Intrinsic value of Cytokinetics - CYTK

Previous Close

$8.80

  Intrinsic Value

$2.08

stock screener

  Rating & Target

str. sell

-76%

Previous close

$8.80

 
Intrinsic value

$2.08

 
Up/down potential

-76%

 
Rating

str. sell

We calculate the intrinsic value of CYTK 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 2017), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

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
  13
  14
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
Variable operating expenses, $m
  11
  11
  11
  12
  12
  13
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
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
  11
  11
  11
  12
  12
  13
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Operating income, $m
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
EBITDA, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Interest expense (income), $m
  2
  3
  -10
  -10
  -10
  -9
  -9
  -9
  -9
  -9
  -8
  -8
  -8
  -8
  -7
  -7
  -7
  -6
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -1
  -1
  0
  1
Earnings before tax, $m
  -1
  12
  12
  12
  12
  12
  12
  12
  12
  12
  11
  11
  11
  11
  11
  11
  11
  10
  10
  10
  10
  9
  9
  9
  9
  8
  8
  8
  7
  7
Tax expense, $m
  0
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  2
Net income, $m
  -1
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  8
  8
  8
  8
  8
  8
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
  5

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
  58
  59
  61
  62
  64
  66
  69
  71
  74
  77
  80
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  162
  169
  178
  186
Adjusted assets (=assets-cash), $m
  58
  59
  61
  62
  64
  66
  69
  71
  74
  77
  80
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  162
  169
  178
  186
Revenue / Adjusted assets
  0.224
  0.237
  0.230
  0.226
  0.234
  0.227
  0.232
  0.225
  0.230
  0.234
  0.225
  0.229
  0.233
  0.233
  0.223
  0.224
  0.225
  0.224
  0.232
  0.231
  0.230
  0.227
  0.231
  0.229
  0.231
  0.227
  0.228
  0.231
  0.230
  0.231
Average production assets, $m
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
Working capital, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Total debt, $m
  -101
  -100
  -98
  -97
  -95
  -93
  -91
  -89
  -87
  -84
  -81
  -78
  -75
  -72
  -69
  -65
  -61
  -57
  -52
  -48
  -43
  -38
  -32
  -27
  -21
  -14
  -8
  -1
  7
  15
Total liabilities, $m
  52
  53
  55
  56
  58
  60
  62
  64
  66
  69
  72
  75
  78
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  126
  132
  139
  145
  152
  160
  168
Total equity, $m
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
Total liabilities and equity, $m
  58
  59
  61
  62
  64
  67
  69
  71
  73
  77
  80
  83
  87
  90
  93
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  178
  187
Debt-to-equity ratio
  -17.430
  -16.830
  -16.190
  -15.500
  -14.780
  -14.030
  -13.280
  -12.510
  -11.740
  -10.970
  -10.210
  -9.460
  -8.730
  -8.010
  -7.300
  -6.620
  -5.950
  -5.310
  -4.690
  -4.090
  -3.510
  -2.950
  -2.410
  -1.900
  -1.400
  -0.930
  -0.470
  -0.030
  0.380
  0.780
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  8
  8
  8
  8
  8
  8
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
  5
Depreciation, amort., depletion, $m
  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
Funds from operations, $m
  0
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  8
  8
  8
  8
  7
  7
  7
  7
  7
  7
  6
  6
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
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  0
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  8
  8
  8
  8
  8
  7
  7
  7
  7
Maintenance CAPEX, $m
  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
  -1
New CAPEX, $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
  -1
  -1
Cash from investing activities, $m
  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
  -2
  -2
Free cash flow, $m
  -1
  9
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  8
  8
  8
  8
  8
  8
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
Issuance/(repayment) of debt, $m
  -133
  1
  1
  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
  7
  8
Issuance/(repurchase) of shares, $m
  133
  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  
  0
  1
  1
  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
  7
  8
Total cash flow (excl. dividends), $m
  -0
  10
  10
  10
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  13
  13
  13
  13
  13
  13
Retained Cash Flow (-), $m
  -133
  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
Prev. year cash balance distribution, $m
  236
  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
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Cash available for distribution, $m
  103
  10
  10
  10
  10
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
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
  99
  9
  9
  8
  8
  8
  7
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Cytokinetics, Incorporated is a late-stage biopharmaceutical company. The Company is focused on discovering, developing and commercializing first-in-class muscle activators as potential treatments for debilitating diseases in which muscle performance is compromised and/or declining. It is focused on the discovery and development of small molecule therapeutics that modulate muscle function for the treatment of serious diseases and medical conditions. Its drug candidates, which are in clinical development include tirasemtiv, CK-2127107 and omecamtiv mecarbil. Its tirasemtiv and CK-2127107 are skeletal muscle troponin activators. It is developing tirasemtiv drug candidate for the treatment of Amyotrophic lateral sclerosis (ALS). The Company is developing CK-2127107 for the potential treatment of spinal muscular atrophy, chronic obstructive pulmonary disease and ALS. The Omecamtiv mecarbil is a cardiac muscle myosin activator, which is being evaluated for the treatment of heart failure.

