Intrinsic value of OPKO Health - OPK

Previous Close

$3.09

  Intrinsic Value

$0.69

stock screener

  Rating & Target

str. sell

-78%

Previous close

$3.09

 
Intrinsic value

$0.69

 
Up/down potential

-78%

 
Rating

str. sell

We calculate the intrinsic value of OPK 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 1.7

 

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
  1,089
  1,114
  1,143
  1,175
  1,210
  1,249
  1,292
  1,338
  1,388
  1,441
  1,498
  1,559
  1,623
  1,692
  1,765
  1,842
  1,924
  2,011
  2,102
  2,199
  2,301
  2,408
  2,522
  2,641
  2,767
  2,899
  3,039
  3,185
  3,339
  3,502
Variable operating expenses, $m
  1,151
  1,175
  1,201
  1,231
  1,264
  1,300
  1,340
  1,383
  1,429
  1,478
  1,391
  1,448
  1,508
  1,572
  1,639
  1,711
  1,787
  1,868
  1,953
  2,042
  2,137
  2,237
  2,342
  2,453
  2,570
  2,693
  2,822
  2,958
  3,102
  3,252
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
  1,151
  1,175
  1,201
  1,231
  1,264
  1,300
  1,340
  1,383
  1,429
  1,478
  1,391
  1,448
  1,508
  1,572
  1,639
  1,711
  1,787
  1,868
  1,953
  2,042
  2,137
  2,237
  2,342
  2,453
  2,570
  2,693
  2,822
  2,958
  3,102
  3,252
Operating income, $m
  -63
  -61
  -59
  -56
  -54
  -51
  -48
  -45
  -41
  -37
  107
  111
  116
  121
  126
  131
  137
  143
  150
  157
  164
  172
  180
  188
  197
  207
  216
  227
  238
  249
EBITDA, $m
  134
  137
  141
  145
  149
  154
  159
  165
  171
  177
  184
  192
  200
  208
  217
  227
  237
  247
  259
  271
  283
  296
  310
  325
  340
  357
  374
  392
  411
  431
Interest expense (income), $m
  3
  6
  8
  10
  13
  16
  19
  23
  27
  31
  36
  41
  46
  52
  58
  64
  71
  78
  86
  94
  103
  112
  121
  131
  142
  153
  165
  178
  191
  204
  219
Earnings before tax, $m
  -68
  -69
  -69
  -69
  -70
  -70
  -71
  -72
  -72
  -73
  66
  65
  64
  63
  61
  60
  59
  57
  56
  54
  52
  50
  48
  46
  44
  41
  39
  36
  34
  31
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  18
  18
  17
  17
  17
  16
  16
  15
  15
  15
  14
  14
  13
  12
  12
  11
  11
  10
  9
  8
Net income, $m
  -68
  -69
  -69
  -69
  -70
  -70
  -71
  -72
  -72
  -73
  48
  47
  47
  46
  45
  44
  43
  42
  41
  39
  38
  37
  35
  34
  32
  30
  28
  27
  25
  22

