Intrinsic value of Eagle Pharmaceuticals - EGRX

Previous Close

$58.08

  Intrinsic Value

$111.41

stock screener

  Rating & Target

str. buy

+92%

Previous close

$58.08

 
Intrinsic value

$111.41

 
Up/down potential

+92%

 
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 0.9

 

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, %
  18.30
  16.97
  15.77
  14.70
  13.73
  12.85
  12.07
  11.36
  10.73
  10.15
  9.64
  9.17
  8.76
  8.38
  8.04
  7.74
  7.46
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
  5.70
  5.63
Revenue, $m
  280
  328
  379
  435
  495
  558
  626
  697
  771
  850
  932
  1,017
  1,106
  1,199
  1,295
  1,395
  1,500
  1,608
  1,720
  1,837
  1,959
  2,085
  2,217
  2,354
  2,496
  2,645
  2,800
  2,962
  3,130
  3,307
Variable operating expenses, $m
  194
  226
  260
  297
  337
  380
  425
  473
  523
  575
  624
  681
  740
  802
  867
  934
  1,004
  1,076
  1,152
  1,230
  1,311
  1,396
  1,484
  1,576
  1,671
  1,771
  1,874
  1,982
  2,095
  2,213
Fixed operating expenses, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
Total operating expenses, $m
  199
  231
  265
  302
  343
  386
  431
  479
  529
  581
  630
  687
  747
  809
  874
  941
  1,011
  1,083
  1,160
  1,238
  1,319
  1,404
  1,492
  1,584
  1,680
  1,780
  1,883
  1,991
  2,104
  2,223
Operating income, $m
  81
  97
  114
  132
  152
  173
  195
  218
  243
  268
  302
  330
  359
  390
  421
  454
  489
  524
  561
  600
  640
  681
  725
  770
  817
  866
  917
  970
  1,026
  1,084
EBITDA, $m
  90
  106
  123
  142
  162
  184
  206
  230
  255
  282
  310
  338
  368
  400
  432
  466
  501
  538
  576
  615
  656
  699
  743
  790
  838
  888
  941
  995
  1,052
  1,112
Interest expense (income), $m
  0
  3
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
Earnings before tax, $m
  79
  93
  109
  127
  145
  165
  186
  208
  231
  255
  287
  314
  341
  370
  400
  431
  463
  497
  532
  568
  606
  645
  686
  728
  773
  819
  867
  917
  970
  1,024
Tax expense, $m
  21
  25
  30
  34
  39
  45
  50
  56
  62
  69
  78
  85
  92
  100
  108
  116
  125
  134
  144
  153
  164
  174
  185
  197
  209
  221
  234
  248
  262
  277
Net income, $m
  57
  68
  80
  92
  106
  120
  136
  152
  169
  186
  210
  229
  249
  270
  292
  315
  338
  363
  388
  415
  442
  471
  501
  532
  564
  598
  633
  670
  708
  748

