Intrinsic value of Catalent, Inc. - CTLT

Previous Close

$45.46

  Intrinsic Value

$15.89

stock screener

  Rating & Target

str. sell

-65%

Previous close

$45.46

 
Intrinsic value

$15.89

 
Up/down potential

-65%

 
Rating

str. sell

We calculate the intrinsic value of CTLT 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 6.6

 

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, %
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  2,532
  2,608
  2,692
  2,784
  2,883
  2,990
  3,104
  3,227
  3,357
  3,497
  3,645
  3,802
  3,968
  4,144
  4,331
  4,528
  4,736
  4,955
  5,186
  5,430
  5,687
  5,958
  6,243
  6,543
  6,859
  7,191
  7,540
  7,907
  8,294
  8,700
Variable operating expenses, $m
  2,240
  2,302
  2,370
  2,444
  2,524
  2,610
  2,703
  2,802
  2,907
  3,020
  2,945
  3,072
  3,207
  3,349
  3,500
  3,659
  3,827
  4,004
  4,191
  4,388
  4,596
  4,815
  5,045
  5,288
  5,543
  5,811
  6,093
  6,390
  6,702
  7,031
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
  2,240
  2,302
  2,370
  2,444
  2,524
  2,610
  2,703
  2,802
  2,907
  3,020
  2,945
  3,072
  3,207
  3,349
  3,500
  3,659
  3,827
  4,004
  4,191
  4,388
  4,596
  4,815
  5,045
  5,288
  5,543
  5,811
  6,093
  6,390
  6,702
  7,031
Operating income, $m
  292
  306
  322
  340
  359
  379
  401
  425
  450
  477
  699
  729
  761
  795
  831
  869
  909
  951
  995
  1,042
  1,091
  1,143
  1,198
  1,255
  1,316
  1,379
  1,447
  1,517
  1,591
  1,669
EBITDA, $m
  624
  643
  663
  686
  710
  737
  765
  795
  827
  862
  898
  937
  978
  1,021
  1,067
  1,116
  1,167
  1,221
  1,278
  1,338
  1,401
  1,468
  1,538
  1,612
  1,690
  1,772
  1,858
  1,948
  2,044
  2,144
Interest expense (income), $m
  81
  147
  152
  158
  164
  171
  178
  186
  195
  204
  214
  225
  236
  248
  260
  274
  288
  303
  318
  335
  352
  371
  390
  410
  432
  455
  478
  503
  530
  557
  587
Earnings before tax, $m
  145
  154
  165
  176
  188
  201
  215
  230
  246
  262
  474
  493
  514
  535
  557
  581
  606
  632
  660
  690
  720
  753
  787
  823
  861
  901
  943
  987
  1,034
  1,082
Tax expense, $m
  39
  42
  44
  47
  51
  54
  58
  62
  66
  71
  128
  133
  139
  144
  150
  157
  164
  171
  178
  186
  195
  203
  213
  222
  233
  243
  255
  267
  279
  292
Net income, $m
  106
  113
  120
  128
  137
  147
  157
  168
  179
  192
  346
  360
  375
  390
  407
  424
  442
  462
  482
  503
  526
  550
  575
  601
  629
  658
  688
  721
  755
  790