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
  2,643
  2,704
  2,773
  2,851
  2,938
  3,032
  3,136
  3,247
  3,368
  3,497
  3,635
  3,783
  3,940
  4,107
  4,284
  4,472
  4,671
  4,881
  5,103
  5,337
  5,585
  5,846
  6,121
  6,410
  6,716
  7,037
  7,375
  7,731
  8,105
  8,499
Adjusted assets (=assets-cash), $m
  2,643
  2,704
  2,773
  2,851
  2,938
  3,032
  3,136
  3,247
  3,368
  3,497
  3,635
  3,783
  3,940
  4,107
  4,284
  4,472
  4,671
  4,881
  5,103
  5,337
  5,585
  5,846
  6,121
  6,410
  6,716
  7,037
  7,375
  7,731
  8,105
  8,499
Revenue / Adjusted assets
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
  0.412
Average production assets, $m
  869
  889
  912
  937
  966
  997
  1,031
  1,068
  1,107
  1,150
  1,195
  1,244
  1,295
  1,350
  1,409
  1,470
  1,536
  1,605
  1,678
  1,755
  1,836
  1,922
  2,012
  2,108
  2,208
  2,314
  2,425
  2,542
  2,665
  2,794
Working capital, $m
  -48
  -49
  -50
  -52
  -53
  -55
  -57
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -78
  -81
  -85
  -88
  -93
  -97
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -140
  -147
  -154
Total debt, $m
  57
  75
  94
  116
  141
  168
  197
  229
  263
  300
  339
  381
  426
  473
  523
  577
  633
  693
  756
  823
  893
  967
  1,045
  1,127
  1,214
  1,305
  1,401
  1,502
  1,609
  1,721
Total liabilities, $m
  751
  768
  788
  810
  834
  861
  891
  922
  956
  993
  1,032
  1,074
  1,119
  1,166
  1,217
  1,270
  1,326
  1,386
  1,449
  1,516
  1,586
  1,660
  1,738
  1,821
  1,907
  1,998
  2,095
  2,196
  2,302
  2,414
Total equity, $m
  1,892
  1,936
  1,986
  2,041
  2,103
  2,171
  2,245
  2,325
  2,411
  2,504
  2,603
  2,709
  2,821
  2,941
  3,067
  3,202
  3,344
  3,495
  3,654
  3,822
  3,999
  4,186
  4,382
  4,590
  4,808
  5,038
  5,281
  5,535
  5,804
  6,085
Total liabilities and equity, $m
  2,643
  2,704
  2,774
  2,851
  2,937
  3,032
  3,136
  3,247
  3,367
  3,497
  3,635
  3,783
  3,940
  4,107
  4,284
  4,472
  4,670
  4,881
  5,103
  5,338
  5,585
  5,846
  6,120
  6,411
  6,715
  7,036
  7,376
  7,731
  8,106
  8,499
Debt-to-equity ratio
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
Adjusted equity ratio
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716
  0.716

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -68
  -69
  -69
  -69
  -70
  -70
  -71
  -72
  -72
  -73
  48
  47
  47
  46
  45
  44
  43
  42
  41
  39
  38
  37
  35
  34
  32
  30
  28
  27
  25
  22
Depreciation, amort., depletion, $m
  197
  198
  199
  201
  203
  205
  207
  209
  212
  215
  78
  81
  84
  88
  91
  95
  100
  104
  109
  114
  119
  125
  131
  137
  143
  150
  157
  165
  173
  181
Funds from operations, $m
  128
  129
  130
  132
  133
  135
  136
  138
  140
  142
  126
  128
  131
  133
  136
  139
  143
  146
  149
  153
  157
  161
  166
  170
  175
  180
  186
  192
  198
  204
Change in working capital, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
Cash from operations, $m
  129
  130
  132
  133
  135
  136
  138
  140
  142
  144
  128
  131
  134
  136
  139
  143
  146
  150
  154
  158
  162
  166
  171
  176
  181
  186
  192
  198
  204
  211
Maintenance CAPEX, $m
  -55
  -56
  -58
  -59
  -61
  -63
  -65
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -100
  -104
  -109
  -114
  -119
  -125
  -131
  -137
  -143
  -150
  -157
  -165
  -173
New CAPEX, $m
  -17
  -20
  -23
  -26
  -28
  -31
  -34
  -37
  -40
  -42
  -45
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -106
  -111
  -117
  -123
  -129
Cash from investing activities, $m
  -72
  -76
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -114
  -120
  -127
  -133
  -139
  -146
  -153
  -160
  -169
  -177
  -186
  -195
  -205
  -215
  -226
  -237
  -249
  -261
  -274
  -288
  -302
Free cash flow, $m
  57
  54
  51
  48
  45
  42
  39
  36
  33
  29
  8
  5
  1
  -3
  -6
  -10
  -15
  -19
  -24
  -29
  -34
  -39
  -44
  -50
  -56
  -63
  -69
  -76
  -84
  -92
Issuance/(repayment) of debt, $m
  16
  17
  20
  22
  25
  27
  29
  32
  34
  37
  39
  42
  45
  47
  50
  53
  56
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
Issuance/(repurchase) of shares, $m
  105
  112
  119
  125
  132
  138
  145
  152
  159
  166
  51
  58
  66
  74
  82
  91
  99
  109
  118
  129
  139
  150
  162
  174
  187
  200
  214
  228
  244
  260
Cash from financing (excl. dividends), $m  
  121
  129
  139
  147
  157
  165
  174
  184
  193
  203
  90
  100
  111
  121
  132
  144
  155
  169
  181
  196
  209
  224
  240
  256
  274
  291
  310
  329
  350
  372
Total cash flow (excl. dividends), $m
  178
  183
  189
  196
  202
  207
  213
  220
  226
  232
  98
  105
  112
  119
  126
  133
  141
  149
  158
  167
  176
  185
  195
  206
  217
  228
  240
  253
  266
  280
Retained Cash Flow (-), $m
  -105
  -112
  -119
  -125
  -132
  -138
  -145
  -152
  -159
  -166
  -99
  -106
  -112
  -120
  -127
  -134
  -142
  -150
  -159
  -168
  -177
  -187
  -197
  -207
  -219
  -230
  -242
  -255
  -268
  -282
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
  73
  71
  71
  70
  70
  69
  69
  68
  67
  66
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
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
  70
  65
  62
  58
  54
  50
  46
  42
  39
  35
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  94.3
  88.6
  83.2
  77.9
  72.9
  68.1
  63.5
  59.2
  55.2
  51.4
  50.3
  49.1
  47.9
  46.6
  45.2
  43.8
  42.4
  41.0
  39.5
  38.1
  36.7
  35.2
  33.8
  32.5
  31.1
  29.8
  28.5
  27.2
  26.0
  24.8

