Intrinsic value of Seres Therapeutics - MCRB

Previous Close

$8.21

  Intrinsic Value

$0.37

stock screener

  Rating & Target

str. sell

-95%

Previous close

$8.21

 
Intrinsic value

$0.37

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of MCRB 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 0.3

 

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, %
  53.00
  48.20
  43.88
  39.99
  36.49
  33.34
  30.51
  27.96
  25.66
  23.60
  21.74
  20.06
  18.56
  17.20
  15.98
  14.88
  13.89
  13.01
  12.20
  11.48
  10.84
  10.25
  9.73
  9.25
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
Revenue, $m
  49
  73
  105
  147
  200
  267
  348
  446
  560
  692
  843
  1,012
  1,199
  1,406
  1,630
  1,873
  2,133
  2,410
  2,705
  3,015
  3,342
  3,684
  4,043
  4,417
  4,807
  5,213
  5,635
  6,074
  6,531
  7,005
Variable operating expenses, $m
  52
  77
  111
  156
  213
  284
  370
  474
  595
  736
  896
  1,075
  1,275
  1,494
  1,733
  1,991
  2,267
  2,562
  2,875
  3,205
  3,552
  3,917
  4,297
  4,695
  5,110
  5,541
  5,990
  6,457
  6,942
  7,446
Fixed operating expenses, $m
  96
  98
  100
  103
  105
  107
  109
  112
  114
  117
  119
  122
  125
  127
  130
  133
  136
  139
  142
  145
  148
  152
  155
  158
  162
  166
  169
  173
  177
  181
Total operating expenses, $m
  148
  175
  211
  259
  318
  391
  479
  586
  709
  853
  1,015
  1,197
  1,400
  1,621
  1,863
  2,124
  2,403
  2,701
  3,017
  3,350
  3,700
  4,069
  4,452
  4,853
  5,272
  5,707
  6,159
  6,630
  7,119
  7,627
Operating income, $m
  -99
  -103
  -107
  -112
  -117
  -124
  -131
  -140
  -150
  -160
  -173
  -186
  -200
  -216
  -233
  -251
  -270
  -291
  -313
  -335
  -359
  -384
  -410
  -437
  -465
  -494
  -524
  -556
  -588
  -622
EBITDA, $m
  -89
  -87
  -84
  -80
  -74
  -66
  -56
  -44
  -29
  -11
  9
  33
  59
  87
  119
  153
  190
  229
  271
  315
  362
  411
  463
  516
  573
  631
  692
  755
  821
  890
Interest expense (income), $m
  0
  0
  -2
  1
  4
  9
  14
  21
  30
  40
  52
  66
  82
  100
  120
  142
  166
  191
  219
  248
  279
  312
  347
  383
  421
  461
  502
  545
  590
  636
  685
Earnings before tax, $m
  -99
  -101
  -108
  -116
  -126
  -138
  -153
  -170
  -190
  -213
  -239
  -268
  -300
  -336
  -375
  -417
  -462
  -510
  -561
  -615
  -671
  -731
  -793
  -858
  -926
  -996
  -1,069
  -1,145
  -1,224
  -1,306
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
  -99
  -101
  -108
  -116
  -126
  -138
  -153
  -170
  -190
  -213
  -239
  -268
  -300
  -336
  -375
  -417
  -462
  -510
  -561
  -615
  -671
  -731
  -793
  -858
  -926
  -996
  -1,069
  -1,145
  -1,224
  -1,306

