Intrinsic value of NovoCure Limited - NVCR

Previous Close

$51.14

  Intrinsic Value

$2.53

stock screener

  Rating & Target

str. sell

-95%

Previous close

$51.14

 
Intrinsic value

$2.53

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of NVCR 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 4.9

 

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, %
  29.80
  27.32
  25.09
  23.08
  21.27
  19.64
  18.18
  16.86
  15.68
  14.61
  13.65
  12.78
  12.00
  11.30
  10.67
  10.11
  9.60
  9.14
  8.72
  8.35
  8.02
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
Revenue, $m
  322
  410
  513
  631
  765
  916
  1,082
  1,264
  1,463
  1,676
  1,905
  2,149
  2,406
  2,678
  2,964
  3,264
  3,577
  3,904
  4,244
  4,599
  4,968
  5,351
  5,749
  6,163
  6,593
  7,040
  7,505
  7,988
  8,491
  9,015
Variable operating expenses, $m
  296
  377
  471
  580
  703
  841
  994
  1,162
  1,344
  1,540
  1,751
  1,975
  2,212
  2,462
  2,724
  3,000
  3,287
  3,588
  3,901
  4,226
  4,565
  4,917
  5,283
  5,664
  6,059
  6,470
  6,897
  7,341
  7,803
  8,285
Fixed operating expenses, $m
  55
  56
  58
  59
  60
  62
  63
  64
  66
  67
  69
  70
  72
  73
  75
  76
  78
  80
  82
  83
  85
  87
  89
  91
  93
  95
  97
  99
  102
  104
Total operating expenses, $m
  351
  433
  529
  639
  763
  903
  1,057
  1,226
  1,410
  1,607
  1,820
  2,045
  2,284
  2,535
  2,799
  3,076
  3,365
  3,668
  3,983
  4,309
  4,650
  5,004
  5,372
  5,755
  6,152
  6,565
  6,994
  7,440
  7,905
  8,389
Operating income, $m
  -29
  -23
  -16
  -8
  2
  13
  25
  38
  53
  69
  86
  104
  123
  144
  165
  188
  212
  236
  262
  289
  317
  346
  377
  408
  441
  475
  511
  548
  586
  626
EBITDA, $m
  -25
  -18
  -9
  1
  12
  25
  39
  55
  72
  91
  111
  133
  156
  180
  205
  232
  260
  289
  319
  351
  384
  418
  454
  491
  529
  569
  611
  655
  700
  747
Interest expense (income), $m
  7
  15
  10
  15
  21
  28
  36
  44
  54
  64
  75
  87
  100
  114
  129
  144
  160
  177
  195
  214
  233
  253
  274
  296
  318
  342
  366
  392
  418
  445
  474
Earnings before tax, $m
  -44
  -34
  -32
  -29
  -26
  -23
  -19
  -15
  -11
  -7
  -2
  4
  9
  15
  21
  27
  34
  41
  48
  56
  64
  72
  81
  90
  99
  109
  119
  130
  141
  152
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  6
  7
  9
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
Net income, $m
  -44
  -34
  -32
  -29
  -26
  -23
  -19
  -15
  -11
  -7
  -2
  3
  7
  11
  15
  20
  25
  30
  35
  41
  47
  53
  59
  66
  72
  79
  87
  95
  103
  111

