Intrinsic value of Galapagos NV - GLPG

Previous Close

$99.47

  Intrinsic Value

$23.70

stock screener

  Rating & Target

str. sell

-76%

Previous close

$99.47

 
Intrinsic value

$23.70

 
Up/down potential

-76%

 
Rating

str. sell

We calculate the intrinsic value of GLPG 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 5.4

 

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, %
  17.30
  16.07
  14.96
  13.97
  13.07
  12.26
  11.54
  10.88
  10.29
  9.77
  9.29
  8.86
  8.47
  8.13
  7.81
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.79
  5.72
  5.64
  5.58
Revenue, $m
  219
  255
  293
  334
  377
  423
  472
  524
  578
  634
  693
  754
  818
  885
  954
  1,026
  1,100
  1,178
  1,259
  1,342
  1,430
  1,520
  1,615
  1,713
  1,816
  1,922
  2,034
  2,150
  2,271
  2,398
Variable operating expenses, $m
  235
  273
  314
  357
  403
  453
  505
  559
  617
  677
  737
  803
  871
  942
  1,015
  1,092
  1,171
  1,254
  1,339
  1,429
  1,521
  1,618
  1,719
  1,823
  1,932
  2,046
  2,164
  2,288
  2,417
  2,552
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
  235
  273
  314
  357
  403
  453
  505
  559
  617
  677
  737
  803
  871
  942
  1,015
  1,092
  1,171
  1,254
  1,339
  1,429
  1,521
  1,618
  1,719
  1,823
  1,932
  2,046
  2,164
  2,288
  2,417
  2,552
Operating income, $m
  -16
  -18
  -21
  -23
  -26
  -29
  -32
  -36
  -39
  -43
  -45
  -49
  -53
  -57
  -61
  -66
  -71
  -76
  -81
  -86
  -92
  -98
  -104
  -110
  -117
  -124
  -131
  -138
  -146
  -154
EBITDA, $m
  -10
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -31
  -33
  -36
  -39
  -42
  -45
  -49
  -52
  -56
  -59
  -63
  -67
  -71
  -76
  -80
  -85
  -90
  -95
  -100
  -106
Interest expense (income), $m
  0
  0
  3
  6
  10
  14
  18
  22
  27
  32
  37
  42
  48
  54
  60
  66
  73
  80
  87
  94
  102
  110
  118
  127
  136
  145
  155
  165
  175
  187
  198
Earnings before tax, $m
  -16
  -21
  -27
  -33
  -40
  -47
  -55
  -63
  -71
  -80
  -87
  -97
  -107
  -117
  -128
  -139
  -150
  -163
  -175
  -188
  -202
  -216
  -231
  -246
  -262
  -278
  -296
  -314
  -333
  -352
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
  -16
  -21
  -27
  -33
  -40
  -47
  -55
  -63
  -71
  -80
  -87
  -97
  -107
  -117
  -128
  -139
  -150
  -163
  -175
  -188
  -202
  -216
  -231
  -246
  -262
  -278
  -296
  -314
  -333
  -352

