Total cash flow (excl. dividends), $m
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
Retained Cash Flow (-), $m
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -45
  -47
  -51
  -54
  -57
  -60
  -64
  -68
  -71
  -75
  -80
  -84
  -89
  -93
  -99
  -104
Prev. year cash balance distribution, $m
  8
  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
  11
  2
  1
  0
  -1
  -2
  -3
  -4
  -5
  -6
  -8
  -9
  -10
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -47
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
  10
  1
  1
  0
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  85.5
  73.4
  63.2
  54.6
  47.3
  41.1
  35.8
  31.2
  27.3
  23.9
  21.0
  18.5
  16.3
  14.4
  12.7
  11.2
  9.9
  8.8
  7.8
  6.9
  6.2
  5.5
  4.9
  4.3
  3.8
  3.4
  3.0
  2.7
  2.4
  2.1

Cumberland Pharmaceuticals Inc. (Cumberland) is a specialty pharmaceutical company. The Company is focused on the acquisition, development and commercialization of branded prescription products. The Company operates through specialty pharmaceutical products segment. The Company's product portfolio includes Acetadote (acetylcysteine) Injection for the treatment of acetaminophen poisoning; Caldolor (ibuprofen) Injection for the treatment of pain and fever; Kristalose (lactulose) for Oral Solution for the treatment of chronic and acute constipation; Omeclamox-Pak, (omeprazole, clarithromycin, amoxicillin) for the treatment of Helicobacter pylori (H. pylori) infection and related duodenal ulcer disease; Vaprisol (conivaptan) Injection to raise serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia; Hepatoren (ifetroban) Injection, and Boxaban (ifetroban) oral capsules for the treatment of patients with aspirin-exacerbated respiratory disease (AERD).

FINANCIAL RATIOS  of  Cumberland Pharmaceuticals Inc. (CPIX)

Valuation Ratios
P/E Ratio -96.1
Price to Sales 2.9
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 96.1
Price to Free Cash Flow -96.1
Growth Rates
Sales Growth Rate -2.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 5.5%
Total Debt to Equity 5.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.1%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital -1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity -1.3%
Return On Equity - 3 Yr. Avg. 0.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 81.8%
Gross Margin - 3 Yr. Avg. 84.5%
EBITDA Margin 3%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin -3%
Oper. Margin - 3 Yr. Avg. 4.6%
Pre-Tax Margin -3%
Pre-Tax Margin - 3 Yr. Avg. 3.6%
Net Profit Margin -3%
Net Profit Margin - 3 Yr. Avg. 1.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

CPIX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPIX stock intrinsic value calculation we used $41 million for the last fiscal year's total revenue generated by Cumberland Pharmaceuticals Inc.. The default revenue input number comes from 0001 income statement of Cumberland Pharmaceuticals 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 CPIX stock valuation model: a) initial revenue growth rate of 15.9% 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 CPIX is calculated based on our internal credit rating of Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals 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 CPIX stock the variable cost ratio is equal to 109.8%.

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 CPIX 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 Cumberland Pharmaceuticals Inc..

Corporate tax rate of 27% is the nominal tax rate for Cumberland Pharmaceuticals 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 CPIX 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 CPIX are equal to 35.7%.

Life of production assets of 9.6 years is the average useful life of capital assets used in Cumberland Pharmaceuticals 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 CPIX is equal to -12%. 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 - $55.844767 million for Cumberland Pharmaceuticals 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 15.447 million for Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals Inc. at the current share price and the inputted number of shares is $0.1 billion.

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