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
  203
  258
  323
  398
  482
  577
  682
  797
  922
  1,057
  1,201
  1,355
  1,517
  1,689
  1,869
  2,058
  2,255
  2,462
  2,676
  2,900
  3,132
  3,374
  3,625
  3,886
  4,157
  4,439
  4,732
  5,037
  5,354
  5,684
Adjusted assets (=assets-cash), $m
  203
  258
  323
  398
  482
  577
  682
  797
  922
  1,057
  1,201
  1,355
  1,517
  1,689
  1,869
  2,058
  2,255
  2,462
  2,676
  2,900
  3,132
  3,374
  3,625
  3,886
  4,157
  4,439
  4,732
  5,037
  5,354
  5,684
Revenue / Adjusted assets
  1.586
  1.589
  1.588
  1.585
  1.587
  1.588
  1.587
  1.586
  1.587
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
  1.586
Average production assets, $m
  22
  27
  34
  42
  51
  61
  72
  85
  98
  112
  128
  144
  161
  179
  199
  219
  240
  262
  284
  308
  333
  358
  385
  413
  442
  472
  503
  535
  569
  604
Working capital, $m
  11
  14
  18
  22
  27
  32
  38
  44
  51
  59
  67
  75
  84
  94
  104
  114
  125
  137
  149
  161
  174
  187
  201
  216
  231
  246
  263
  280
  297
  316
Total debt, $m
  104
  154
  213
  280
  356
  441
  536
  639
  752
  873
  1,003
  1,141
  1,287
  1,442
  1,604
  1,774
  1,952
  2,137
  2,330
  2,531
  2,741
  2,958
  3,184
  3,419
  3,663
  3,917
  4,180
  4,455
  4,740
  5,037
Total liabilities, $m
  183
  233
  291
  358
  434
  520
  614
  718
  830
  951
  1,081
  1,219
  1,366
  1,520
  1,682
  1,852
  2,030
  2,215
  2,409
  2,610
  2,819
  3,036
  3,262
  3,497
  3,741
  3,995
  4,259
  4,533
  4,818
  5,116
Total equity, $m
  20
  26
  32
  40
  48
  58
  68
  80
  92
  106
  120
  135
  152
  169
  187
  206
  226
  246
  268
  290
  313
  337
  362
  389
  416
  444
  473
  504
  535
  568
Total liabilities and equity, $m
  203
  259
  323
  398
  482
  578
  682
  798
  922
  1,057
  1,201
  1,354
  1,518
  1,689
  1,869
  2,058
  2,256
  2,461
  2,677
  2,900
  3,132
  3,373
  3,624
  3,886
  4,157
  4,439
  4,732
  5,037
  5,353
  5,684
Debt-to-equity ratio
  5.140
  5.970
  6.580
  7.030
  7.380
  7.640
  7.850
  8.020
  8.150
  8.260
  8.350
  8.420
  8.480
  8.540
  8.580
  8.620
  8.650
  8.680
  8.710
  8.730
  8.750
  8.770
  8.780
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
  8.860
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
  -44
  -34
  -32
  -29
  -26
  -23
  -19
  -15
  -11
  -7
  -2
  3
  7
  11
  15
  20
  25
  30
  35
  41
  47
  53
  59
  66
  72
  79
  87
  95
  103
  111
Depreciation, amort., depletion, $m
  4
  5
  7
  8
  10
  12
  14
  17
  20
  22
  26
  29
  32
  36
  40
  44
  48
  52
  57
  62
  67
  72
  77
  83
  88
  94
  101
  107
  114
  121
Funds from operations, $m
  -40
  -28
  -25
  -21
  -16
  -11
  -5
  2
  8
  16
  24
  31
  39
  47
  55
  64
  73
  82
  92
  103
  113
  124
  136
  148
  161
  174
  187
  202
  217
  232
Change in working capital, $m
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
Cash from operations, $m
  -42
  -31
  -28
  -25
  -21
  -16
  -11
  -5
  2
  8
  16
  23
  30
  37
  45
  53
  62
  71
  80
  90
  100
  111
  122
  134
  146
  158
  171
  185
  199
  214
Maintenance CAPEX, $m
  -3
  -4
  -5
  -7
  -8
  -10
  -12
  -14
  -17
  -20
  -22
  -26
  -29
  -32
  -36
  -40
  -44
  -48
  -52
  -57
  -62
  -67
  -72
  -77
  -83
  -88
  -94
  -101
  -107
  -114
New CAPEX, $m
  -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
  -32
  -34
  -35
Cash from investing activities, $m
  -8
  -10
  -12
  -15
  -17
  -20
  -23
  -26
  -30
  -34
  -37
  -42
  -46
  -50
  -55
  -60
  -65
  -70
  -75
  -81
  -87
  -93
  -99
  -105
  -112
  -118
  -125
  -133
  -141
  -149
Free cash flow, $m
  -51
  -41
  -41
  -40
  -38
  -36
  -34
  -32
  -29
  -25
  -22
  -19
  -16
  -13
  -10
  -6
  -3
  1
  5
  10
  14
  19
  24
  29
  34
  40
  46
  52
  58
  65
Issuance/(repayment) of debt, $m
  -45
  50
  58
  67
  76
  85
  94
  104
  112
  121
  130
  138
  146
  154
  162
  170
  178
  185
  193
  201
  209
  217
  226
  235
  244
  254
  264
  274
  285
  297
Issuance/(repurchase) of shares, $m
  136
  39
  38
  37
  35
  32
  30
  27
  24
  20
  16
  13
  10
  6
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  91
  89
  96
  104
  111
  117
  124
  131
  136
  141
  146
  151
  156
  160
  165
  170
  178
  185
  193
  201
  209
  217
  226
  235
  244
  254
  264
  274
  285
  297
Total cash flow (excl. dividends), $m
  41
  48
  56
  64
  73
  81
  90
  99
  107
  116
  124
  132
  140
  147
  155
  164
  175
  187
  198
  211
  223
  236
  250
  264
  278
  294
  309
  326
  344
  362
Retained Cash Flow (-), $m
  -136
  -39
  -38
  -37
  -35
  -32
  -30
  -27
  -24
  -20
  -16
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
Prev. year cash balance distribution, $m
  183
  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
  88
  8
  18
  28
  38
  49
  60
  72
  84
  96
  108
  117
  124
  130
  137
  145
  155
  166
  177
  188
  200
  212
  225
  238
  251
  265
  280
  296
  312
  329
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
  84
  8
  15
  23
  30
  36
  41
  45
  48
  50
  51
  50
  47
  44
  40
  37
  34
  31
  27
  24
  21
  18
  15
  12
  10
  8
  6
  5
  3
  2
Current shareholders' claim on cash, %
  50.0
  41.9
  36.5
  32.8
  30.2
  28.3
  26.9
  25.9
  25.1
  24.6
  24.2
  24.0
  23.8
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7
  23.7