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
  432
  501
  576
  657
  742
  834
  930
  1,031
  1,137
  1,248
  1,364
  1,485
  1,611
  1,741
  1,878
  2,019
  2,166
  2,319
  2,477
  2,642
  2,814
  2,993
  3,179
  3,372
  3,574
  3,784
  4,003
  4,232
  4,471
  4,720
Adjusted assets (=assets-cash), $m
  432
  501
  576
  657
  742
  834
  930
  1,031
  1,137
  1,248
  1,364
  1,485
  1,611
  1,741
  1,878
  2,019
  2,166
  2,319
  2,477
  2,642
  2,814
  2,993
  3,179
  3,372
  3,574
  3,784
  4,003
  4,232
  4,471
  4,720
Revenue / Adjusted assets
  0.507
  0.509
  0.509
  0.508
  0.508
  0.507
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
Average production assets, $m
  22
  26
  30
  34
  38
  43
  48
  53
  58
  64
  70
  76
  83
  89
  96
  104
  111
  119
  127
  136
  144
  154
  163
  173
  183
  194
  205
  217
  229
  242
Working capital, $m
  -176
  -205
  -235
  -268
  -303
  -340
  -380
  -421
  -464
  -510
  -557
  -606
  -658
  -711
  -767
  -825
  -885
  -947
  -1,012
  -1,079
  -1,149
  -1,222
  -1,298
  -1,377
  -1,460
  -1,546
  -1,635
  -1,729
  -1,826
  -1,928
Total debt, $m
  57
  119
  186
  258
  335
  416
  502
  592
  687
  786
  890
  998
  1,111
  1,228
  1,349
  1,476
  1,607
  1,744
  1,886
  2,033
  2,187
  2,346
  2,512
  2,685
  2,866
  3,054
  3,250
  3,454
  3,668
  3,891
Total liabilities, $m
  386
  448
  515
  587
  664
  745
  831
  922
  1,016
  1,116
  1,219
  1,327
  1,440
  1,557
  1,679
  1,805
  1,936
  2,073
  2,215
  2,362
  2,516
  2,675
  2,842
  3,015
  3,195
  3,383
  3,579
  3,784
  3,997
  4,220
Total equity, $m
  46
  53
  61
  70
  79
  88
  99
  109
  121
  132
  145
  157
  171
  185
  199
  214
  230
  246
  263
  280
  298
  317
  337
  357
  379
  401
  424
  449
  474
  500
Total liabilities and equity, $m
  432
  501
  576
  657
  743
  833
  930
  1,031
  1,137
  1,248
  1,364
  1,484
  1,611
  1,742
  1,878
  2,019
  2,166
  2,319
  2,478
  2,642
  2,814
  2,992
  3,179
  3,372
  3,574
  3,784
  4,003
  4,233
  4,471
  4,720
Debt-to-equity ratio
  1.240
  2.240
  3.040
  3.700
  4.250
  4.710
  5.090
  5.420
  5.700
  5.950
  6.160
  6.340
  6.510
  6.650
  6.780
  6.900
  7.000
  7.090
  7.180
  7.260
  7.330
  7.400
  7.460
  7.510
  7.560
  7.610
  7.660
  7.700
  7.740
  7.780
Adjusted equity ratio
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -16
  -21
  -27
  -33
  -40
  -47
  -55
  -63
  -71
  -80
  -87
  -97
  -107
  -117
  -128
  -139
  -150
  -163
  -175
  -188
  -202
  -216
  -231
  -246
  -262
  -278
  -296
  -314
  -333
  -352
Depreciation, amort., depletion, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
Funds from operations, $m
  -10
  -14
  -19
  -25
  -31
  -37
  -43
  -50
  -57
  -65
  -73
  -81
  -90
  -99
  -108
  -118
  -128
  -139
  -150
  -161
  -173
  -185
  -198
  -211
  -225
  -240
  -255
  -270
  -287
  -304
Change in working capital, $m
  -26
  -28
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -90
  -93
  -98
  -102
Cash from operations, $m
  16
  14
  11
  8
  4
  0
  -4
  -9
  -14
  -20
  -26
  -32
  -39
  -46
  -53
  -60
  -68
  -76
  -85
  -94
  -103
  -112
  -122
  -132
  -143
  -154
  -165
  -177
  -189
  -202
Maintenance CAPEX, $m
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
New CAPEX, $m
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -24
  -25
  -26
  -29
  -30
  -32
  -33
  -36
  -38
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -59
Free cash flow, $m
  9
  6
  2
  -2
  -7
  -12
  -18
  -24
  -30
  -37
  -44
  -52
  -60
  -69
  -78
  -87
  -96
  -106
  -117
  -128
  -139
  -150
  -162
  -175
  -188
  -201
  -215
  -230
  -245
  -261
Issuance/(repayment) of debt, $m
  57
  62
  67
  72
  77
  81
  86
  90
  95
  99
  104
  108
  112
  117
  122
  126
  131
  137
  142
  148
  153
  160
  166
  173
  180
  188
  196
  205
  214
  223
Issuance/(repurchase) of shares, $m
  23
  29
  35
  42
  49
  57
  65
  74
  82
  92
  99
  109
  120
  131
  142
  154
  166
  179
  192
  206
  220
  235
  250
  266
  283
  301
  319
  338
  358
  379
Cash from financing (excl. dividends), $m  
  80
  91
  102
  114
  126
  138
  151
  164
  177
  191
  203
  217
  232
  248
  264
  280
  297
  316
  334
  354
  373
  395
  416
  439
  463
  489
  515
  543
  572
  602
Total cash flow (excl. dividends), $m
  89
  97
  105
  112
  119
  126
  133
  140
  147
  154
  159
  165
  172
  179
  186
  193
  201
  209
  217
  226
  235
  244
  254
  265
  276
  287
  300
  313
  327
  341
Retained Cash Flow (-), $m
  -23
  -29
  -35
  -42
  -49
  -57
  -65
  -74
  -82
  -92
  -99
  -109
  -120
  -131
  -142
  -154
  -166
  -179
  -192
  -206
  -220
  -235
  -250
  -266
  -283
  -301
  -319
  -338
  -358
  -379
Prev. year cash balance distribution, $m
  1,176
  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
  1,242
  68
  69
  70
  70
  70
  68
  67
  65
  62
  59
  56
  52
  48
  44
  40
  35
  30
  25
  20
  15
  9
  4
  -2
  -7
  -13
  -19
  -25
  -31
  -38
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
  1,191
  62
  60
  58
  54
  50
  46
  42
  37
  33
  28
  24
  20
  16
  13
  10
  8
  6
  4
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  88.4
  77.4
  67.4
  58.4
  50.4
  43.4
  37.2
  31.9
  27.3
  23.3
  19.9
  17.1
  14.6
  12.4
  10.6
  9.0
  7.7
  6.6
  5.6
  4.7
  4.0
  3.4
  2.9
  2.5
  2.1
  1.8
  1.5
  1.3
  1.1
  0.9