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
  4,654
  4,795
  4,949
  5,117
  5,299
  5,495
  5,706
  5,931
  6,172
  6,428
  6,700
  6,988
  7,294
  7,618
  7,961
  8,323
  8,705
  9,108
  9,534
  9,982
  10,454
  10,952
  11,476
  12,027
  12,608
  13,218
  13,860
  14,535
  15,245
  15,992
Adjusted assets (=assets-cash), $m
  4,654
  4,795
  4,949
  5,117
  5,299
  5,495
  5,706
  5,931
  6,172
  6,428
  6,700
  6,988
  7,294
  7,618
  7,961
  8,323
  8,705
  9,108
  9,534
  9,982
  10,454
  10,952
  11,476
  12,027
  12,608
  13,218
  13,860
  14,535
  15,245
  15,992
Revenue / Adjusted assets
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
  0.544
Average production assets, $m
  2,003
  2,063
  2,130
  2,202
  2,280
  2,365
  2,455
  2,552
  2,656
  2,766
  2,883
  3,007
  3,139
  3,278
  3,426
  3,581
  3,746
  3,919
  4,102
  4,295
  4,499
  4,713
  4,938
  5,175
  5,425
  5,688
  5,964
  6,255
  6,560
  6,881
Working capital, $m
  334
  344
  355
  367
  381
  395
  410
  426
  443
  462
  481
  502
  524
  547
  572
  598
  625
  654
  685
  717
  751
  786
  824
  864
  905
  949
  995
  1,044
  1,095
  1,148
Total debt, $m
  2,814
  2,921
  3,038
  3,166
  3,304
  3,453
  3,613
  3,785
  3,967
  4,162
  4,369
  4,588
  4,821
  5,067
  5,327
  5,602
  5,893
  6,199
  6,523
  6,863
  7,222
  7,600
  7,999
  8,418
  8,859
  9,323
  9,811
  10,324
  10,863
  11,431
Total liabilities, $m
  3,537
  3,644
  3,761
  3,889
  4,027
  4,177
  4,337
  4,508
  4,690
  4,885
  5,092
  5,311
  5,544
  5,790
  6,050
  6,325
  6,616
  6,922
  7,246
  7,586
  7,945
  8,324
  8,722
  9,141
  9,582
  10,046
  10,534
  11,047
  11,587
  12,154
Total equity, $m
  1,117
  1,151
  1,188
  1,228
  1,272
  1,319
  1,369
  1,423
  1,481
  1,543
  1,608
  1,677
  1,751
  1,828
  1,911
  1,997
  2,089
  2,186
  2,288
  2,396
  2,509
  2,628
  2,754
  2,887
  3,026
  3,172
  3,326
  3,489
  3,659
  3,838
Total liabilities and equity, $m
  4,654
  4,795
  4,949
  5,117
  5,299
  5,496
  5,706
  5,931
  6,171
  6,428
  6,700
  6,988
  7,295
  7,618
  7,961
  8,322
  8,705
  9,108
  9,534
  9,982
  10,454
  10,952
  11,476
  12,028
  12,608
  13,218
  13,860
  14,536
  15,246
  15,992
Debt-to-equity ratio
  2.520
  2.540
  2.560
  2.580
  2.600
  2.620
  2.640
  2.660
  2.680
  2.700
  2.720
  2.740
  2.750
  2.770
  2.790
  2.800
  2.820
  2.840
  2.850
  2.860
  2.880
  2.890
  2.900
  2.920
  2.930
  2.940
  2.950
  2.960
  2.970
  2.980
Adjusted equity ratio
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  106
  113
  120
  128
  137
  147
  157
  168
  179
  192
  346
  360
  375
  390
  407
  424
  442
  462
  482
  503
  526
  550
  575
  601
  629
  658
  688
  721
  755
  790
Depreciation, amort., depletion, $m
  332
  336
  341
  346
  351
  357
  364
  370
  377
  385
  199
  207
  216
  226
  236
  247
  258
  270
  283
  296
  310
  325
  341
  357
  374
  392
  411
  431
  452
  475
Funds from operations, $m
  438
  449
  461
  474
  489
  504
  520
  538
  557
  576
  545
  568
  591
  616
  643
  671
  701
  732
  765
  800
  836
  875
  915
  958
  1,003
  1,050
  1,100
  1,152
  1,207
  1,265
Change in working capital, $m
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
  54
Cash from operations, $m
  429
  439
  450
  462
  476
  490
  505
  522
  539
  558
  526
  547
  569
  593
  618
  645
  673
  703
  734
  767
  802
  839
  878
  918
  961
  1,006
  1,054
  1,104
  1,156
  1,211
Maintenance CAPEX, $m
  -134
  -138
  -142
  -147
  -152
  -157
  -163
  -169
  -176
  -183
  -191
  -199
  -207
  -216
  -226
  -236
  -247
  -258
  -270
  -283
  -296
  -310
  -325
  -341
  -357
  -374
  -392
  -411
  -431
  -452
New CAPEX, $m
  -55
  -60
  -66
  -72
  -78
  -84
  -91
  -97
  -103
  -110
  -117
  -124
  -132
  -139
  -147
  -156
  -164
  -174
  -183
  -193
  -203
  -214
  -225
  -237
  -250
  -263
  -276
  -291
  -306
  -321
Cash from investing activities, $m
  -189
  -198
  -208
  -219
  -230
  -241
  -254
  -266
  -279
  -293
  -308
  -323
  -339
  -355
  -373
  -392
  -411
  -432
  -453
  -476
  -499
  -524
  -550
  -578
  -607
  -637
  -668
  -702
  -737
  -773
Free cash flow, $m
  240
  240
  241
  243
  245
  248
  252
  255
  260
  265
  218
  224
  230
  237
  245
  253
  262
  271
  281
  292
  303
  315
  327
  341
  355
  369
  385
  402
  419
  437
Issuance/(repayment) of debt, $m
  93
  107
  117
  128
  138
  149
  160
  171
  183
  195
  207
  219
  233
  246
  260
  275
  290
  307
  323
  341
  359
  378
  398
  419
  441
  464
  488
  513
  540
  567
Issuance/(repurchase) of shares, $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 financing (excl. dividends), $m  
  93
  107
  117
  128
  138
  149
  160
  171
  183
  195
  207
  219
  233
  246
  260
  275
  290
  307
  323
  341
  359
  378
  398
  419
  441
  464
  488
  513
  540
  567
Total cash flow (excl. dividends), $m
  333
  347
  359
  371
  384
  397
  412
  427
  443
  459
  425
  443
  463
  484
  505
  528
  552
  578
  604
  632
  662
  693
  725
  760
  796
  833
  873
  915
  959
  1,005
Retained Cash Flow (-), $m
  -30
  -34
  -37
  -40
  -44
  -47
  -51
  -54
  -58
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -92
  -97
  -102
  -108
  -113
  -119
  -126
  -132
  -139
  -147
  -154
  -162
  -170
  -179
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
  302
  313
  322
  331
  340
  350
  361
  373
  385
  398
  359
  374
  389
  406
  423
  441
  461
  481
  502
  525
  548
  573
  600
  627
  656
  687
  719
  753
  788
  826
Discount rate, %
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
  277
  262
  242
  222
  202
  182
  163
  144
  125
  108
  80
  67
  56
  45
  36
  28
  22
  16
  12
  9
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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
  100.0

