Intrinsic value of Halozyme Therapeutics, Inc. - HALO

Previous Close

$15.73

  Intrinsic Value

$0.42

stock screener

  Rating & Target

str. sell

-97%

Previous close

$15.73

 
Intrinsic value

$0.42

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of HALO 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 2.3

 

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
  155
  159
  163
  167
  172
  178
  184
  191
  198
  205
  213
  222
  231
  241
  251
  262
  274
  286
  299
  313
  328
  343
  359
  376
  394
  413
  433
  454
  475
  499
Variable operating expenses, $m
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  70
  73
Fixed operating expenses, $m
  197
  202
  206
  211
  215
  220
  225
  230
  235
  240
  245
  251
  256
  262
  267
  273
  279
  286
  292
  298
  305
  312
  318
  325
  333
  340
  347
  355
  363
  371
Total operating expenses, $m
  220
  226
  231
  236
  241
  247
  253
  259
  265
  271
  276
  283
  290
  297
  304
  311
  319
  328
  336
  344
  353
  362
  371
  380
  391
  400
  410
  421
  433
  444
Operating income, $m
  -66
  -67
  -68
  -68
  -69
  -69
  -68
  -68
  -67
  -65
  -63
  -61
  -59
  -56
  -53
  -49
  -46
  -41
  -36
  -31
  -25
  -19
  -12
  -4
  4
  13
  22
  32
  43
  55
EBITDA, $m
  -64
  -65
  -66
  -67
  -67
  -67
  -66
  -66
  -65
  -63
  -62
  -60
  -57
  -54
  -51
  -48
  -44
  -39
  -34
  -29
  -23
  -16
  -9
  -2
  7
  16
  25
  35
  47
  58
Interest expense (income), $m
  4
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
Earnings before tax, $m
  -80
  -81
  -82
  -83
  -84
  -84
  -84
  -84
  -83
  -83
  -81
  -79
  -78
  -76
  -73
  -71
  -67
  -64
  -60
  -56
  -51
  -45
  -40
  -33
  -26
  -19
  -11
  -2
  7
  18
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
  2
  5
Net income, $m
  -80
  -81
  -82
  -83
  -84
  -84
  -84
  -84
  -83
  -83
  -81
  -79
  -78
  -76
  -73
  -71
  -67
  -64
  -60
  -56
  -51
  -45
  -40
  -33
  -26
  -19
  -11
  -2
  5
  13

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
  146
  149
  153
  157
  162
  168
  173
  179
  186
  193
  201
  209
  218
  227
  237
  247
  258
  270
  282
  295
  308
  323
  338
  354
  371
  389
  407
  427
  448
  469
Adjusted assets (=assets-cash), $m
  146
  149
  153
  157
  162
  168
  173
  179
  186
  193
  201
  209
  218
  227
  237
  247
  258
  270
  282
  295
  308
  323
  338
  354
  371
  389
  407
  427
  448
  469
Revenue / Adjusted assets
  1.062
  1.067
  1.065
  1.064
  1.062
  1.060
  1.064
  1.067
  1.065
  1.062
  1.060
  1.062
  1.060
  1.062
  1.059
  1.061
  1.062
  1.059
  1.060
  1.061
  1.065
  1.062
  1.062
  1.062
  1.062
  1.062
  1.064
  1.063
  1.060
  1.064
Average production assets, $m
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
Working capital, $m
  15
  16
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
Total debt, $m
  128
  131
  133
  136
  140
  143
  147
  152
  156
  161
  167
  172
  178
  185
  192
  199
  207
  215
  223
  232
  242
  252
  263
  274
  285
  298
  311
  325
  339
  354
Total liabilities, $m
  102
  104
  107
  110
  113
  117
  121
  125
  130
  135
  140
  146
  152
  158
  165
  172
  180
  188
  197
  206
  215
  225
  236
  247
  259
  271
  284
  298
  313
  328
Total equity, $m
  44
  45
  46
  48
  49
  51
  52
  54
  56
  58
  61
  63
  66
  69
  71
  75
  78
  81
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  142
Total liabilities and equity, $m
  146
  149
  153
  158
  162
  168
  173
  179
  186
  193
  201
  209
  218
  227
  236
  247
  258
  269
  282
  295
  308
  323
  338
  354
  371
  388
  407
  427
  448
  470
Debt-to-equity ratio
  2.910
  2.900
  2.880
  2.870
  2.850
  2.840
  2.820
  2.800
  2.780
  2.770
  2.750
  2.730
  2.710
  2.700
  2.680
  2.670
  2.650
  2.640
  2.620
  2.610
  2.600
  2.580
  2.570
  2.560
  2.550
  2.540
  2.530
  2.520
  2.510
  2.500
Adjusted equity ratio
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -80
  -81
  -82
  -83
  -84
  -84
  -84
  -84
  -83
  -83
  -81
  -79
  -78
  -76
  -73
  -71
  -67
  -64
  -60
  -56
  -51
  -45
  -40
  -33
  -26
  -19
  -11
  -2
  5
  13
Depreciation, amort., depletion, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
Funds from operations, $m
  -78
  -79
  -80
  -81
  -82
  -82
  -82
  -82
  -81
  -81
  -79
  -78
  -76
  -74
  -71
  -69
  -65
  -62
  -58
  -53
  -48
  -43
  -37
  -31
  -24
  -16
  -8
  1
  9
  16
Change in working capital, $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  -78
  -80
  -81
  -82
  -82
  -83
  -83
  -83
  -82
  -81
  -80
  -79
  -77
  -75
  -73
  -70
  -67
  -63
  -59
  -55
  -50
  -44
  -39
  -32
  -25
  -18
  -10
  -1
  7
  14
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
Free cash flow, $m
  -79
  -81
  -82
  -83
  -84
  -84
  -84
  -84
  -84
  -83
  -82
  -81
  -79
  -77
  -75
  -72
  -69
  -65
  -62
  -57
  -53
  -47
  -42
  -35
  -29
  -21
  -13
  -5
  3
  10
Issuance/(repayment) of debt, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Issuance/(repurchase) of shares, $m
  80
  82
  83
  84
  85
  86
  86
  86
  86
  85
  83
  82
  80
  78
  76
  74
  71
  67
  64
  59
  55
  50
  44
  38
  31
  24
  16
  8
  1
  0
Cash from financing (excl. dividends), $m  
  82
  84
  86
  87
  88
  90
  90
  90
  91
  90
  88
  88
  86
  84
  83
  81
  79
  75
  73
  68
  65
  60
  55
  49
  43
  36
  29
  22
  15
  15
Total cash flow (excl. dividends), $m
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  25
Retained Cash Flow (-), $m
  -80
  -82
  -83
  -84
  -85
  -86
  -86
  -86
  -86
  -85
  -83
  -82
  -80
  -78
  -76
  -74
  -71
  -67
  -64
  -59
  -55
  -50
  -44
  -38
  -31
  -24
  -16
  -8
  -6
  -7
Prev. year cash balance distribution, $m
  206
  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
  129
  -78
  -79
  -80
  -80
  -80
  -80
  -80
  -79
  -78
  -77
  -75
  -73
  -71
  -68
  -65
  -61
  -57
  -53
  -48
  -43
  -37
  -31
  -24
  -17
  -9
  0
  9
  12
  19
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
  123
  -72
  -69
  -66
  -62
  -58
  -54
  -50
  -45
  -41
  -36
  -32
  -28
  -24
  -20
  -16
  -13
  -11
  -8
  -6
  -4
  -3
  -2
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  83.1
  69.1
  57.5
  47.9
  40.1
  33.7
  28.4
  24.1
  20.5
  17.6
  15.3
  13.3
  11.7
  10.3
  9.2
  8.3
  7.5
  6.8
  6.3
  5.9
  5.5
  5.2
  4.9
  4.8
  4.6
  4.5
  4.4
  4.4
  4.4
  4.4

