Intrinsic value of Mallinckrodt plc - MNK

Previous Close

$4.08

  Intrinsic Value

$75.73

stock screener

  Rating & Target

str. buy

+999%

Previous close

$4.08

 
Intrinsic value

$75.73

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of MNK 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, %
  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
  3,280
  3,356
  3,442
  3,539
  3,646
  3,764
  3,892
  4,031
  4,180
  4,341
  4,512
  4,695
  4,890
  5,098
  5,318
  5,551
  5,797
  6,058
  6,334
  6,625
  6,932
  7,256
  7,597
  7,957
  8,335
  8,734
  9,154
  9,596
  10,061
  10,549
Variable operating expenses, $m
  2,762
  2,806
  2,857
  2,914
  2,977
  3,047
  3,122
  3,204
  3,292
  3,387
  2,660
  2,768
  2,883
  3,005
  3,134
  3,272
  3,417
  3,571
  3,733
  3,905
  4,086
  4,277
  4,478
  4,690
  4,913
  5,148
  5,396
  5,656
  5,930
  6,218
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
  2,762
  2,806
  2,857
  2,914
  2,977
  3,047
  3,122
  3,204
  3,292
  3,387
  2,660
  2,768
  2,883
  3,005
  3,134
  3,272
  3,417
  3,571
  3,733
  3,905
  4,086
  4,277
  4,478
  4,690
  4,913
  5,148
  5,396
  5,656
  5,930
  6,218
Operating income, $m
  518
  549
  585
  625
  669
  717
  770
  827
  888
  954
  1,853
  1,928
  2,008
  2,093
  2,183
  2,279
  2,380
  2,487
  2,600
  2,720
  2,846
  2,979
  3,119
  3,267
  3,422
  3,586
  3,758
  3,940
  4,130
  4,331
EBITDA, $m
  1,818
  1,860
  1,908
  1,962
  2,021
  2,086
  2,157
  2,234
  2,317
  2,406
  2,501
  2,603
  2,711
  2,826
  2,948
  3,077
  3,214
  3,358
  3,511
  3,672
  3,843
  4,022
  4,211
  4,411
  4,621
  4,842
  5,074
  5,319
  5,577
  5,848
Interest expense (income), $m
  0
  353
  362
  373
  386
  400
  415
  432
  450
  470
  492
  515
  540
  566
  594
  624
  656
  689
  725
  762
  802
  844
  888
  935
  984
  1,036
  1,090
  1,148
  1,208
  1,272
  1,339
Earnings before tax, $m
  165
  187
  212
  239
  269
  302
  338
  376
  418
  462
  1,338
  1,388
  1,442
  1,499
  1,559
  1,623
  1,691
  1,762
  1,838
  1,918
  2,002
  2,091
  2,184
  2,283
  2,386
  2,496
  2,610
  2,731
  2,859
  2,992
Tax expense, $m
  45
  51
  57
  65
  73
  82
  91
  102
  113
  125
  361
  375
  389
  405
  421
  438
  457
  476
  496
  518
  541
  564
  590
  616
  644
  674
  705
  737
  772
  808
Net income, $m
  121
  137
  155
  174
  196
  220
  246
  275
  305
  337
  976
  1,013
  1,052
  1,094
  1,138
  1,185
  1,234
  1,287
  1,342
  1,400
  1,461
  1,526
  1,594
  1,666
  1,742
  1,822
  1,906
  1,994
  2,087
  2,184

