Intrinsic value of NewLink Genetics - NLNK

Previous Close

$1.83

  Intrinsic Value

$1.02

stock screener

  Rating & Target

sell

-44%

Previous close

$1.83

 
Intrinsic value

$1.02

 
Up/down potential

-44%

 
Rating

sell

We calculate the intrinsic value of NLNK 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 0.1

 

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
  29
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  44
  46
  47
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
Variable operating expenses, $m
  104
  106
  109
  112
  116
  119
  123
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  252
  264
  277
  290
  304
  319
  335
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
  104
  106
  109
  112
  116
  119
  123
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  252
  264
  277
  290
  304
  319
  335
Operating income, $m
  -75
  -76
  -78
  -81
  -83
  -86
  -89
  -92
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -132
  -138
  -144
  -151
  -158
  -165
  -173
  -181
  -190
  -199
  -209
  -219
  -229
  -240
EBITDA, $m
  -74
  -75
  -77
  -79
  -82
  -84
  -87
  -90
  -94
  -97
  -101
  -105
  -110
  -114
  -119
  -124
  -130
  -136
  -142
  -148
  -155
  -163
  -170
  -178
  -187
  -196
  -205
  -215
  -226
  -236
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
Earnings before tax, $m
  -75
  -77
  -79
  -81
  -84
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -130
  -136
  -142
  -149
  -156
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -229
  -240
  -252
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
  -75
  -77
  -79
  -81
  -84
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -130
  -136
  -142
  -149
  -156
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -229
  -240
  -252

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
  44
  45
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  136
  142
Adjusted assets (=assets-cash), $m
  44
  45
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  136
  142
Revenue / Adjusted assets
  0.659
  0.667
  0.674
  0.667
  0.673
  0.667
  0.673
  0.667
  0.661
  0.661
  0.656
  0.667
  0.667
  0.667
  0.653
  0.667
  0.667
  0.659
  0.671
  0.663
  0.667
  0.663
  0.667
  0.664
  0.661
  0.661
  0.667
  0.667
  0.662
  0.662
Average production assets, $m
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
Working capital, $m
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
Total debt, $m
  1
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
Total liabilities, $m
  29
  30
  31
  31
  32
  34
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  90
  94
Total equity, $m
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
Total liabilities and equity, $m
  44
  45
  47
  47
  49
  51
  53
  54
  56
  59
  61
  64
  66
  68
  71
  74
  79
  82
  85
  89
  94
  98
  103
  107
  112
  118
  123
  129
  136
  142
Debt-to-equity ratio
  0.040
  0.080
  0.130
  0.180
  0.230
  0.280
  0.340
  0.390
  0.450
  0.500
  0.560
  0.610
  0.670
  0.720
  0.770
  0.820
  0.870
  0.910
  0.960
  1.000
  1.040
  1.080
  1.120
  1.160
  1.190
  1.230
  1.260
  1.290
  1.320
  1.350
Adjusted equity ratio
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -75
  -77
  -79
  -81
  -84
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -130
  -136
  -142
  -149
  -156
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -229
  -240
  -252
Depreciation, amort., depletion, $m
  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
  4
  4
  4
Funds from operations, $m
  -74
  -75
  -77
  -80
  -82
  -85
  -88
  -92
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -128
  -134
  -140
  -147
  -154
  -161
  -169
  -177
  -186
  -195
  -205
  -215
  -225
  -236
  -248
Change in working capital, $m
  0
  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
Cash from operations, $m
  -73
  -75
  -77
  -80
  -82
  -85
  -88
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -128
  -134
  -140
  -146
  -153
  -161
  -169
  -177
  -185
  -194
  -204
  -214
  -225
  -236
  -247
Maintenance CAPEX, $m
  -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
  -4
  -4
New CAPEX, $m
  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
  -1
  -1
Cash from investing activities, $m
  -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
  -5
  -5
Free cash flow, $m
  -75
  -77
  -79
  -81
  -84
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -130
  -136
  -142
  -149
  -156
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -229
  -240
  -252
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Issuance/(repurchase) of shares, $m
  75
  77
  79
  81
  84
  87
  90
  94
  97
  101
  106
  110
  115
  120
  125
  131
  137
  144
  150
  158
  165
  173
  182
  190
  200
  210
  220
  231
  242
  254
Cash from financing (excl. dividends), $m  
  75
  78
  80
  82
  85
  88
  91
  95
  98
  102
  108
  112
  117
  122
  127
  133
  139
  146
  152
  161
  168
  176
  185
  193
  203
  214
  224
  235
  246
  258
Total cash flow (excl. dividends), $m
  0
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
Retained Cash Flow (-), $m
  -75
  -77
  -79
  -81
  -84
  -87
  -90
  -94
  -97
  -101
  -106
  -110
  -115
  -120
  -125
  -131
  -137
  -144
  -150
  -158
  -165
  -173
  -182
  -190
  -200
  -210
  -220
  -231
  -242
  -254
Prev. year cash balance distribution, $m
  137
  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
  62
  -76
  -78
  -80
  -83
  -85
  -88
  -92
  -95
  -99
  -103
  -108
  -112
  -117
  -122
  -128
  -134
  -140
  -147
  -154
  -161
  -169
  -177
  -186
  -195
  -204
  -214
  -225
  -236
  -248
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
  60
  -69
  -68
  -66
  -64
  -62
  -60
  -57
  -55
  -52
  -49
  -46
  -43
  -39
  -36
  -33
  -29
  -26
  -23
  -20
  -17
  -14
  -12
  -9
  -8
  -6
  -5
  -3
  -3
  -2
Current shareholders' claim on cash, %
  12.2
  1.5
  0.2
  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
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NewLink Genetics Corporation is a clinical-stage immuno-oncology company focused on discovering, developing and commercializing immunotherapeutic products for the treatment of cancer. The Company's portfolio includes biologic and small-molecule immunotherapy product candidates for a range of oncology indications. Its biologic product candidates are based on its HyperAcute Cellular Immunotherapy technology, which is designed to stimulate the human immune system to attack cancer cells. Its additional HyperAcute Cellular Immunotherapy product candidates in clinical development include tergenpumatucel-L and dorgenmeltucel-L for patients with advanced lung cancer and melanoma, respectively. Additionally, it has two small-molecule product candidates in clinical development: GDC-0919 and indoximod. These product candidates are indoleamine-2, 3-dioxygenase (IDO) pathway inhibitors and focus on breaking the immune system's tolerance to cancer.

