Intrinsic value of Eagle Pharmaceuticals, Inc. - EGRX

Previous Close

$49.17

  Intrinsic Value

$81.93

stock screener

  Rating & Target

str. buy

+67%

Previous close

$49.17

 
Intrinsic value

$81.93

 
Up/down potential

+67%

 
Rating

str. buy

We calculate the intrinsic value of EGRX 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 0.7

 

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, %
  19.80
  18.32
  16.99
  15.79
  14.71
  13.74
  12.87
  12.08
  11.37
  10.73
  10.16
  9.64
  9.18
  8.76
  8.39
  8.05
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
Revenue, $m
  255
  302
  353
  409
  469
  534
  602
  675
  752
  832
  917
  1,005
  1,098
  1,194
  1,294
  1,398
  1,506
  1,619
  1,736
  1,857
  1,984
  2,115
  2,252
  2,394
  2,542
  2,696
  2,856
  3,024
  3,198
  3,380
Variable operating expenses, $m
  183
  217
  253
  293
  337
  383
  432
  484
  539
  597
  658
  721
  787
  856
  928
  1,003
  1,080
  1,161
  1,245
  1,332
  1,422
  1,517
  1,614
  1,716
  1,822
  1,933
  2,048
  2,168
  2,293
  2,424
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
  183
  217
  253
  293
  337
  383
  432
  484
  539
  597
  658
  721
  787
  856
  928
  1,003
  1,080
  1,161
  1,245
  1,332
  1,422
  1,517
  1,614
  1,716
  1,822
  1,933
  2,048
  2,168
  2,293
  2,424
Operating income, $m
  72
  85
  100
  116
  133
  151
  170
  191
  212
  235
  259
  284
  311
  338
  366
  396
  426
  458
  491
  526
  561
  598
  637
  677
  719
  763
  808
  856
  905
  956
EBITDA, $m
  75
  88
  103
  120
  137
  156
  176
  197
  220
  243
  268
  294
  321
  349
  378
  409
  440
  473
  507
  543
  580
  618
  658
  699
  743
  788
  835
  884
  935
  988
Interest expense (income), $m
  0
  3
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  55
  58
  62
Earnings before tax, $m
  69
  82
  95
  110
  126
  143
  161
  180
  201
  222
  245
  268
  292
  318
  344
  372
  400
  430
  461
  493
  526
  561
  597
  634
  673
  714
  756
  801
  847
  895
Tax expense, $m
  19
  22
  26
  30
  34
  39
  44
  49
  54
  60
  66
  72
  79
  86
  93
  100
  108
  116
  124
  133
  142
  151
  161
  171
  182
  193
  204
  216
  229
  242
Net income, $m
  51
  60
  70
  80
  92
  104
  118
  132
  147
  162
  179
  196
  213
  232
  251
  271
  292
  314
  336
  360
  384
  409
  436
  463
  492
  521
  552
  584
  618
  653