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
  107
  159
  228
  319
  436
  581
  759
  971
  1,220
  1,508
  1,836
  2,204
  2,613
  3,062
  3,551
  4,080
  4,647
  5,251
  5,892
  6,569
  7,281
  8,027
  8,808
  9,623
  10,473
  11,357
  12,277
  13,234
  14,228
  15,261
Adjusted assets (=assets-cash), $m
  107
  159
  228
  319
  436
  581
  759
  971
  1,220
  1,508
  1,836
  2,204
  2,613
  3,062
  3,551
  4,080
  4,647
  5,251
  5,892
  6,569
  7,281
  8,027
  8,808
  9,623
  10,473
  11,357
  12,277
  13,234
  14,228
  15,261
Revenue / Adjusted assets
  0.458
  0.459
  0.461
  0.461
  0.459
  0.460
  0.458
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
Average production assets, $m
  53
  79
  113
  158
  216
  288
  376
  481
  604
  747
  909
  1,091
  1,294
  1,517
  1,759
  2,021
  2,301
  2,601
  2,918
  3,253
  3,606
  3,975
  4,362
  4,766
  5,187
  5,625
  6,080
  6,554
  7,046
  7,558
Working capital, $m
  -43
  -64
  -92
  -128
  -175
  -234
  -305
  -390
  -491
  -606
  -738
  -886
  -1,051
  -1,231
  -1,428
  -1,641
  -1,868
  -2,111
  -2,369
  -2,641
  -2,927
  -3,228
  -3,541
  -3,869
  -4,211
  -4,566
  -4,936
  -5,321
  -5,721
  -6,136
Total debt, $m
  -33
  14
  77
  159
  264
  394
  554
  745
  969
  1,228
  1,523
  1,855
  2,223
  2,627
  3,068
  3,543
  4,053
  4,597
  5,174
  5,783
  6,424
  7,096
  7,798
  8,532
  9,296
  10,092
  10,921
  11,781
  12,676
  13,606
Total liabilities, $m
  96
  143
  205
  287
  392
  523
  683
  874
  1,098
  1,357
  1,652
  1,983
  2,351
  2,756
  3,196
  3,672
  4,182
  4,726
  5,303
  5,912
  6,553
  7,224
  7,927
  8,661
  9,425
  10,221
  11,049
  11,910
  12,805
  13,735
Total equity, $m
  11
  16
  23
  32
  44
  58
  76
  97
  122
  151
  184
  220
  261
  306
  355
  408
  465
  525
  589
  657
  728
  803
  881
  962
  1,047
  1,136
  1,228
  1,323
  1,423
  1,526
Total liabilities and equity, $m
  107
  159
  228
  319
  436
  581
  759
  971
  1,220
  1,508
  1,836
  2,203
  2,612
  3,062
  3,551
  4,080
  4,647
  5,251
  5,892
  6,569
  7,281
  8,027
  8,808
  9,623
  10,472
  11,357
  12,277
  13,233
  14,228
  15,261
Debt-to-equity ratio
  -3.040
  0.880
  3.350
  4.970
  6.050
  6.780
  7.300
  7.670
  7.940
  8.150
  8.300
  8.420
  8.510
  8.580
  8.640
  8.680
  8.720
  8.750
  8.780
  8.800
  8.820
  8.840
  8.850
  8.870
  8.880
  8.890
  8.900
  8.900
  8.910
  8.920
Adjusted equity ratio
  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
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -99
  -101
  -108
  -116
  -126
  -138
  -153
  -170
  -190
  -213
  -239
  -268
  -300
  -336
  -375
  -417
  -462
  -510
  -561
  -615
  -671
  -731
  -793
  -858
  -926
  -996
  -1,069
  -1,145
  -1,224
  -1,306
Depreciation, amort., depletion, $m
  11
  16
  23
  32
  43
  58
  75
  96
  121
  149
  182
  218
  259
  303
  352
  404
  460
  520
  584
  651
  721
  795
  872
  953
  1,037
  1,125
  1,216
  1,311
  1,409
  1,512
Funds from operations, $m
  -89
  -85
  -85
  -84
  -83
  -81
  -78
  -74
  -69
  -63
  -57
  -50
  -42
  -33
  -23
  -13
  -1
  10
  23
  36
  50
  64
  80
  95
  112
  129
  147
  166
  185
  205
Change in working capital, $m