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
  11,082
  11,337
  11,628
  11,956
  12,318
  12,716
  13,149
  13,617
  14,123
  14,664
  15,244
  15,863
  16,522
  17,222
  17,965
  18,752
  19,585
  20,467
  21,398
  22,381
  23,418
  24,513
  25,666
  26,881
  28,160
  29,508
  30,926
  32,418
  33,988
  35,640
Adjusted assets (=assets-cash), $m
  11,082
  11,337
  11,628
  11,956
  12,318
  12,716
  13,149
  13,617
  14,123
  14,664
  15,244
  15,863
  16,522
  17,222
  17,965
  18,752
  19,585
  20,467
  21,398
  22,381
  23,418
  24,513
  25,666
  26,881
  28,160
  29,508
  30,926
  32,418
  33,988
  35,640
Revenue / Adjusted assets
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
Average production assets, $m
  6,131
  6,272
  6,433
  6,614
  6,815
  7,035
  7,274
  7,534
  7,813
  8,113
  8,434
  8,776
  9,140
  9,528
  9,939
  10,374
  10,835
  11,323
  11,838
  12,382
  12,956
  13,561
  14,199
  14,871
  15,579
  16,324
  17,109
  17,935
  18,803
  19,717
Working capital, $m
  161
  164
  169
  173
  179
  184
  191
  198
  205
  213
  221
  230
  240
  250
  261
  272
  284
  297
  310
  325
  340
  356
  372
  390
  408
  428
  449
  470
  493
  517
Total debt, $m
  6,247
  6,434
  6,648
  6,889
  7,155
  7,448
  7,766
  8,110
  8,482
  8,880
  9,306
  9,761
  10,245
  10,760
  11,306
  11,884
  12,497
  13,145
  13,829
  14,552
  15,314
  16,118
  16,966
  17,859
  18,800
  19,790
  20,832
  21,929
  23,083
  24,297
Total liabilities, $m
  8,145
  8,333
  8,547
  8,787
  9,054
  9,346
  9,664
  10,009
  10,380
  10,778
  11,205
  11,659
  12,143
  12,658
  13,204
  13,783
  14,395
  15,043
  15,727
  16,450
  17,213
  18,017
  18,864
  19,757
  20,698
  21,688
  22,731
  23,828
  24,981
  26,195
Total equity, $m
  2,937
  3,004
  3,082
  3,168
  3,264
  3,370
  3,484
  3,609
  3,742
  3,886
  4,040
  4,204
  4,378
  4,564
  4,761
  4,969
  5,190
  5,424
  5,670
  5,931
  6,206
  6,496
  6,801
  7,123
  7,463
  7,820
  8,195
  8,591
  9,007
  9,445
Total liabilities and equity, $m
  11,082
  11,337
  11,629
  11,955
  12,318
  12,716
  13,148
  13,618
  14,122
  14,664
  15,245
  15,863
  16,521
  17,222
  17,965
  18,752
  19,585
  20,467
  21,397
  22,381
  23,419
  24,513
  25,665
  26,880
  28,161
  29,508
  30,926
  32,419
  33,988
  35,640
Debt-to-equity ratio
  2.130
  2.140
  2.160
  2.170
  2.190
  2.210
  2.230
  2.250
  2.270
  2.290
  2.300
  2.320
  2.340
  2.360
  2.370
  2.390
  2.410
  2.420
  2.440
  2.450
  2.470
  2.480
  2.490
  2.510
  2.520
  2.530
  2.540
  2.550
  2.560
  2.570
Adjusted equity ratio
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265
  0.265

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  121
  137
  155
  174
  196
  220
  246
  275
  305
  337
  976
  1,013
  1,052
  1,094
  1,138
  1,185
  1,234
  1,287
  1,342
  1,400
  1,461
  1,526
  1,594
  1,666
  1,742
  1,822
  1,906
  1,994
  2,087
  2,184
Depreciation, amort., depletion, $m
  1,300
  1,311
  1,323
  1,337
  1,353
  1,369
  1,388
  1,408
  1,429
  1,452
  649
  675
  703
  733
  765
  798
  833
  871
  911
  952
  997
  1,043
  1,092
  1,144
  1,198
  1,256
  1,316
  1,380
  1,446
  1,517
Funds from operations, $m
  1,420
  1,447
  1,478
  1,512
  1,549
  1,590
  1,634
  1,682
  1,734
  1,790
  1,625
  1,688
  1,756
  1,827
  1,903
  1,983
  2,068
  2,158
  2,252
  2,352
  2,458
  2,569
  2,687
  2,810
  2,940
  3,077
  3,222
  3,373
  3,533
  3,701
Change in working capital, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  1,417
  1,444
  1,473
  1,507
  1,544
  1,584
  1,628
  1,676
  1,727
  1,782
  1,617
  1,679
  1,746
  1,817
  1,892
  1,971
  2,056
  2,145
  2,239
  2,338
  2,443
  2,553
  2,670
  2,793
  2,922
  3,058
  3,201
  3,352
  3,510
  3,677
Maintenance CAPEX, $m
  -462
  -472
  -482
  -495
  -509
  -524
  -541
  -560
  -580
  -601
  -624
  -649
  -675
  -703
  -733
  -765
  -798
  -833
  -871
  -911
  -952
  -997
  -1,043
  -1,092
  -1,144
  -1,198
  -1,256
  -1,316
  -1,380
  -1,446
New CAPEX, $m
  -121
  -141
  -161
  -181
  -201
  -220
  -240
  -259
  -279
  -300
  -321
  -342
  -364
  -387
  -411
  -436
  -461
  -488
  -515
  -544
  -574
  -605
  -638
  -672
  -708
  -745
  -785
  -826
  -869
  -914
Cash from investing activities, $m
  -583
  -613
  -643
  -676
  -710
  -744
  -781
  -819
  -859
  -901
  -945
  -991
  -1,039
  -1,090
  -1,144
  -1,201
  -1,259
  -1,321
  -1,386
  -1,455
  -1,526
  -1,602
  -1,681
  -1,764
  -1,852
  -1,943
  -2,041
  -2,142
  -2,249
  -2,360
Free cash flow, $m
  834
  831
  830
  831
  834
  840
  847
  857
  868
  881
  672
  688
  706
  726
  748
  771
  797
  824
  853
  884
  917
  952
  989
  1,028
  1,070
  1,114
  1,161
  1,210
  1,262
  1,317
Issuance/(repayment) of debt, $m
  155
  187
  214
  240
  266
  292
  318
  345
  371
  398
  426
  455
  484
  515
  546
  579
  613
  648
  684
  723
  763
  804
  848
  893
  941
  990
  1,042
  1,097
  1,154
  1,214
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  155
  187
  214
  240
  266
  292
  318
  345
  371
  398
  426
  455
  484
  515
  546
  579
  613
  648
  684
  723
  763
  804
  848
  893
  941
  990
  1,042
  1,097
  1,154
  1,214
Total cash flow (excl. dividends), $m
  989
  1,018
  1,044
  1,071
  1,101
  1,132
  1,166
  1,201
  1,239
  1,279
  1,098
  1,143
  1,191
  1,241
  1,294
  1,350
  1,409
  1,471
  1,537
  1,606
  1,679
  1,756
  1,836
  1,921
  2,011
  2,104
  2,203
  2,307
  2,416
  2,531
Retained Cash Flow (-), $m
  -49
  -68
  -77
  -87
  -96
  -105
  -115
  -124
  -134
  -144
  -154
  -164
  -175
  -186
  -197
  -209
  -221
  -234
  -247
  -261
  -275
  -290
  -306
  -322
  -339
  -357
  -376
  -395
  -416
  -438
Prev. year cash balance distribution, $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 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
  940
  951
  967
  985
  1,005
  1,027
  1,051
  1,077
  1,105
  1,136
  944
  979
  1,016
  1,055
  1,097
  1,141
  1,188
  1,238
  1,290
  1,346
  1,404
  1,466
  1,531
  1,599
  1,671
  1,747
  1,827
  1,912
  2,000
  2,093
Discount rate, %
  9.80
  10.29
  10.80
  11.34
  11.91
  12.51
  13.13
  13.79
  14.48
  15.20
  15.96
  16.76
  17.60
  18.48
  19.40
  20.37
  21.39
  22.46
  23.58
  24.76
  26.00
  27.30
  28.67
  30.10
  31.61
  33.19
  34.85
  36.59
  38.42
  40.34
PV of cash for distribution, $m
  856
  782
  711
  641
  572
  506
  443
  383
  327
  276
  185
  152
  123
  98
  77
  59
  44
  32
  23
  16
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  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
  100.0

