Intrinsic value of Cumberland Pharmaceuticals - CPIX

Previous Close

$7.09

  Intrinsic Value

$2.66

stock screener

  Rating & Target

str. sell

-62%

Previous close

$7.09

 
Intrinsic value

$2.66

 
Up/down potential

-62%

 
Rating

str. sell

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

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -2.94
  22.20
  20.48
  18.93
  17.54
  16.28
  15.16
  14.14
  13.23
  12.40
  11.66
  11.00
  10.40
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
Revenue, $m
  33
  40
  49
  58
  68
  79
  91
  104
  118
  132
  148
  164
  181
  199
  217
  237
  257
  278
  300
  322
  346
  371
  396
  423
  450
  479
  509
  540
  572
  606
  641
Variable operating expenses, $m
 
  38
  46
  54
  64
  74
  85
  97
  110
  124
  139
  154
  170
  186
  204
  222
  241
  261
  281
  303
  325
  348
  372
  397
  423
  450
  478
  507
  537
  569
  602
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
  34
  38
  46
  54
  64
  74
  85
  97
  110
  124
  139
  154
  170
  186
  204
  222
  241
  261
  281
  303
  325
  348
  372
  397
  423
  450
  478
  507
  537
  569
  602
Operating income, $m
  -1
  2
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
EBITDA, $m
  1
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  69
  74
  78
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
Earnings before tax, $m
  -1
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
Tax expense, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
Net income, $m
  -1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  50
  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
  93
  53
  63
  75
  89
  103
  119
  135
  153
  172
  192
  213
  236
  259
  283
  308
  335
  362
  391
  420
  451
  483
  516
  551
  587
  624
  663
  704
  746
  790
  836
Adjusted assets (=assets-cash), $m
  43
  53
  63
  75
  89
  103
  119
  135
  153
  172
  192
  213
  236
  259
  283
  308
  335
  362
  391
  420
  451
  483
  516
  551
  587
  624
  663
  704
  746
  790
  836
Revenue / Adjusted assets
  0.767
  0.755
  0.778
  0.773
  0.764
  0.767
  0.765
  0.770
  0.771
  0.767
  0.771
  0.770
  0.767
  0.768
  0.767
  0.769
  0.767
  0.768
  0.767
  0.767
  0.767
  0.768
  0.767
  0.768
  0.767
  0.768
  0.768
  0.767
  0.767
  0.767
  0.767
Average production assets, $m
  22
  26
  32
  38
  44
  51
  59
  68
  77
  86
  96
  107
  118
  129
  142
  154
  167
  181
  195
  210
  226
  242
  258
  276
  294
  312
  332
  352
  373
  395
  418
Working capital, $m
  51
  1
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
Total debt, $m
  4
  8
  13
  19
  25
  32
  39
  47
  55
  64
  73
  83
  94
  104
  116
  127
  140
  152
  166
  179
  194
  209
  224
  240
  257
  274
  292
  311
  331
  351
  373
Total liabilities, $m
  20
  24
  29
  35
  41
  48
  55
  63
  71
  80
  89
  99
  110
  120
  132
  143
  156
  168
  182
  195
  210
  225
  240
  256
  273
  290
  308
  327
  347
  367
  389
Total equity, $m
  73
  28
  34
  40
  47
  55
  63
  72
  82
  92
  103
  114
  126
  139
  152
  165
  179
  194
  209
  225
  241
  259
  276
  295
  314
  334
  355
  377
  399
  423
  447
Total liabilities and equity, $m
  93
  52
  63
  75
  88
  103
  118
  135
  153
  172
  192
  213
  236
  259
  284
  308
  335
  362
  391
  420
  451
  484
  516
  551
  587
  624
  663
  704
  746
  790
  836
Debt-to-equity ratio
  0.055
  0.300
  0.400
  0.470
  0.530
  0.580
  0.620
  0.650
  0.670
  0.700
  0.710
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.790
  0.800
  0.800
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.830
  0.830
  0.830
  0.830
Adjusted equity ratio
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
Depreciation, amort., depletion, $m
  2
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
Funds from operations, $m
  -2
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
Change in working capital, $m
  -3
  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
  1
  1
Cash from operations, $m
  1
  4
  5
  5
  6
  7
  8
  10
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  57
Maintenance CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
New CAPEX, $m
  -2
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  -3
  -7
  -7
  -9
  -10
  -11
  -13
  -13
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -30
  -31
  -33
  -34
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -57
  -60
Free cash flow, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -3
  -3
  -3
  -2
  -2
Issuance/(repayment) of debt, $m
  2
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
Issuance/(repurchase) of shares, $m
  -3
  3
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  5
  5
  5
  5
  5
  5
  5
  5
  5
Cash from financing (excl. dividends), $m  
  -1
  7
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  19
  20
  20
  21
  20
  21
  22
  22
  23
  24
  25
  25
  26
Total cash flow (excl. dividends), $m
  -4
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
Retained Cash Flow (-), $m
  4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Prev. year cash balance distribution, $m
 
  50
  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
 
  50
  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
  -1
  -1
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
 
  48
  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
Current shareholders' claim on cash, %
  100
  91.2
  83.9
  77.7
  72.4
  67.9
  64.1
  60.8
  57.9
  55.4
  53.2
  51.3
  49.7
  48.2
  46.9
  45.7
  44.7
  43.8
  42.9
  42.2
  41.5
  40.9
  40.4
  39.9
  39.4
  39.0
  38.6
  38.2
  37.9
  37.6
  37.3

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 (CPIX)

Valuation Ratios
P/E Ratio -113.9
Price to Sales 3.5
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 113.9
Price to Free Cash Flow -113.9
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 $33 million for the last fiscal year's total revenue generated by Cumberland Pharmaceuticals. The default revenue input number comes from 2016 income statement of Cumberland Pharmaceuticals. 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 22.2% 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 CPIX is calculated based on our internal credit rating of Cumberland Pharmaceuticals, 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.
    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 93.9%.

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 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 3.5% for Cumberland Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Cumberland Pharmaceuticals. 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 65.2%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Cumberland Pharmaceuticals 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 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 - $73 million for Cumberland Pharmaceuticals - 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 15.941 million for Cumberland Pharmaceuticals 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 at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ The fastest-growing Nashville health care company of 2017 might surprise you   [Dec-26-17 10:45AM  American City Business Journals]
▶ Who Owns Cumberland Pharmaceuticals Inc (NASDAQ:CPIX)?   [Dec-15-17 01:35PM  Simply Wall St.]
▶ Cumberland reports 3Q loss   [Nov-07-17 06:19PM  Associated Press]
▶ Cumberland reports 2Q loss   [Aug-08-17 11:15PM  Associated Press]
▶ Cumberland reports 1Q loss   [May-15-17 05:26PM  Associated Press]
▶ Cumberland reports 4Q loss   [06:26PM  Associated Press]
Financial statements of CPIX
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