  -15
  -21
  -28
  -37
  -47
  -58
  -71
  -85
  -100
  -116
  -132
  -148
  -164
  -181
  -197
  -213
  -228
  -243
  -258
  -272
  -286
  -300
  -314
  -328
  -342
  -356
  -370
  -385
  -400
  -415
Cash from operations, $m
  -74
  -65
  -57
  -48
  -36
  -22
  -6
  12
  31
  52
  75
  98
  123
  148
  174
  200
  226
  253
  281
  308
  336
  364
  393
  423
  453
  485
  517
  550
  585
  621
Maintenance CAPEX, $m
  -7
  -11
  -16
  -23
  -32
  -43
  -58
  -75
  -96
  -121
  -149
  -182
  -218
  -259
  -303
  -352
  -404
  -460
  -520
  -584
  -651
  -721
  -795
  -872
  -953
  -1,037
  -1,125
  -1,216
  -1,311
  -1,409
New CAPEX, $m
  -18
  -26
  -34
  -45
  -58
  -72
  -88
  -105
  -123
  -143
  -162
  -182
  -203
  -223
  -242
  -262
  -281
  -299
  -317
  -335
  -353
  -370
  -387
  -404
  -421
  -438
  -456
  -474
  -492
  -512
Cash from investing activities, $m
  -25
  -37
  -50
  -68
  -90
  -115
  -146
  -180
  -219
  -264
  -311
  -364
  -421
  -482
  -545
  -614
  -685
  -759
  -837
  -919
  -1,004
  -1,091
  -1,182
  -1,276
  -1,374
  -1,475
  -1,581
  -1,690
  -1,803
  -1,921
Free cash flow, $m
  -99
  -101
  -107
  -115
  -125
  -137
  -152
  -169
  -188
  -211
  -237
  -266
  -298
  -333
  -372
  -414
  -458
  -506
  -557
  -611
  -667
  -726
  -788
  -853
  -921
  -991
  -1,064
  -1,140
  -1,218
  -1,300
Issuance/(repayment) of debt, $m
  -33
  46
  63
  82
  105
  131
  160
  191
  224
  259
  295
  331
  368
  404
  440
  476
  510
  544
  577
  609
  641
  672
  703
  734
  765
  796
  828
  861
  895
  930
Issuance/(repurchase) of shares, $m
  169
  106
  115
  125
  138
  153
  170
  191
  215
  242
  272
  305
  341
  381
  424
  470
  518
  570
  625
  682
  742
  805
  871
  939
  1,010
  1,084
  1,161
  1,241
  1,324
  1,410
Cash from financing (excl. dividends), $m  
  136
  152
  178
  207
  243
  284
  330
  382
  439
  501
  567
  636
  709
  785
  864
  946
  1,028
  1,114
  1,202
  1,291
  1,383
  1,477
  1,574
  1,673
  1,775
  1,880
  1,989
  2,102
  2,219
  2,340
Total cash flow (excl. dividends), $m
  37
  52
  70
  92
  117
  146
  178
  213
  251
  290
  330
  370
  411
  452
  492
  532
  570
  608
  645
  681
  716
  751
  785
  820
  855
  890
  925
  962
  1,000
  1,039
Retained Cash Flow (-), $m
  -169
  -106
  -115
  -125
  -138
  -153
  -170
  -191
  -215
  -242
  -272
  -305
  -341
  -381
  -424
  -470
  -518
  -570
  -625
  -682
  -742
  -805
  -871
  -939
  -1,010
  -1,084
  -1,161
  -1,241
  -1,324
  -1,410
Prev. year cash balance distribution, $m
  120
  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
  -12
  -54
  -45
  -33
  -20
  -6
  8
  22
  36
  48
  58
  66
  70
  71
  68
  62
  52
  38
  20
  -2
  -26
  -55
  -86
  -119
  -156
  -195
  -236
  -279
  -324
  -371
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
  -11
  -50
  -39
  -27
  -16
  -5
  5
  14
  21
  25
  28
  28
  27
  24
  20
  16
  11
  7
  3
  0
  -3
  -5
  -6
  -6
  -6
  -6
  -5
  -4
  -4
  -3
Current shareholders' claim on cash, %
  50.0
  17.8
  7.7
  3.9
  2.2
  1.3
  0.9
  0.6
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  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

