Intrinsic value of Five Prime Therapeutics - FPRX

Previous Close

$11.26

  Intrinsic Value

$1.88

stock screener

  Rating & Target

str. sell

-83%

Previous close

$11.26

 
Intrinsic value

$1.88

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of FPRX 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, %
  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
  40
  41
  42
  43
  45
  46
  48
  50
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
  118
  124
  130
Variable operating expenses, $m
  170
  174
  179
  184
  189
  195
  202
  209
  217
  225
  234
  244
  254
  265
  276
  288
  301
  314
  329
  344
  360
  377
  394
  413
  433
  453
  475
  498
  522
  548
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
  170
  174
  179
  184
  189
  195
  202
  209
  217
  225
  234
  244
  254
  265
  276
  288
  301
  314
  329
  344
  360
  377
  394
  413
  433
  453
  475
  498
  522
  548
Operating income, $m
  -130
  -133
  -136
  -140
  -144
  -149
  -154
  -160
  -166
  -172
  -179
  -186
  -194
  -202
  -211
  -220
  -230
  -240
  -251
  -262
  -275
  -287
  -301
  -315
  -330
  -346
  -363
  -380
  -399
  -418
EBITDA, $m
  -127
  -130
  -134
  -137
  -142
  -146
  -151
  -157
  -162
  -169
  -175
  -182
  -190
  -198
  -207
  -216
  -225
  -235
  -246
  -257
  -269
  -282
  -295
  -309
  -324
  -339
  -356
  -373
  -391
  -410
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  -130
  -133
  -136
  -140
  -145
  -150
  -155
  -161
  -167
  -173
  -180
  -188
  -196
  -204
  -213
  -223
  -233
  -243
  -255
  -266
  -279
  -292
  -306
  -321
  -336
  -353
  -370
  -388
  -407
  -427
Tax expense, $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
Net income, $m
  -130
  -133
  -136
  -140
  -145
  -150
  -155
  -161
  -167
  -173
  -180
  -188
  -196
  -204
  -213
  -223
  -233
  -243
  -255
  -266
  -279
  -292
  -306
  -321
  -336
  -353
  -370
  -388
  -407
  -427