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
  232
  274
  321
  371
  426
  484
  547
  613
  682
  755
  832
  912
  996
  1,083
  1,174
  1,269
  1,367
  1,469
  1,575
  1,685
  1,800
  1,919
  2,043
  2,172
  2,306
  2,446
  2,592
  2,744
  2,902
  3,068
Adjusted assets (=assets-cash), $m
  232
  274
  321
  371
  426
  484
  547
  613
  682
  755
  832
  912
  996
  1,083
  1,174
  1,269
  1,367
  1,469
  1,575
  1,685
  1,800
  1,919
  2,043
  2,172
  2,306
  2,446
  2,592
  2,744
  2,902
  3,068
Revenue / Adjusted assets
  1.099
  1.102
  1.100
  1.102
  1.101
  1.103
  1.101
  1.101
  1.103
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
  1.102
Average production assets, $m
  42
  50
  58
  67
  77
  88
  99
  111
  123
  137
  150
  165
  180
  196
  212
  229
  247
  266
  285
  305
  325
  347
  369
  393
  417
  442
  468
  496
  525
  554
Working capital, $m
  62
  73
  85
  99
  114
  129
  146
  163
  182
  201
  222
  243
  266
  289
  313
  338
  365
  392
  420
  449
  480
  512
  545
  579
  615
  652
  691
  732
  774
  818
Total debt, $m
  58
  74
  91
  110
  130
  152
  175
  199
  225
  252
  281
  310
  341
  374
  407
  442
  479
  516
  556
  596
  639
  683
  729
  776
  826
  878
  932
  988
  1,047
  1,108
Total liabilities, $m
  86
  101
  119
  137
  158
  179
  202
  227
  252
  279
  308
  338
  369
  401
  434
  469
  506
  544
  583
  624
  666
  710
  756
  804
  853
  905
  959
  1,015
  1,074
  1,135
Total equity, $m
  146
  173
  202
  234
  268
  305
  344
  386
  430
  476
  524
  575
  628
  683
  740
  799
  861
  926
  992
  1,062
  1,134
  1,209
  1,287
  1,368
  1,453
  1,541
  1,633
  1,729
  1,828
  1,933
Total liabilities and equity, $m
  232
  274
  321
  371
  426
  484
  546
  613
  682
  755
  832
  913
  997
  1,084
  1,174
  1,268
  1,367
  1,470
  1,575
  1,686
  1,800
  1,919
  2,043
  2,172
  2,306
  2,446
  2,592
  2,744
  2,902
  3,068
Debt-to-equity ratio
  0.400
  0.430
  0.450
  0.470
  0.490
  0.500
  0.510
  0.520
  0.520
  0.530
  0.540
  0.540
  0.540
  0.550
  0.550
  0.550
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
Adjusted equity ratio
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  51
  60
  70
  80
  92
  104
  118
  132
  147
  162
  179
  196
  213
  232
  251
  271
  292
  314
  336
  360
  384
  409
  436
  463
  492
  521
  552
  584
  618
  653
Depreciation, amort., depletion, $m
  3
  3
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  26
  28
  30
  31
Funds from operations, $m
  53
  63
  73
  84
  97
  110
  123
  138
  154
  170
  187
  205
  224
  243
  263
  284
  306
  329
  352
  377
  402
  429
  456
  485
  515
  546
  579
  612
  648
  684
Change in working capital, $m
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  41
  42
  44
Cash from operations, $m
  43
  51
  61
  71
  82
  94
  107
  121
  135
  150
  167
  183
  201
  220
  239
  259
  280
  302
  324
  348
  372
  397
  423
  451
  479
  509
  540
  572
  605
  640
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -30
New CAPEX, $m
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
Cash from investing activities, $m
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -57
  -60
Free cash flow, $m
  34
  41
  49
  58
  68
  79
  91
  103
  116
  130
  145
  160
  177
  194
  211
  230
  249
  269
  290
  311
  334
  357
  381
  407
  433
  460
  488
  518
  549
  581
Issuance/(repayment) of debt, $m
  14
  16
  17
  19
  20
  22
  23
  24
  26
  27
  28
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
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  
  14
  16
  17
  19
  20
  22
  23
  24
  26
  27
  28
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
Total cash flow (excl. dividends), $m
  48
  57
  67
  77
  89
  101
  114
  127
  142
  157
  173
  190
  208
  226
  245
  265
  286
  307
  329
  352
  376
  401
  427
  454
  482
  512
  542
  574
  607
  642
Retained Cash Flow (-), $m
  -24
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -104
Prev. year cash balance distribution, $m
  39
  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
  63
  30
  37
  45
  54
  64
  74
  86
  98
  111
  125
  140
  155
  171
  188
  205
  224
  243
  262
  283
  304
  326
  349
  373
  398
  424
  451
  478
  508
  538
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
  60
  28
  33
  37
  42
  46
  50
  54
  56
  58
  59
  60
  59
  57
  55
  52
  49
  45
  40
  36
  31
  27
  23
  19
  15
  12
  10
  7
  6
  4
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
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Eagle Pharmaceuticals, Inc. is a specialty pharmaceutical company. The Company focuses on developing and commercializing injectable products in the critical care and oncology areas. The Company's product portfolio includes products, including Argatroban; Ryanodex; docetaxel injection, non-alcohol formulation; and Bendeka. Its advanced candidates include EP-3101 (bendamustine Resistance Temperature Detectors (RTD)) (EP-3101), EP-4104 (dantrolene sodium for exertional heat stroke (EHS)) (EP-4104), EGL-4104-C-1702 (dantrolene sodium for drug induced hyperthermia), EP-5101 (pemetrexed) (EP-5101) and EGL-5385-C-1701 (fulvestrant). Its product portfolio focuses on oncology, critical care and orphan diseases. Bendamustine is an alkylating agent approved for use in chronic lymphocytic leukemia (CLL), and indolent B-cell non-Hodgkin's lymphoma (NHL), that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen.

FINANCIAL RATIOS  of  Eagle Pharmaceuticals, Inc. (EGRX)

Valuation Ratios
P/E Ratio 9.3
Price to Sales 4
Price to Book 5
Price to Tangible Book
Price to Cash Flow 14.2
Price to Free Cash Flow 20.4
Growth Rates
Sales Growth Rate 186.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 700%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 47.8%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 67.2%
Ret/ On T. Cap. - 3 Yr. Avg. -10.3%
Return On Equity 67.2%
Return On Equity - 3 Yr. Avg. -10.3%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 70.9%
Gross Margin - 3 Yr. Avg. 61.7%
EBITDA Margin 29.1%
EBITDA Margin - 3 Yr. Avg. -22.1%
Operating Margin 28%
Oper. Margin - 3 Yr. Avg. -23%
Pre-Tax Margin 28%
Pre-Tax Margin - 3 Yr. Avg. -22.5%
Net Profit Margin 42.9%
Net Profit Margin - 3 Yr. Avg. -15.8%
Effective Tax Rate -52.8%
Eff/ Tax Rate - 3 Yr. Avg. -15.9%
Payout Ratio 0%

EGRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EGRX stock intrinsic value calculation we used $213 million for the last fiscal year's total revenue generated by Eagle Pharmaceuticals, Inc.. The default revenue input number comes from 0001 income statement of Eagle 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 EGRX stock valuation model: a) initial revenue growth rate of 19.8% 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 4.3%, whose default value for EGRX is calculated based on our internal credit rating of Eagle 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 Eagle 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 EGRX stock the variable cost ratio is equal to 71.8%.

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 EGRX 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 5.9% for Eagle Pharmaceuticals, Inc..

Corporate tax rate of 27% is the nominal tax rate for Eagle 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 EGRX 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 EGRX are equal to 16.4%.

Life of production assets of 17.7 years is the average useful life of capital assets used in Eagle 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 EGRX is equal to 24.2%. 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 - $160.762 million for Eagle 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 13.924 million for Eagle 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 Eagle Pharmaceuticals, Inc. at the current share price and the inputted number of shares is $0.7 billion.

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