Seres Therapeutics, Inc. is a microbiome therapeutics platform company. The Company is engaged in developing a class of biological drugs, which is referred as Ecobiotic microbiome therapeutics. The Company's drugs are designed to restore health by repairing the function of a dysbiotic microbiome. The Company is focused on implementing its microbiome therapeutics platform to develop Ecobiotic microbiome therapeutics that treats dysbiosis in the colonic microbiome. SER-109 is its lead product candidate, which is designed to prevent further recurrences of Clostridium difficile infection (CDI). The Company is developing additional product candidates, including SER-262 to prevent an initial recurrence of primary CDI; SER-287 and SER-301, to treat inflammatory bowel disease (IBD), including ulcerative colitis, and SER-155 to treat enteric bacterial pathogens.

FINANCIAL RATIOS  of  Seres Therapeutics (MCRB)

Valuation Ratios
P/E Ratio -3.6
Price to Sales 15.1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 14.4
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 425%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 8.3%
Total Debt to Equity 8.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -37.6%
Ret/ On Assets - 3 Yr. Avg. -33%
Return On Total Capital -52.6%
Ret/ On T. Cap. - 3 Yr. Avg. -39.1%
Return On Equity -54.4%
Return On Equity - 3 Yr. Avg. -40.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -400%
EBITDA Margin - 3 Yr. Avg. -133.3%
Operating Margin -422.7%
Oper. Margin - 3 Yr. Avg. -140.9%
Pre-Tax Margin -418.2%
Pre-Tax Margin - 3 Yr. Avg. -139.4%
Net Profit Margin -418.2%
Net Profit Margin - 3 Yr. Avg. -139.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

MCRB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCRB stock intrinsic value calculation we used $32.1 million for the last fiscal year's total revenue generated by Seres Therapeutics. The default revenue input number comes from 0001 income statement of Seres 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 MCRB stock valuation model: a) initial revenue growth rate of 53% 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 MCRB is calculated based on our internal credit rating of Seres 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 Seres 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 MCRB stock the variable cost ratio is equal to 106.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $94 million in the base year in the intrinsic value calculation for MCRB 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 Seres Therapeutics.

Corporate tax rate of 27% is the nominal tax rate for Seres 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 MCRB 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 MCRB are equal to 107.9%.

Life of production assets of 4.8 years is the average useful life of capital assets used in Seres 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 MCRB is equal to -87.6%. 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 - $60.699 million for Seres 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 40.653 million for Seres 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 Seres Therapeutics at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Seres Therapeutics: 2Q Earnings Snapshot   [10:04AM  Associated Press]
▶ 3 Cheapest Stocks With Greatest Potential for Growth   [May-29-18 10:48AM  InvestorPlace]
▶ Seres Therapeutics: 1Q Earnings Snapshot   [May-09-18 07:05AM  Associated Press]
▶ Seres teams up with MD Anderson to explore gut's role in drug response   [06:20AM  American City Business Journals]
▶ Seres Therapeutics reports 3Q loss   [09:50AM  Associated Press]
▶ Seres Therapeutics reports 2Q loss   [Aug-04-17 02:05AM  Associated Press]
▶ Seres Therapeutics reports 1Q loss   [May-04-17 09:12AM  Associated Press]
▶ Biotech Premarket Movers: Seres, PTC, Inovio   [10:42AM  TheStreet.com]
▶ Seres gets FDA mulligan on microbiome drug, eyes pivotal trial   [07:15AM  American City Business Journals]

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