Intrinsic value of MEI Pharma, Inc. - MEIP

Previous Close

$2.47

  Intrinsic Value

$2.18

stock screener

  Rating & Target

hold

-12%

Previous close

$2.47

 
Intrinsic value

$2.18

 
Up/down potential

-12%

 
Rating

hold

We calculate the intrinsic value of MEIP 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 0.2

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  3
  5
  7
  11
  15
  21
  28
  37
  47
  60
  74
  90
  109
  130
  153
  178
  204
  233
  264
  297
  332
  369
  407
  447
  489
  533
  578
  626
  675
  726
Variable operating expenses, $m
  3
  5
  7
  11
  15
  21
  28
  37
  47
  60
  74
  90
  109
  130
  153
  178
  204
  233
  264
  297
  332
  369
  407
  447
  489
  533
  578
  626
  675
  726
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
  3
  5
  7
  11
  15
  21
  28
  37
  47
  60
  74
  90
  109
  130
  153
  178
  204
  233
  264
  297
  332
  369
  407
  447
  489
  533
  578
  626
  675
  726
Operating income, $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
EBITDA, $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
Interest expense (income), $m
  0
  0
  -2
  -2
  -1
  0
  1
  2
  4
  6
  8
  11
  15
  19
  23
  28
  33
  39
  46
  53
  60
  68
  76
  85
  94
  104
  114
  124
  135
  146
  158
Earnings before tax, $m
  0
  2
  2
  1
  0
  -1
  -2
  -4
  -6
  -8
  -11
  -15
  -19
  -23
  -28
  -33
  -39
  -46
  -53
  -60
  -68
  -76
  -85
  -94
  -104
  -114
  -124
  -135
  -146
  -158
Tax expense, $m
  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
  0
  0
Net income, $m
  0
  2
  1
  1
  0
  -1
  -2
  -4
  -6
  -8
  -11
  -15
  -19
  -23
  -28
  -33
  -39
  -46
  -53
  -60
  -68
  -76
  -85
  -94
  -104
  -114
  -124
  -135
  -146
  -158