NovoCure Limited is a commercial-stage oncology company. The Company is engaged in developing a cancer treatment centered on a therapy called TTFields, the use of electric fields tuned to specific frequencies to disrupt solid tumor cancer cell division. Its TTFields delivery system is used for the treatment of glioblastoma (GBM) and to advance programs testing of TTFields in multiple solid tumor indications through its clinical pipeline. In addition to its clinical and commercial progress in GBM, it is planning or conducting clinical trials evaluating the use of TTFields in brain metastases, non-small-cell lung cancer (NSCLC), pancreatic cancer, ovarian cancer and mesothelioma. TTFields are delivered through a portable, medical device. The complete delivery system, which is designed to allow patients to go about their daily activities while receiving continuous cancer treatment, includes a portable electric field generator, transducer arrays, rechargeable batteries and accessories.

FINANCIAL RATIOS  of  NovoCure Limited (NVCR)

Valuation Ratios
P/E Ratio -33.7
Price to Sales 53.6
Price to Book 31.4
Price to Tangible Book
Price to Cash Flow -41.2
Price to Free Cash Flow -35.3
Growth Rates
Sales Growth Rate 151.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 80%
Cap. Spend. - 3 Yr. Gr. Rate 35.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 67.6%
Total Debt to Equity 67.6%
Interest Coverage -16
Management Effectiveness
Return On Assets -42.2%
Ret/ On Assets - 3 Yr. Avg. -48.9%
Return On Total Capital -51.6%
Ret/ On T. Cap. - 3 Yr. Avg. -57.3%
Return On Equity -67.2%
Return On Equity - 3 Yr. Avg. -63.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 51.8%
Gross Margin - 3 Yr. Avg. 40.5%
EBITDA Margin -130.1%
EBITDA Margin - 3 Yr. Avg. -319.7%
Operating Margin -138.6%
Oper. Margin - 3 Yr. Avg. -331.2%
Pre-Tax Margin -145.8%
Pre-Tax Margin - 3 Yr. Avg. -334.5%
Net Profit Margin -159%
Net Profit Margin - 3 Yr. Avg. -346.1%
Effective Tax Rate -9.1%
Eff/ Tax Rate - 3 Yr. Avg. -5%
Payout Ratio 0%

NVCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NVCR stock intrinsic value calculation we used $248 million for the last fiscal year's total revenue generated by NovoCure Limited. The default revenue input number comes from 0001 income statement of NovoCure Limited. 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 NVCR stock valuation model: a) initial revenue growth rate of 29.8% 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 NVCR is calculated based on our internal credit rating of NovoCure Limited, 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 NovoCure Limited.
    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 NVCR stock the variable cost ratio is equal to 91.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $54 million in the base year in the intrinsic value calculation for NVCR 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 10% for NovoCure Limited.

Corporate tax rate of 27% is the nominal tax rate for NovoCure Limited. 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 NVCR 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 NVCR are equal to 6.7%.

Life of production assets of 1.9 years is the average useful life of capital assets used in NovoCure Limited 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 NVCR is equal to 3.5%. 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 - $112.259 million for NovoCure Limited - 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 95.007 million for NovoCure Limited 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 NovoCure Limited at the current share price and the inputted number of shares is $4.9 billion.

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