OPKO Health, Inc. is a healthcare company. Its segments include Pharmaceutical, Diagnostics and Corporate. Pharmaceutical consists of the pharmaceutical operations in Chile, Mexico, Ireland, Israel and Spain and its pharmaceutical research and development operations. Diagnostics consists of the clinical laboratory operations in Bio-Reference Laboratories (Bio-Reference) and its point-of-care operations. Through Bio-Reference, it operates laboratory divisions, such as Bio-Reference, GenPath (Oncology), GenPath (Women's Health), GeneDx and Laboratorio Bueno Salud. As of December 31, 2016, it had one commercial stage pharmaceutical product and several pharmaceutical compounds and technologies in various stages of research and development for a range of indications and conditions, including Renal Products, Biologics, hGH-CTP, Factor VII, Oxyntomodulin, active pharmaceutical ingredients, Oligonucleotide Therapeutics, NK-1 Program, Asthma and chronic obstructive pulmonary disease.

FINANCIAL RATIOS  of  OPKO Health (OPK)

Valuation Ratios
P/E Ratio -69
Price to Sales 1.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 53.9
Price to Free Cash Flow 215.5
Growth Rates
Sales Growth Rate 148.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 43.1%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 3.5%
Total Debt to Equity 4.3%
Interest Coverage -24
Management Effectiveness
Return On Assets -0.9%
Ret/ On Assets - 3 Yr. Avg. -4.9%
Return On Total Capital -1.2%
Ret/ On T. Cap. - 3 Yr. Avg. -7%
Return On Equity -1.2%
Return On Equity - 3 Yr. Avg. -7.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 49.9%
Gross Margin - 3 Yr. Avg. 49.8%
EBITDA Margin 2.1%
EBITDA Margin - 3 Yr. Avg. -60.4%
Operating Margin -6%
Oper. Margin - 3 Yr. Avg. -62.1%
Pre-Tax Margin -6.1%
Pre-Tax Margin - 3 Yr. Avg. -74%
Net Profit Margin -2%
Net Profit Margin - 3 Yr. Avg. -65.7%
Effective Tax Rate 77%
Eff/ Tax Rate - 3 Yr. Avg. 53.2%
Payout Ratio 0%

OPK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OPK stock intrinsic value calculation we used $1067.503 million for the last fiscal year's total revenue generated by OPKO Health. The default revenue input number comes from 0001 income statement of OPKO Health. 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 OPK 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 OPK is calculated based on our internal credit rating of OPKO Health, 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 OPKO Health.
    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 OPK stock the variable cost ratio is equal to 106%.

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 OPK 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 13.6% for OPKO Health.

Corporate tax rate of 27% is the nominal tax rate for OPKO Health. 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 OPK 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 OPK are equal to 79.8%.

Life of production assets of 15.4 years is the average useful life of capital assets used in OPKO Health 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 OPK is equal to -4.4%. 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 - $1855.578 million for OPKO Health - 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 559.474 million for OPKO Health 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 OPKO Health at the current share price and the inputted number of shares is $1.7 billion.

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COMPANY NEWS

▶ World Stocks Red Monday   [12:46PM  GuruFocus.com]
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▶ OPKO Health: 3Q Earnings Snapshot   [04:12PM  Associated Press]

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