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
  16
  24
  36
  53
  74
  102
  137
  180
  231
  292
  363
  444
  535
  636
  748
  870
  1,002
  1,144
  1,296
  1,457
  1,627
  1,807
  1,995
  2,192
  2,398
  2,612
  2,836
  3,068
  3,310
  3,561
Adjusted assets (=assets-cash), $m
  16
  24
  36
  53
  74
  102
  137
  180
  231
  292
  363
  444
  535
  636
  748
  870
  1,002
  1,144
  1,296
  1,457
  1,627
  1,807
  1,995
  2,192
  2,398
  2,612
  2,836
  3,068
  3,310
  3,561
Revenue / Adjusted assets
  0.188
  0.208
  0.194
  0.208
  0.203
  0.206
  0.204
  0.206
  0.203
  0.205
  0.204
  0.203
  0.204
  0.204
  0.205
  0.205
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
Average production assets, $m
  0
  0
  1
  1
  1
  2
  3
  4
  5
  6
  7
  9
  11
  13
  15
  18
  20
  23
  26
  29
  33
  36
  40
  44
  48
  53
  57
  62
  67
  72
Working capital, $m
  -10
  -16
  -23
  -34
  -48
  -66
  -88
  -116
  -149
  -188
  -233
  -285
  -344
  -409
  -481
  -559
  -644
  -735
  -833
  -936
  -1,046
  -1,161
  -1,282
  -1,409
  -1,541
  -1,679
  -1,822
  -1,972
  -2,127
  -2,288
Total debt, $m
  -40
  -32
  -22
  -7
  13
  38
  69
  108
  154
  209
  272
  345
  427
  518
  619
  729
  848
  976
  1,112
  1,257
  1,410
  1,572
  1,741
  1,919
  2,104
  2,297
  2,498
  2,707
  2,925
  3,151
Total liabilities, $m
  14
  22
  33
  47
  67
  92
  123
  162
  208
  263
  327
  399
  481
  573
  673
  783
  902
  1,030
  1,166
  1,311
  1,465
  1,626
  1,795
  1,973
  2,158
  2,351
  2,552
  2,761
  2,979
  3,205
Total equity, $m
  2
  2
  4
  5
  7
  10
  14
  18
  23
  29
  36
  44
  53
  64
  75
  87
  100
  114
  130
  146
  163
  181
  199
  219
  240
  261
  284
  307
  331
  356
Total liabilities and equity, $m
  16
  24
  37
  52
  74
  102
  137
  180
  231
  292
  363
  443
  534
  637
  748
  870
  1,002
  1,144
  1,296
  1,457
  1,628
  1,807
  1,994
  2,192
  2,398
  2,612
  2,836
  3,068
  3,310
  3,561
Debt-to-equity ratio
  -25.550
  -13.360
  -5.950
  -1.310
  1.700
  3.690
  5.040
  5.990
  6.660
  7.150
  7.510
  7.780
  7.990
  8.150
  8.280
  8.380
  8.460
  8.530
  8.580
  8.630
  8.670
  8.700
  8.730
  8.750
  8.770
  8.790
  8.810
  8.820
  8.840
  8.850
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
  0
  2
  1
  1
  0
  -1
  -2
  -4
  -6
  -8
  -11
  -15
  -19
  -23
  -28
  -33
  -39
  -46
  -53
  -60
  -68
  -76
  -85
  -94
  -104
  -114
  -124
  -135
  -146
  -158
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
Funds from operations, $m
  0
  2
  1
  1
  0
  0
  -2
  -3
  -5
  -7
  -10
  -13
  -17
  -21
  -26
  -31
  -36
  -42
  -49
  -56
  -63
  -71
  -79
  -87
  -96
  -106
  -115
  -126
  -136
  -147
Change in working capital, $m
  -4
  -5
  -8
  -11
  -14
  -18
  -22
  -28
  -33
  -39
  -45
  -52
  -59
  -65
  -72
  -78
  -85
  -91
  -97
  -104
  -109
  -115
  -121
  -127
  -132
  -138
  -144
  -149
  -155
  -161
Cash from operations, $m
  4
  7
  9
  12
  14
  17
  21
  24
  28
  32
  35
  39
  42
  44
  46
  48
  49
  49
  49
  48
  46
  45
  42
  39
  36
  32
  28
  24
  19
  14
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
New CAPEX, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
Cash from investing activities, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -6
  -6
  -6
  -7
  -7
  -9
  -9
  -10
  -11
  -11
  -13
  -14
  -14
  -15
Free cash flow, $m
  4
  7
  9
  11
  14
  17
  20
  23
  26
  30
  33
  36
  38
  40
  42
  43
  43
  43
  42
  41
  39
  36
  33
  29
  25
  21
  16
  11
  5
  -1
Issuance/(repayment) of debt, $m
  -40
  8
  11
  15
  19
  25
  31
  39
  46
  55
  64
  73
  82
  91
  101
  110
  119
  128
  137
  145
  153
  161
  169
  177
  185
  193
  201
  209
  218
  226
Issuance/(repurchase) of shares, $m
  46
  0
  0
  1
  2
  3
  6
  8
  11
  14
  18
  23
  28
  33
  39
  46
  53
  60
  68
  76
  85
  94
  104
  114
  124
  135
  146
  158
  170
  183
Cash from financing (excl. dividends), $m  
  6
  8
  11
  16
  21
  28
  37
  47
  57
  69
  82
  96
  110
  124
  140
  156
  172
  188
  205
  221
  238
  255
  273
  291
  309
  328
  347
  367
  388
  409
Total cash flow (excl. dividends), $m
  9
  15
  20
  27
  35
  45
  57
  70
  84
  99
  115
  131
  148
  165
  182
  198
  215
  231
  247
  262
  277
  291
  306
  320
  334
  349
  363
  378
  393
  408
Retained Cash Flow (-), $m
  -46
  -1
  -1
  -2
  -2
  -3
  -6
  -8
  -11
  -14
  -18
  -23
  -28
  -33
  -39
  -46
  -53
  -60
  -68
  -76
  -85
  -94
  -104
  -114
  -124
  -135
  -146
  -158
  -170
  -183
Prev. year cash balance distribution, $m
  95
  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
  58
  14
  18
  25
  33
  42
  51
  62
  73
  85
  96
  108
  120
  132
  143
  153
  162
  171
  179
  186
  192
  197
  202
  206
  210
  214
  217
  220
  223
  225
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
  56
  13
  16
  21
  26
  30
  35
  39
  42
  44
  46
  46
  46
  44
  42
  39
  35
  31
  28
  24
  20
  16
  13
  11
  8
  6
  5
  3
  2
  2
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  47.1
  42.7
  37.6
  32.6
  27.9
  23.7
  20.1
  17.1
  14.5
  12.3
  10.4
  8.8
  7.5
  6.4
  5.5
  4.7
  4.0
  3.4
  2.9
  2.5
  2.2
  1.9
  1.6
  1.4
  1.2
  1.0
  0.9