Mallinckrodt public limited company develops, manufactures, markets and distributes branded and generic specialty pharmaceutical products and therapies. The Company focuses on various therapeutic areas, such as autoimmune and rare disease specialty areas, including neurology, rheumatology, nephrology, ophthalmology and pulmonology; immunotherapy and neonatal critical care respiratory therapies; analgesics and hemostasis products, and central nervous system drugs. Its segments include Specialty Brands and Specialty Generics. The Specialty Brands segment produces and markets branded pharmaceutical products and therapies. The Specialty Generics segment produces and markets specialty generic pharmaceuticals and active pharmaceutical ingredient (API) consisting of biologics, medicinal opioids, synthetic controlled substances, acetaminophen and other active ingredients. Its product portfolio includes Acthar, Inomax, Ofirmev, Therakos immunotherapy, Hemostasis products and StrataGraft.

FINANCIAL RATIOS  of  Mallinckrodt plc (MNK)

Valuation Ratios
P/E Ratio -2.8
Price to Sales 0.5
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 3.3
Growth Rates
Sales Growth Rate -75.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -64.5%
Cap. Spend. - 3 Yr. Gr. Rate -12.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 118%
Total Debt to Equity 123.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -1%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital -1.4%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity -3%
Return On Equity - 3 Yr. Avg. 5.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 53.7%
Gross Margin - 3 Yr. Avg. 54.8%
EBITDA Margin -11.6%
EBITDA Margin - 3 Yr. Avg. 21.1%
Operating Margin -24.9%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin -36%
Pre-Tax Margin - 3 Yr. Avg. -8.5%
Net Profit Margin -18.4%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 40.8%
Eff/ Tax Rate - 3 Yr. Avg. -63.5%
Payout Ratio 0%

MNK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MNK stock intrinsic value calculation we used $3216 million for the last fiscal year's total revenue generated by Mallinckrodt plc. The default revenue input number comes from 0001 income statement of Mallinckrodt plc. 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 MNK 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 9.8%, whose default value for MNK is calculated based on our internal credit rating of Mallinckrodt plc, 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 Mallinckrodt plc.
    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 MNK stock the variable cost ratio is equal to 84.7%.

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 MNK 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 5.8% for Mallinckrodt plc.

Corporate tax rate of 27% is the nominal tax rate for Mallinckrodt plc. 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 MNK 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 MNK are equal to 186.9%.

Life of production assets of 13 years is the average useful life of capital assets used in Mallinckrodt plc 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 MNK is equal to 4.9%. 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 - $2887.3 million for Mallinckrodt plc - 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 83.676 million for Mallinckrodt plc 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 Mallinckrodt plc at the current share price and the inputted number of shares is $0.3 billion.

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