FINANCIAL RATIOS  of  NewLink Genetics (NLNK)

Valuation Ratios
P/E Ratio -0.6
Price to Sales 1.5
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow -0.8
Price to Free Cash Flow -0.8
Growth Rates
Sales Growth Rate -47.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0.8%
Total Debt to Equity 0.8%
Interest Coverage 0
Management Effectiveness
Return On Assets -43.1%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital -52%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity -52.3%
Return On Equity - 3 Yr. Avg. 0.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -247.2%
EBITDA Margin - 3 Yr. Avg. -74.9%
Operating Margin -252.8%
Oper. Margin - 3 Yr. Avg. -77.5%
Pre-Tax Margin -252.8%
Pre-Tax Margin - 3 Yr. Avg. -77.9%
Net Profit Margin -236.1%
Net Profit Margin - 3 Yr. Avg. -79.5%
Effective Tax Rate 6.6%
Eff/ Tax Rate - 3 Yr. Avg. 2.5%
Payout Ratio 0%

NLNK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NLNK stock intrinsic value calculation we used $28.711 million for the last fiscal year's total revenue generated by NewLink Genetics. The default revenue input number comes from 0001 income statement of NewLink Genetics. 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 NLNK 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 NLNK is calculated based on our internal credit rating of NewLink Genetics, 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 NewLink Genetics.
    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 NLNK stock the variable cost ratio is equal to 355.2%.

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 NLNK 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 19.3% for NewLink Genetics.

Corporate tax rate of 27% is the nominal tax rate for NewLink Genetics. 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 NLNK 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 NLNK are equal to 20.6%.

Life of production assets of 4.2 years is the average useful life of capital assets used in NewLink Genetics 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 NLNK is equal to -17.4%. 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 - $151.557 million for NewLink Genetics - 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 37.165 million for NewLink Genetics 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 NewLink Genetics at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ NewLink: 3Q Earnings Snapshot   [05:07AM  Associated Press]
▶ Whats Ahead For NewLink Genetics Corporation (NASDAQ:NLNK)?   [Sep-18-18 11:25AM  Simply Wall St.]
▶ NewLink: 2Q Earnings Snapshot   [Jul-31-18 05:22PM  Associated Press]
▶ NewLink: 1Q Earnings Snapshot   [May-03-18 05:46PM  Associated Press]
▶ NewLink Shares Bite The Dust After Merck-Incyte Melanoma Failure   [Apr-16-18 04:21PM  Investor's Business Daily]
▶ NewLink reports 4Q loss   [Mar-01-18 04:57PM  Associated Press]
▶ NewLink reports 3Q loss   [Nov-02-17 08:36AM  Associated Press]
▶ NewLink Genetics Prices Public Offering of Common Stock   [Oct-03-17 08:54PM  GlobeNewswire]

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