FINANCIAL RATIOS  of  Cytokinetics (CYTK)

Valuation Ratios
P/E Ratio 22.4
Price to Sales 3.4
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 10.2
Growth Rates
Sales Growth Rate 265.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 52
Current Ratio 0
LT Debt to Equity 28.7%
Total Debt to Equity 31.9%
Interest Coverage 9
Management Effectiveness
Return On Assets 12.6%
Ret/ On Assets - 3 Yr. Avg. -10.6%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. -16.1%
Return On Equity 19.6%
Return On Equity - 3 Yr. Avg. -16%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 17.9%
EBITDA Margin - 3 Yr. Avg. -47.2%
Operating Margin 17%
Oper. Margin - 3 Yr. Avg. -47.5%
Pre-Tax Margin 15.1%
Pre-Tax Margin - 3 Yr. Avg. -49.3%
Net Profit Margin 15.1%
Net Profit Margin - 3 Yr. Avg. -49.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CYTK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CYTK stock intrinsic value calculation we used $13 million for the last fiscal year's total revenue generated by Cytokinetics. The default revenue input number comes from 2017 income statement of Cytokinetics. 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 CYTK 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 CYTK is calculated based on our internal credit rating of Cytokinetics, 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 Cytokinetics.
    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 CYTK stock the variable cost ratio is equal to 82.3%.

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 CYTK 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 9.8% for Cytokinetics.

Corporate tax rate of 27% is the nominal tax rate for Cytokinetics. 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 CYTK stock is equal to 25%.

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 CYTK are equal to 26.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Cytokinetics 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 CYTK is equal to -39.3%. 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 - $110 million for Cytokinetics - 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 49 million for Cytokinetics 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 Cytokinetics at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ 3 Biotechs with Upcoming Data to Watch   [Jun-11-18 10:34AM  SmarterAnalyst]
▶ June Best Growth Stocks   [Jun-05-18 12:02PM  Simply Wall St.]
▶ Cytokinetics to Hold Annual Meeting of Stockholders   [May-10-18 04:00PM  GlobeNewswire]
▶ Cytokinetics: 1Q Earnings Snapshot   [Apr-27-18 05:06AM  Associated Press]
▶ Cytokinetics to Present at March Investor Conferences   [Mar-05-18 04:00PM  GlobeNewswire]
▶ Cytokinetics reports 4Q loss   [Feb-15-18 04:34PM  Associated Press]
▶ Cytokinetics Earnings Outlook   [09:29AM  Benzinga]
▶ Cytokinetics Announces Progress Against Vision 2020   [Jan-03-18 07:30AM  GlobeNewswire]
▶ Cytokinetics Crumbles on Late-Stage Results   [11:04AM  24/7 Wall St.]
▶ Why Is Cytokinetics Plunging Today?   [09:47AM  Benzinga]
▶ Is It Too Late To Buy Cytokinetics Incorporated (CYTK)?   [Nov-14-17 09:09AM  Simply Wall St.]
▶ Cytokinetics reports 3Q loss   [Oct-26-17 05:47PM  Associated Press]
▶ Cytokinetics to Present at September Investor Conferences   [Sep-05-17 04:00PM  GlobeNewswire]
▶ Cytokinetics reports 2Q loss   [Aug-02-17 10:34PM  Associated Press]
▶ ETFs with exposure to Cytokinetics, Inc. : July 11, 2017   [Jul-11-17 02:24PM  Capital Cube]
▶ ETFs with exposure to Cytokinetics, Inc. : June 12, 2017   [Jun-12-17 01:58PM  Capital Cube]
▶ Biotech Movers: Anika Up on Strong Analyst Ratings   [May-12-17 09:50AM  TheStreet.com]
▶ Cytokinetics to Hold Annual Meeting of Stockholders   [May-11-17 04:00PM  GlobeNewswire]
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