Intrinsic value of Diplomat Pharmacy, Inc. - DPLO

Previous Close

$5.41

  Intrinsic Value

$18.38

stock screener

  Rating & Target

str. buy

+240%

Previous close

$5.41

 
Intrinsic value

$18.38

 
Up/down potential

+240%

 
Rating

str. buy

We calculate the intrinsic value of DPLO 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 0.4

 

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, %
  22.10
  20.39
  18.85
  17.47
  16.22
  15.10
  14.09
  13.18
  12.36
  11.62
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.10
  5.99
  5.89
  5.81
Revenue, $m
  5,476
  6,593
  7,836
  9,204
  10,697
  12,312
  14,046
  15,898
  17,863
  19,939
  22,125
  24,419
  26,819
  29,325
  31,939
  34,660
  37,492
  40,435
  43,495
  46,674
  49,978
  53,412
  56,983
  60,695
  64,558
  68,578
  72,765
  77,127
  81,673
  86,415
Variable operating expenses, $m
  5,388
  6,461
  7,655
  8,970
  10,405
  11,956
  13,623
  15,402
  17,290
  19,285
  21,260
  23,463
  25,770
  28,178
  30,690
  33,304
  36,025
  38,854
  41,794
  44,849
  48,023
  51,323
  54,754
  58,321
  62,033
  65,896
  69,919
  74,110
  78,479
  83,035
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
  5,388
  6,461
  7,655
  8,970
  10,405
  11,956
  13,623
  15,402
  17,290
  19,285
  21,260
  23,463
  25,770
  28,178
  30,690
  33,304
  36,025
  38,854
  41,794
  44,849
  48,023
  51,323
  54,754
  58,321
  62,033
  65,896
  69,919
  74,110
  78,479
  83,035
Operating income, $m
  88
  132
  180
  234
  292
  355
  423
  496
  573
  654
  865
  955
  1,049
  1,147
  1,249
  1,356
  1,467
  1,582
  1,701
  1,826
  1,955
  2,089
  2,229
  2,374
  2,525
  2,683
  2,846
  3,017
  3,195
  3,380
EBITDA, $m
  256
  308
  367
  431
  501
  576
  657
  744
  836
  933
  1,035
  1,143
  1,255
  1,372
  1,494
  1,622
  1,754
  1,892
  2,035
  2,184
  2,339
  2,499
  2,666
  2,840
  3,021
  3,209
  3,405
  3,609
  3,822
  4,044
Interest expense (income), $m
  5
  39
  53
  69
  87
  107
  128
  151
  176
  203
  231
  261
  292
  325
  359
  395
  433
  472
  513
  555
  599
  644
  692
  741
  792
  845
  901
  959
  1,019
  1,081
  1,146
Earnings before tax, $m
  49
  79
  111
  147
  186
  227
  272
  320
  370
  423
  605
  663
  724
  788
  854
  923
  995
  1,069
  1,147
  1,227
  1,311
  1,398
  1,488
  1,582
  1,680
  1,782
  1,888
  1,998
  2,114
  2,234
Tax expense, $m
  13
  21
  30
  40
  50
  61
  73
  86
  100
  114
  163
  179
  196
  213
  231
  249
  269
  289
  310
  331
  354
  377
  402
  427
  454
  481
  510
  540
  571
  603
Net income, $m
  36
  57
  81
  107
  136
  166
  199
  233
  270
  309
  441
  484
  529
  575
  623
  674
  726
  780
  837
  896
  957
  1,020
  1,086
  1,155
  1,226
  1,301
  1,378
  1,459
  1,543
  1,631