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
  102
  104
  107
  110
  113
  116
  120
  125
  129
  134
  140
  145
  151
  158
  165
  172
  179
  187
  196
  205
  215
  225
  235
  246
  258
  270
  283
  297
  311
  326
Adjusted assets (=assets-cash), $m
  102
  104
  107
  110
  113
  116
  120
  125
  129
  134
  140
  145
  151
  158
  165
  172
  179
  187
  196
  205
  215
  225
  235
  246
  258
  270
  283
  297
  311
  326
Revenue / Adjusted assets
  0.392
  0.394
  0.393
  0.391
  0.398
  0.397
  0.400
  0.400
  0.395
  0.396
  0.393
  0.400
  0.397
  0.399
  0.394
  0.395
  0.397
  0.396
  0.398
  0.395
  0.395
  0.396
  0.396
  0.398
  0.395
  0.396
  0.396
  0.397
  0.399
  0.399
Average production assets, $m
  19
  19
  20
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
Working capital, $m
  -34
  -35
  -36
  -37
  -38
  -39
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
Total debt, $m
  1
  2
  4
  7
  9
  12
  15
  19
  22
  26
  30
  35
  39
  45
  50
  55
  61
  68
  74
  81
  89
  97
  105
  114
  123
  133
  143
  153
  165
  176
Total liabilities, $m
  79
  81
  83
  86
  88
  91
  94
  98
  101
  105
  109
  114
  118
  123
  129
  134
  140
  147
  153
  160
  168
  176
  184
  193
  202
  211
  222
  232
  243
  255
Total equity, $m
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
Total liabilities and equity, $m
  101
  104
  106
  110
  113
  116
  120
  125
  129
  134
  139
  146
  151
  157
  165
  171
  179
  188
  196
  205
  215
  225
  235
  247
  258
  270
  284
  297
  311
  326
Debt-to-equity ratio
  0.020
  0.100
  0.190
  0.280
  0.380
  0.480
  0.580
  0.690
  0.790
  0.890
  1.000
  1.100
  1.200
  1.290
  1.390
  1.480
  1.570
  1.660
  1.740
  1.820
  1.900
  1.980
  2.050
  2.120
  2.180
  2.250
  2.310
  2.370
  2.430
  2.480
Adjusted equity ratio
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -130
  -133
  -136
  -140
  -145
  -150
  -155
  -161
  -167
  -173
  -180
  -188
  -196
  -204
  -213
  -223
  -233
  -243
  -255
  -266
  -279
  -292
  -306
  -321
  -336
  -353
  -370
  -388
  -407
  -427
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Funds from operations, $m
  -127
  -130
  -134
  -138
  -142
  -147
  -152
  -157
  -163
  -170
  -177
  -184
  -192
  -200
  -209
  -218
  -228
  -239
  -250
  -261
  -274
  -287
  -300
  -315
  -330
  -346
  -363
  -381
  -399
  -419
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from operations, $m
  -127
  -130
  -133
  -137
  -141
  -146
  -151
  -156
  -162
  -168
  -175
  -182
  -190
  -198
  -207
  -216
  -226
  -236
  -247
  -258
  -271
  -283
  -297
  -311
  -326
  -342
  -358
  -376
  -394
  -414
Maintenance CAPEX, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
New CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
Cash from investing activities, $m
  -2
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -11
Free cash flow, $m
  -129
  -133
  -136
  -140
  -144
  -149
  -154
  -160
  -166
  -172
  -179
  -187
  -195
  -203
  -212
  -221
  -231
  -242
  -253
  -265
  -277
  -290
  -304
  -319
  -334
  -350
  -368
  -385
  -404
  -424
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
Issuance/(repurchase) of shares, $m
  130
  133
  137
  141
  146
  150
  156
  161
  168
  174
  181
  189
  197
  205
  215
  224
  234
  245
  256
  268
  281
  294
  309
  323
  339
  355
  373
  391
  410
  430
Cash from financing (excl. dividends), $m  
  131
  135
  139
  143
  149
  153
  159
  164
  172
  178
  185
  193
  202
  210
  220
  230
  240
  251
  263
  275
  288
  302
  317
  332
  348
  365
  383
  402
  421
  442
Total cash flow (excl. dividends), $m
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
Retained Cash Flow (-), $m
  -130
  -133
  -137
  -141
  -146
  -150
  -156
  -161
  -168
  -174
  -181
  -189
  -197
  -205
  -215
  -224
  -234
  -245
  -256
  -268
  -281
  -294
  -309
  -323
  -339
  -355
  -373
  -391
  -410
  -430
Prev. year cash balance distribution, $m
  243
  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
  -131
  -134
  -138
  -142
  -146
  -151
  -156
  -162
  -168
  -175
  -182
  -190
  -198
  -207
  -216
  -225
  -236
  -246
  -258
  -270
  -283
  -296
  -310
  -325
  -341
  -357
  -375
  -393
  -412
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
  110
  -120
  -117
  -113
  -110
  -106
  -102
  -98
  -93
  -88
  -83
  -78
  -72
  -66
  -61
  -55
  -49
  -43
  -38
  -33
  -28
  -23
  -19
  -16
  -13
  -10
  -8
  -6
  -4
  -3
Current shareholders' claim on cash, %
  20.1
  4.0
  0.8
  0.2
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
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Five Prime Therapeutics, Inc. is a clinical-stage biotechnology company focused on discovering and developing protein therapeutics. The Company's product candidates include Cabiralizumab (FPA008), which is an antibody that inhibits colony stimulating factor-1 receptor, that it is studying in clinical trials as a monotherapy in pigmented villonodular synovitis, and in multiple cancers in combination with programmed-death 1 immune checkpoint inhibitor, Opdivo; FPA144, which is an antibody that inhibits fibroblast growth factor receptor 2b, that it is initially developing to treat patients with gastric (stomach) cancer and is in a Phase I clinical trial, and FP-1039, which is a fusion protein that traps and neutralizes cancer-promoting fibroblast growth factors, involved in cancer cell proliferation and new blood vessel formation and is in Phase Ib clinical development to treat patients with malignant pleural mesothelioma. Its preclinical programs include FPA150, FPA154 and FPT155.