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
  234
  273
  317
  363
  413
  466
  522
  582
  644
  709
  778
  849
  923
  1,001
  1,081
  1,165
  1,252
  1,342
  1,436
  1,534
  1,635
  1,741
  1,850
  1,965
  2,084
  2,208
  2,337
  2,472
  2,613
  2,760
Adjusted assets (=assets-cash), $m
  234
  273
  317
  363
  413
  466
  522
  582
  644
  709
  778
  849
  923
  1,001
  1,081
  1,165
  1,252
  1,342
  1,436
  1,534
  1,635
  1,741
  1,850
  1,965
  2,084
  2,208
  2,337
  2,472
  2,613
  2,760
Revenue / Adjusted assets
  1.197
  1.201
  1.196
  1.198
  1.199
  1.197
  1.199
  1.198
  1.197
  1.199
  1.198
  1.198
  1.198
  1.198
  1.198
  1.197
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
  1.198
Average production assets, $m
  46
  54
  63
  72
  82
  92
  103
  115
  127
  140
  154
  168
  183
  198
  214
  230
  247
  265
  284
  303
  323
  344
  366
  388
  412
  436
  462
  489
  517
  546
Working capital, $m
  37
  44
  50
  58
  66
  74
  83
  93
  103
  113
  124
  135
  147
  159
  172
  186
  199
  214
  229
  244
  261
  277
  295
  313
  332
  352
  372
  394
  416
  440
Total debt, $m
  63
  81
  99
  120
  141
  164
  189
  215
  242
  270
  300
  331
  363
  397
  432
  468
  506
  546
  586
  629
  673
  719
  767
  816
  868
  922
  978
  1,037
  1,098
  1,162
Total liabilities, $m
  102
  119
  138
  158
  180
  203
  227
  253
  280
  309
  338
  369
  402
  435
  470
  507
  545
  584
  625
  667
  711
  757
  805
  855
  906
  960
  1,017
  1,075
  1,137
  1,201
Total equity, $m
  132
  154
  179
  205
  233
  263
  295
  329
  364
  401
  439
  480
  522
  565
  611
  658
  707
  758
  811
  866
  924
  983
  1,046
  1,110
  1,177
  1,247
  1,321
  1,397
  1,476
  1,559
Total liabilities and equity, $m
  234
  273
  317
  363
  413
  466
  522
  582
  644
  710
  777
  849
  924
  1,000
  1,081
  1,165
  1,252
  1,342
  1,436
  1,533
  1,635
  1,740
  1,851
  1,965
  2,083
  2,207
  2,338
  2,472
  2,613
  2,760
Debt-to-equity ratio
  0.480
  0.520
  0.560
  0.580
  0.610
  0.620
  0.640
  0.650
  0.660
  0.670
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.720
  0.720
  0.730
  0.730
  0.730
  0.730
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.750
Adjusted equity ratio
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  57
  68
  80
  92
  106
  120
  136
  152
  169
  186
  210
  229
  249
  270
  292
  315
  338
  363
  388
  415
  442
  471
  501
  532
  564
  598
  633
  670
  708
  748
Depreciation, amort., depletion, $m
  9
  9
  10
  10
  10
  11
  12
  12
  13
  13
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
Funds from operations, $m
  66
  77
  89
  102
  116
  131
  147
  164
  182
  200
  217
  238
  258
  280
  303
  326
  351
  376
  403
  430
  459
  489
  519
  552
  585
  620
  657
  695
  734
  776
Change in working capital, $m
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  21
  22
  22
  23
Cash from operations, $m
  60
  71
  82
  95
  109
  123
  138
  155
  172
  189
  207
  226
  247
  268
  290
  313
  337
  362
  388
  415
  443
  472
  502
  533
  566
  600
  636
  673
  712
  752
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
New CAPEX, $m
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
Cash from investing activities, $m
  -9
  -10
  -12
  -12
  -14
  -14
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -24
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -55
Free cash flow, $m
  51
  61
  71
  83
  95
  108
  122
  137
  153
  170
  186
  204
  223
  243
  264
  286
  308
  331
  356
  381
  407
  434
  463
  492
  523
  555
  588
  623
  659
  697
Issuance/(repayment) of debt, $m
  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
  64
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  
  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
  64
Total cash flow (excl. dividends), $m
  67
  78
  90
  103
  117
  131
  147
  163
  180
  198
  216
  235
  256
  277
  299
  322
  346
  371
  396
  423
  451
  480
  510
  542
  575
  609
  644
  681
  720
  761
Retained Cash Flow (-), $m
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -80
  -83
Prev. year cash balance distribution, $m
  67
  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
  114
  56
  66
  77
  89
  101
  115
  130
  145
  162
  177
  195
  214
  233
  254
  275
  297
  320
  343
  368
  394
  421
  448
  477
  507
  539
  571
  605
  641
  678
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
  109
  51
  57
  63
  69
  74
  78
  81
  83
  85
  84
  83
  81
  78
  74
  70
  65
  59
  53
  47
  41
  35
  29
  24
  20
  16
  12
  9
  7
  5
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 (EGRX)

Valuation Ratios
P/E Ratio 11
Price to Sales 4.7
Price to Book 5.9
Price to Tangible Book
Price to Cash Flow 16.8
Price to Free Cash Flow 24
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 $236.707 million for the last fiscal year's total revenue generated by Eagle Pharmaceuticals. The default revenue input number comes from 0001 income statement of Eagle 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 EGRX stock valuation model: a) initial revenue growth rate of 18.3% 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, 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.
    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 69.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 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 5.4% for Eagle Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Eagle 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 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 16.5%.

Life of production assets of 19.5 years is the average useful life of capital assets used in Eagle 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 EGRX is equal to 13.3%. 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 - $179.144 million for Eagle 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 14.835 million for Eagle 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 Eagle Pharmaceuticals at the current share price and the inputted number of shares is $0.9 billion.

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MGNX Macrogenics 18.74 579.51  str.buy
MRK Merck&Co 72.35 33.05  str.sell
LLY Eli Lilly 111.92 67.15  sell
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COMPANY NEWS

▶ Eagle Pharmaceuticals: 2Q Earnings Snapshot   [07:09AM  Associated Press]
▶ Benzinga Pro's 5 Stocks To Watch Today   [Jun-11-18 09:32AM  Benzinga]
▶ Eagle Pharmaceuticals: 1Q Earnings Snapshot   [May-10-18 07:11AM  Associated Press]
▶ New Strong Sell Stocks for May 2nd   [May-02-18 05:11AM  Zacks]
▶ New Strong Sell Stocks for March 1st   [Mar-01-18 07:42AM  Zacks]
▶ Eagle Pharmaceuticals posts 4Q profit   [07:35AM  Associated Press]
▶ Eagle Pharmaceuticals posts 3Q profit   [Nov-08-17 10:44AM  Associated Press]
▶ Eagle Pharmaceuticals Announces New Patent for RYANODEX   [Oct-17-17 07:33AM  Business Wire]
▶ 3 Biotech Values in a Fully Valued Market   [Oct-15-17 12:00PM  TheStreet.com]
▶ Eagle Pharmaceuticals posts 2Q profit   [Aug-09-17 10:25PM  Associated Press]

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