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
  2,370
  2,853
  3,391
  3,983
  4,629
  5,328
  6,078
  6,879
  7,729
  8,628
  9,574
  10,566
  11,605
  12,689
  13,820
  14,998
  16,223
  17,497
  18,821
  20,197
  21,626
  23,112
  24,657
  26,264
  27,935
  29,675
  31,486
  33,374
  35,341
  37,393
Adjusted assets (=assets-cash), $m
  2,370
  2,853
  3,391
  3,983
  4,629
  5,328
  6,078
  6,879
  7,729
  8,628
  9,574
  10,566
  11,605
  12,689
  13,820
  14,998
  16,223
  17,497
  18,821
  20,197
  21,626
  23,112
  24,657
  26,264
  27,935
  29,675
  31,486
  33,374
  35,341
  37,393
Revenue / Adjusted assets
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
  2.311
Average production assets, $m
  597
  719
  854
  1,003
  1,166
  1,342
  1,531
  1,733
  1,947
  2,173
  2,412
  2,662
  2,923
  3,196
  3,481
  3,778
  4,087
  4,407
  4,741
  5,088
  5,448
  5,822
  6,211
  6,616
  7,037
  7,475
  7,931
  8,407
  8,902
  9,419
Working capital, $m
  120
  145
  172
  202
  235
  271
  309
  350
  393
  439
  487
  537
  590
  645
  703
  763
  825
  890
  957
  1,027
  1,100
  1,175
  1,254
  1,335
  1,420
  1,509
  1,601
  1,697
  1,797
  1,901
Total debt, $m
  985
  1,282
  1,612
  1,975
  2,372
  2,801
  3,262
  3,754
  4,276
  4,827
  5,408
  6,018
  6,655
  7,321
  8,016
  8,739
  9,491
  10,273
  11,086
  11,931
  12,808
  13,721
  14,669
  15,656
  16,682
  17,750
  18,863
  20,021
  21,229
  22,489
Total liabilities, $m
  1,455
  1,752
  2,082
  2,445
  2,842
  3,271
  3,732
  4,224
  4,746
  5,298
  5,878
  6,488
  7,125
  7,791
  8,486
  9,209
  9,961
  10,743
  11,556
  12,401
  13,279
  14,191
  15,139
  16,126
  17,152
  18,220
  19,333
  20,491
  21,699
  22,959
Total equity, $m
  915
  1,101
  1,309
  1,537
  1,787
  2,056
  2,346
  2,655
  2,984
  3,330
  3,695
  4,079
  4,479
  4,898
  5,335
  5,789
  6,262
  6,754
  7,265
  7,796
  8,348
  8,921
  9,518
  10,138
  10,783
  11,454
  12,154
  12,882
  13,642
  14,434
Total liabilities and equity, $m
  2,370
  2,853
  3,391
  3,982
  4,629
  5,327
  6,078
  6,879
  7,730
  8,628
  9,573
  10,567
  11,604
  12,689
  13,821
  14,998
  16,223
  17,497
  18,821
  20,197
  21,627
  23,112
  24,657
  26,264
  27,935
  29,674
  31,487
  33,373
  35,341
  37,393
Debt-to-equity ratio
  1.080
  1.160
  1.230
  1.280
  1.330
  1.360
  1.390
  1.410
  1.430
  1.450
  1.460
  1.480
  1.490
  1.490
  1.500
  1.510
  1.520
  1.520
  1.530
  1.530
  1.530
  1.540
  1.540
  1.540
  1.550
  1.550
  1.550
  1.550
  1.560
  1.560
Adjusted equity ratio
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  36
  57
  81
  107
  136
  166
  199
  233
  270
  309
  441
  484
  529
  575
  623
  674
  726
  780
  837
  896
  957
  1,020
  1,086
  1,155
  1,226
  1,301
  1,378
  1,459
  1,543
  1,631
Depreciation, amort., depletion, $m
  168
  177
  186
  197
  208
  221
  234
  248
  263
  279
  170
  187
  206
  225
  245
  266
  288
  310
  334
  358
  384
  410
  437
  466
  496
  526
  559
  592
  627
  663
Funds from operations, $m
  204
  234
  267
  304
  344
  387
  433
  481
  533
  588
  611
  672
  734
  800
  869
  940
  1,014
  1,091
  1,171
  1,254
  1,340
  1,430
  1,524
  1,621
  1,722
  1,827
  1,937
  2,051
  2,170
  2,294
Change in working capital, $m
  22
  25
  27
  30
  33
  36
  38
  41
  43
  46
  48
  50
  53
  55
  57
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  88
  92
  96
  100
  104
Cash from operations, $m
  182
  210
  240
  274
  311
  351
  394
  441
  490
  542
  563
  621
  682
  745
  811
  880
  952
  1,026
  1,104
  1,184
  1,268
  1,355
  1,445
  1,539
  1,637
  1,739
  1,845
  1,955
  2,070
  2,190
Maintenance CAPEX, $m
  -34
  -42
  -51
  -60
  -71
  -82
  -95
  -108
  -122
  -137
  -153
  -170
  -187
  -206
  -225
  -245
  -266
  -288
  -310
  -334
  -358
  -384
  -410
  -437
  -466
  -496
  -526
  -559
  -592
  -627
New CAPEX, $m
  -110
  -122
  -135
  -149
  -163
  -176
  -189
  -202
  -214
  -226
  -238
  -250
  -262
  -273
  -285
  -297
  -309
  -321
  -333
  -347
  -360
  -374
  -389
  -405
  -421
  -438
  -456
  -475
  -496
  -517
Cash from investing activities, $m
  -144
  -164
  -186
  -209
  -234
  -258
  -284
  -310
  -336
  -363
  -391
  -420
  -449
  -479
  -510
  -542
  -575
  -609
  -643
  -681
  -718
  -758
  -799
  -842
  -887
  -934
  -982
  -1,034
  -1,088
  -1,144
Free cash flow, $m
  38
  46
  54
  65
  78
  93
  111
  131
  154
  179
  172
  201
  233
  266
  301
  338
  377
  417
  460
  504
  549
  597
  646
  697
  750
  805
  862
  921
  982
  1,046
Issuance/(repayment) of debt, $m
  264
  297
  330
  364
  397
  429
  461
  492
  522
  552
  581
  609
  638
  666
  694
  723
  752
  782
  813
  845
  878
  912
  949
  986
  1,026
  1,068
  1,112
  1,159
  1,208
  1,260
Issuance/(repurchase) of shares, $m
  129
  129
  126
  121
  114
  104
  91
  76
  58
  38
  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  
  393
  426
  456
  485
  511
  533
  552
  568
  580
  590
  581
  609
  638
  666
  694
  723
  752
  782
  813
  845
  878
  912
  949
  986
  1,026
  1,068
  1,112
  1,159
  1,208
  1,260
Total cash flow (excl. dividends), $m
  431
  472
  511
  550
  588
  626
  663
  699
  734
  769
  753
  811
  870
  932
  995
  1,061
  1,129
  1,200
  1,273
  1,348
  1,427
  1,509
  1,594
  1,683
  1,776
  1,873
  1,974
  2,080
  2,190
  2,306
Retained Cash Flow (-), $m
  -165
  -187
  -208
  -229
  -249
  -270
  -290
  -309
  -328
  -347
  -365
  -383
  -401
  -419
  -437
  -455
  -473
  -492
  -511
  -531
  -552
  -574
  -596
  -620
  -645
  -672
  -699
  -729
  -759
  -792
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
  266
  285
  303
  321
  339
  356
  373
  390
  406
  422
  388
  427
  469
  513
  559
  607
  656
  708
  762
  817
  875
  936
  998
  1,063
  1,131
  1,201
  1,275
  1,351
  1,431
  1,514
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  248
  247
  242
  234
  224
  212
  197
  182
  165
  148
  116
  108
  99
  88
  78
  67
  57
  47
  38
  30
  23
  18
  13
  9
  7
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  80.2
  66.8
  57.4
  50.7
  45.8
  42.3
  39.8
  38.0
  36.9
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2
  36.2