Halozyme Therapeutics, Inc. is a biotechnology company focused on developing and commercializing oncology therapies. The Company operates in research, development and commercialization of human enzymes and other drug candidates. The Company's segment also includes research and development activities and product sales of Hylenex recombinant. The Company's development pipeline consists of clinical-stage product candidates in oncology. Its lead oncology program is PEGPH20 (polyethylene glycol (PEG)ylated recombinant human hyaluronidase), a molecular entity being developed for the systemic treatment of tumors, which accumulate HA. It is in Phase II and Phase III clinical testing for PEGPH20 in stage IV pancreatic ductal adenocarcinoma (Studies 109-202 and 109-301); Phase Ib clinical testing in non-small cell lung cancer (Study 107-201), and in Phase Ib clinical testing in non-small cell lung cancer and gastric cancer (Study 107-101).

FINANCIAL RATIOS  of  Halozyme Therapeutics, Inc. (HALO)

Valuation Ratios
P/E Ratio -19.8
Price to Sales 13.9
Price to Book -63.7
Price to Tangible Book
Price to Cash Flow -40.7
Price to Free Cash Flow -38.4
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 12
Current Ratio 0
LT Debt to Equity -625%
Total Debt to Equity -678.1%
Interest Coverage -25
Management Effectiveness
Return On Assets -44.6%
Ret/ On Assets - 3 Yr. Avg. -36.4%
Return On Total Capital -74.1%
Ret/ On T. Cap. - 3 Yr. Avg. -73.8%
Return On Equity -1872.7%
Return On Equity - 3 Yr. Avg. -865.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 76.9%
Gross Margin - 3 Yr. Avg. 75.4%
EBITDA Margin -65.3%
EBITDA Margin - 3 Yr. Avg. -56.2%
Operating Margin -56.5%
Oper. Margin - 3 Yr. Avg. -53.7%
Pre-Tax Margin -69.4%
Pre-Tax Margin - 3 Yr. Avg. -61.3%
Net Profit Margin -70.1%
Net Profit Margin - 3 Yr. Avg. -61.5%
Effective Tax Rate -1%
Eff/ Tax Rate - 3 Yr. Avg. -0.3%
Payout Ratio 0%

HALO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HALO stock intrinsic value calculation we used $152 million for the last fiscal year's total revenue generated by Halozyme Therapeutics, Inc.. The default revenue input number comes from 0001 income statement of Halozyme Therapeutics, 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 HALO 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 HALO is calculated based on our internal credit rating of Halozyme Therapeutics, 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 Halozyme Therapeutics, 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 HALO stock the variable cost ratio is equal to 15.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $193 million in the base year in the intrinsic value calculation for HALO 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 11% for Halozyme Therapeutics, Inc..

Corporate tax rate of 27% is the nominal tax rate for Halozyme Therapeutics, 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 HALO 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 HALO are equal to 3.6%.

Life of production assets of 2.3 years is the average useful life of capital assets used in Halozyme Therapeutics, 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 HALO is equal to 9.8%. 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 - $248.887 million for Halozyme Therapeutics, 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 144.900 million for Halozyme Therapeutics, 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 Halozyme Therapeutics, Inc. at the current share price and the inputted number of shares is $2.3 billion.

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