Galapagos NV is a Belgium-based biotechnology company. The Company's activities are divided into two operating divisions: Research and Development (R & D) and Services. The R & D division is engaged in the discovery and development of small molecules. The Services division, offers target-to-drug discovery products and services to pharmaceutical and biotechnology companies and to patient foundations, encompassing target discovery and validation, screening and drug discovery through to delivery of pre-clinical candidates. As of December 31, 2011, Galapagos NV was, through its subsidiaries, active in Belgium, France, Switzerland, the Netherlands, the United Kingdom, Germany, the United States and Croatia. In April 2014, it sold BioFocus and Argenta service division operations to Charles River Laboratories International.

FINANCIAL RATIOS  of  Galapagos NV (GLPG)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

GLPG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GLPG stock intrinsic value calculation we used $187 million for the last fiscal year's total revenue generated by Galapagos NV. The default revenue input number comes from 0001 income statement of Galapagos NV. 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 GLPG stock valuation model: a) initial revenue growth rate of 17.3% 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 GLPG is calculated based on our internal credit rating of Galapagos NV, 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 Galapagos NV.
    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 GLPG stock the variable cost ratio is equal to 107.5%.

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 GLPG 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 Galapagos NV.

Corporate tax rate of 27% is the nominal tax rate for Galapagos NV. 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 GLPG 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 GLPG are equal to 10.1%.

Life of production assets of 3.9 years is the average useful life of capital assets used in Galapagos NV 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 GLPG is equal to -80.4%. 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 - $1214.86554622 million for Galapagos NV - 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 54.464 million for Galapagos NV 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 Galapagos NV at the current share price and the inputted number of shares is $5.4 billion.

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