Catalent, Inc. provides delivery technologies and development solutions for drugs, biologics, and consumer and animal health products. Its segments include Softgel Technologies, Drug Delivery Solutions and Clinical Supply Services. The Softgel Technologies segment is engaged in the formulation, development and manufacturing of prescription and consumer health soft capsules or softgels. The Drug Delivery Solutions segment is engaged in the formulation, development and manufacturing of prescription and consumer and animal health products; blow-fill seal unit dose manufacturing; biologic cell line development; analytical and bioanalytical development, and testing services. The Clinical Supply Services segment is engaged in manufacturing, packaging, labeling, storage, distribution and inventory management for clinical trials of drugs and biologics for patient kits; FastChain clinical supply service; clinical e-solutions and informatics, and global comparator sourcing services.

FINANCIAL RATIOS  of  Catalent, Inc. (CTLT)

Valuation Ratios
P/E Ratio 51.7
Price to Sales 2.7
Price to Book 7.9
Price to Tangible Book
Price to Cash Flow 18.9
Price to Free Cash Flow 35.5
Growth Rates
Sales Growth Rate 12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 2.8%
Financial Strength
Quick Ratio 12
Current Ratio 0.1
LT Debt to Equity 283.8%
Total Debt to Equity 287.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 8.1%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.8%
Return On Equity 16.2%
Return On Equity - 3 Yr. Avg. 65%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 31.6%
Gross Margin - 3 Yr. Avg. 32.3%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 19.1%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 11.6%
Pre-Tax Margin 6.6%
Pre-Tax Margin - 3 Yr. Avg. 6.9%
Net Profit Margin 5.3%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 19.1%
Eff/ Tax Rate - 3 Yr. Avg. -14.4%
Payout Ratio 0%

CTLT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTLT stock intrinsic value calculation we used $2463 million for the last fiscal year's total revenue generated by Catalent, Inc.. The default revenue input number comes from 0001 income statement of Catalent, 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 CTLT stock valuation model: a) initial revenue growth rate of 2.8% 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 9%, whose default value for CTLT is calculated based on our internal credit rating of Catalent, 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 Catalent, 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 CTLT stock the variable cost ratio is equal to 88.7%.

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 CTLT 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 Catalent, Inc..

Corporate tax rate of 27% is the nominal tax rate for Catalent, 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 CTLT 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 CTLT are equal to 79.1%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Catalent, 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 CTLT is equal to 13.2%. 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 - $1086.7 million for Catalent, 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 145.735 million for Catalent, 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 Catalent, Inc. at the current share price and the inputted number of shares is $6.6 billion.

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