MEI Pharma, Inc. is an oncology company. The Company is focused on the clinical development of drugs and therapies for treatment of cancer. The Company's portfolio of clinical drug candidates includes Pracinostat, ME-344 and PWT143. Pracinostat is an orally available histone deacetylase (HDAC) inhibitor indicated for the treatment of advanced hematologic diseases, such as acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). ME-344 is an isoflavone-based mitochondrial inhibitor targeting a mitochondrial component of the terminal respiratory chain complex in rapidly proliferating cells. PWT143 is an oral inhibitor of phosphatidylinositide 3-kinase (PI3K) delta, a molecular target that plays a critical role in the proliferation and survival of hematologic cancer cells. Pracinostat has been tested in multiple Phase I and Phase II clinical trials in advanced hematologic malignancies and solid tumor indications.

FINANCIAL RATIOS  of  MEI Pharma, Inc. (MEIP)

Valuation Ratios
P/E Ratio 30.3
Price to Sales 3.9
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 30.3
Price to Free Cash Flow 30.3
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 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. -29.7%
Return On Total Capital 6.5%
Ret/ On T. Cap. - 3 Yr. Avg. -32.5%
Return On Equity 6.5%
Return On Equity - 3 Yr. Avg. -32.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 78.3%
Gross Margin - 3 Yr. Avg. 26.1%
EBITDA Margin 13%
EBITDA Margin - 3 Yr. Avg. 4.3%
Operating Margin 8.7%
Oper. Margin - 3 Yr. Avg. 2.9%
Pre-Tax Margin 13%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 13%
Net Profit Margin - 3 Yr. Avg. 4.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

MEIP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MEIP stock intrinsic value calculation we used $2 million for the last fiscal year's total revenue generated by MEI Pharma, Inc.. The default revenue input number comes from 0001 income statement of MEI Pharma, 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 MEIP stock valuation model: a) initial revenue growth rate of 60% 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 MEIP is calculated based on our internal credit rating of MEI Pharma, 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 MEI Pharma, 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 MEIP stock the variable cost ratio is equal to 100%.

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 MEIP 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 MEI Pharma, Inc..

Corporate tax rate of 27% is the nominal tax rate for MEI Pharma, 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 MEIP 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 MEIP are equal to 9.9%.

Life of production assets of 6.7 years is the average useful life of capital assets used in MEI Pharma, 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 MEIP is equal to -315%. 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 - $50.459 million for MEI Pharma, 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 71.148 million for MEI Pharma, 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 MEI Pharma, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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