FINANCIAL RATIOS  of  Five Prime Therapeutics (FPRX)

Valuation Ratios
P/E Ratio -4.7
Price to Sales 10
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -3.9
Price to Free Cash Flow -3.7
Growth Rates
Sales Growth Rate -91.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
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 -13.3%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital -16%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity -16%
Return On Equity - 3 Yr. Avg. 9.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -306.5%
EBITDA Margin - 3 Yr. Avg. -138.2%
Operating Margin -319.4%
Oper. Margin - 3 Yr. Avg. -147.9%
Pre-Tax Margin -312.9%
Pre-Tax Margin - 3 Yr. Avg. -144%
Net Profit Margin -212.9%
Net Profit Margin - 3 Yr. Avg. -114%
Effective Tax Rate 32%
Eff/ Tax Rate - 3 Yr. Avg. 15%
Payout Ratio 0%

FPRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FPRX stock intrinsic value calculation we used $39.508 million for the last fiscal year's total revenue generated by Five Prime Therapeutics. The default revenue input number comes from 0001 income statement of Five Prime Therapeutics. 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 FPRX 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 FPRX is calculated based on our internal credit rating of Five Prime Therapeutics, 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 Five Prime Therapeutics.
    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 FPRX stock the variable cost ratio is equal to 422.5%.

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 FPRX 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 Five Prime Therapeutics.

Corporate tax rate of 27% is the nominal tax rate for Five Prime Therapeutics. 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 FPRX 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 FPRX are equal to 46.2%.

Life of production assets of 7.4 years is the average useful life of capital assets used in Five Prime Therapeutics 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 FPRX is equal to -85.1%. 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 - $265.202 million for Five Prime Therapeutics - 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 35.209 million for Five Prime Therapeutics 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 Five Prime Therapeutics at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Health Care Digest: A big Berkeley bio incubator, Apple's clinical trial help and more   [Nov-12-18 10:21AM  American City Business Journals]
▶ Five Prime Therapeutics: 3Q Earnings Snapshot   [05:09PM  Associated Press]
▶ Big pharma leases almost 500,000 square feet for new research center   [Nov-01-18 10:23AM  American City Business Journals]
▶ Five Prime Therapeutics: 2Q Earnings Snapshot   [06:14PM  Associated Press]
▶ 5 Top-Ranked High-Beta Stocks to Play the Roaring Market   [Jun-07-18 11:05AM  InvestorPlace]
▶ Five Prime Therapeutics: 1Q Earnings Snapshot   [May-08-18 06:09PM  Associated Press]
▶ Five Prime to Present at 2018 ASCO Annual Meeting   [Apr-25-18 03:01PM  Business Wire]
▶ Five Prime Therapeutics Announces Executive Change   [Mar-13-18 04:05PM  Business Wire]
▶ Five Prime Therapeutics posts 4Q loss   [Feb-27-18 06:03PM  Associated Press]
▶ A Six-Pack of Biotech Bets   [Feb-22-18 06:00AM  Investopedia]
▶ High Growth Stocks To Invest In   [Feb-01-18 11:02AM  Simply Wall St.]
▶ January Growth Stock Opportunities   [Jan-01-18 11:02AM  Simply Wall St.]
▶ Why This Biotech Still Gets Hit Despite Promising Cancer Data   [Nov-13-17 04:07PM  Investor's Business Daily]
▶ Five Prime Therapeutics posts 3Q loss   [04:59PM  Associated Press]

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