Diplomat Pharmacy, Inc. (Diplomat) operates a specialty pharmacy business, which stocks, dispenses and distributes prescriptions for various biotechnology and specialty pharmaceutical manufacturers. The Company operates through specialty pharmacy services segment. The Company's primary focus is on medication management programs for individuals with chronic diseases, including oncology, immunology, hepatitis, multiple sclerosis, specialty infusion therapy, and various other serious and/or long-term conditions. The Company provides specialty pharmacy support services to a national network of retailers and independent pharmacy groups, hospitals and health systems. The Company offers various services, such as specialty drug dispensing, retail specialty services, hospital and health system services, and hub services. The Company's patient care system is used to coordinate and track patient adherence and safety.

FINANCIAL RATIOS  of  Diplomat Pharmacy, Inc. (DPLO)

Valuation Ratios
P/E Ratio 12.9
Price to Sales 0.1
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 30.1
Growth Rates
Sales Growth Rate 31%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.8%
Cap. Spend. - 3 Yr. Gr. Rate 25.9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 16.3%
Total Debt to Equity 24%
Interest Coverage 8
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 5.5%
Return On Equity 5%
Return On Equity - 3 Yr. Avg. 8.1%
Asset Turnover 4.2
Profitability Ratios
Gross Margin 7.4%
Gross Margin - 3 Yr. Avg. 7.2%
EBITDA Margin 2.1%
EBITDA Margin - 3 Yr. Avg. 1.7%
Operating Margin 1.1%
Oper. Margin - 3 Yr. Avg. 1%
Pre-Tax Margin 0.8%
Pre-Tax Margin - 3 Yr. Avg. 0.8%
Net Profit Margin 0.6%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 30.6%
Eff/ Tax Rate - 3 Yr. Avg. 38%
Payout Ratio 0%

DPLO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DPLO stock intrinsic value calculation we used $4485 million for the last fiscal year's total revenue generated by Diplomat Pharmacy, Inc.. The default revenue input number comes from 0001 income statement of Diplomat Pharmacy, 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 DPLO stock valuation model: a) initial revenue growth rate of 22.1% 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 7.1%, whose default value for DPLO is calculated based on our internal credit rating of Diplomat Pharmacy, 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 Diplomat Pharmacy, 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 DPLO stock the variable cost ratio is equal to 98.9%.

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 DPLO 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 Diplomat Pharmacy, Inc..

Corporate tax rate of 27% is the nominal tax rate for Diplomat Pharmacy, 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 DPLO 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 DPLO are equal to 10.9%.

Life of production assets of 14.2 years is the average useful life of capital assets used in Diplomat Pharmacy, 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 DPLO is equal to 2.2%. 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 - $749.501 million for Diplomat Pharmacy, 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 74.474 million for Diplomat Pharmacy, 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 Diplomat Pharmacy, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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