Intrinsic value of Phibro Animal Health Corporation - PAHC

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$20.66

  Intrinsic Value

$20.27

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  Rating & Target

hold

-2%

Previous close

$20.66

 
Intrinsic value

$20.27

 
Up/down potential

-2%

 
Rating

hold

We calculate the intrinsic value of PAHC 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 0.8

 

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, %
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
Revenue, $m
  869
  920
  974
  1,030
  1,088
  1,149
  1,212
  1,279
  1,348
  1,421
  1,497
  1,576
  1,660
  1,747
  1,838
  1,934
  2,034
  2,139
  2,249
  2,365
  2,486
  2,613
  2,746
  2,886
  3,033
  3,187
  3,348
  3,517
  3,695
  3,881
Variable operating expenses, $m
  757
  802
  848
  896
  946
  999
  1,053
  1,111
  1,171
  1,233
  1,291
  1,359
  1,431
  1,506
  1,585
  1,668
  1,754
  1,845
  1,940
  2,039
  2,144
  2,253
  2,368
  2,489
  2,615
  2,748
  2,887
  3,033
  3,186
  3,347
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
  757
  802
  848
  896
  946
  999
  1,053
  1,111
  1,171
  1,233
  1,291
  1,359
  1,431
  1,506
  1,585
  1,668
  1,754
  1,845
  1,940
  2,039
  2,144
  2,253
  2,368
  2,489
  2,615
  2,748
  2,887
  3,033
  3,186
  3,347
Operating income, $m
  112
  119
  126
  134
  142
  150
  159
  168
  178
  188
  206
  217
  228
  240
  253
  266
  280
  294
  310
  326
  342
  360
  378
  397
  417
  439
  461
  484
  509
  534
EBITDA, $m
  143
  151
  160
  169
  179
  189
  199
  210
  221
  233
  246
  259
  273
  287
  302
  318
  334
  351
  369
  388
  408
  429
  451
  474
  498
  523
  550
  578
  607
  638
Interest expense (income), $m
  15
  17
  18
  20
  22
  24
  25
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
Earnings before tax, $m
  95
  100
  106
  112
  118
  125
  132
  139
  146
  154
  170
  178
  187
  197
  206
  217
  227
  239
  250
  263
  276
  289
  304
  319
  334
  351
  368
  386
  405
  425
Tax expense, $m
  26
  27
  29
  30
  32
  34
  36
  37
  39
  42
  46
  48
  51
  53
  56
  58
  61
  64
  68
  71
  74
  78
  82
  86
  90
  95
  99
  104
  109
  115
Net income, $m
  69
  73
  77
  82
  86
  91
  96
  101
  107
  112
  124
  130
  137
  144
  151
  158
  166
  174
  183
  192
  201
  211
  222
  233
  244
  256
  269
  282
  296
  310

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
  712
  754
  798
  843
  891
  941
  993
  1,047
  1,104
  1,164
  1,226
  1,291
  1,359
  1,431
  1,506
  1,584
  1,666
  1,752
  1,842
  1,937
  2,036
  2,140
  2,249
  2,364
  2,484
  2,610
  2,742
  2,881
  3,026
  3,179
Adjusted assets (=assets-cash), $m
  712
  754
  798
  843
  891
  941
  993
  1,047
  1,104
  1,164
  1,226
  1,291
  1,359
  1,431
  1,506
  1,584
  1,666
  1,752
  1,842
  1,937
  2,036
  2,140
  2,249
  2,364
  2,484
  2,610
  2,742
  2,881
  3,026
  3,179
Revenue / Adjusted assets
  1.221
  1.220
  1.221
  1.222
  1.221
  1.221
  1.221
  1.222
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.220
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
  1.221
Average production assets, $m
  178
  189
  200
  211
  223
  236
  249
  262
  276
  291
  307
  323
  340
  358
  377
  396
  417
  439
  461
  485
  510
  536
  563
  592
  622
  653
  686
  721
  757
  796
Working capital, $m
  218
  231
  244
  258
  273
  288
  304
  321
  338
  357
  376
  396
  417
  438
  461
  485
  511
  537
  565
  594
  624
  656
  689
  724
  761
  800
  840
  883
  927
  974
Total debt, $m
  342
  372
  404
  437
  472
  508
  546
  585
  626
  669
  714
  762
  811
  863
  917
  974
  1,034
  1,096
  1,161
  1,230
  1,302
  1,377
  1,456
  1,539
  1,626
  1,718
  1,814
  1,914
  2,020
  2,130
Total liabilities, $m
  516
  547
  578
  611
  646
  682
  720
  759
  801
  844
  889
  936
  985
  1,037
  1,091
  1,148
  1,208
  1,270
  1,336
  1,404
  1,476
  1,552
  1,631
  1,714
  1,801
  1,892
  1,988
  2,088
  2,194
  2,305
Total equity, $m
  196
  207
  219
  232
  245
  259
  273
  288
  304
  320
  337
  355
  374
  393
  414
  436
  458
  482
  507
  533
  560
  589
  619
  650
  683
  718
  754
  792
  832
  874
Total liabilities and equity, $m
  712
  754
  797
  843
  891
  941
  993
  1,047
  1,105
  1,164
  1,226
  1,291
  1,359
  1,430
  1,505
  1,584
  1,666
  1,752
  1,843
  1,937
  2,036
  2,141
  2,250
  2,364
  2,484
  2,610
  2,742
  2,880
  3,026
  3,179
Debt-to-equity ratio
  1.750
  1.800
  1.840
  1.880
  1.920
  1.960
  2.000
  2.030
  2.060
  2.090
  2.120
  2.150
  2.170
  2.190
  2.220
  2.240
  2.260
  2.270
  2.290
  2.310
  2.330
  2.340
  2.350
  2.370
  2.380
  2.390
  2.410
  2.420
  2.430
  2.440
Adjusted equity ratio
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275
  0.275

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  69
  73
  77
  82
  86
  91
  96
  101
  107
  112
  124
  130
  137
  144
  151
  158
  166
  174
  183
  192
  201
  211
  222
  233
  244
  256
  269
  282
  296
  310
Depreciation, amort., depletion, $m
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  40
  42
  44
  47
  49
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  94
  98
  103
Funds from operations, $m
  100
  106
  111
  117
  123
  130
  136
  143
  150
  158
  164
  172
  181
  190
  200
  210
  220
  231
  243
  255
  267
  281
  295
  309
  325
  341
  358
  376
  394
  414
Change in working capital, $m
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
Cash from operations, $m
  88
  93
  98
  103
  109
  114
  120
  126
  133
  140
  145
  152
  160
  168
  177
  186
  195
  205
  215
  226
  237
  249
  261
  274
  288
  302
  317
  333
  350
  367
Maintenance CAPEX, $m
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -98
New CAPEX, $m
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
Cash from investing activities, $m
  -32
  -34
  -36
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -62
  -66
  -69
  -72
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -113
  -118
  -124
  -130
  -136
Free cash flow, $m
  56
  59
  62
  66
  69
  73
  77
  81
  85
  89
  91
  96
  101
  106
  111
  117
  123
  129
  136
  142
  149
  157
  164
  173
  181
  190
  199
  209
  219
  230
Issuance/(repayment) of debt, $m
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  96
  101
  106
  111
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  
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  96
  101
  106
  111
Total cash flow (excl. dividends), $m
  86
  90
  94
  99
  104
  109
  114
  120
  126
  132
  137
  143
  150
  158
  166
  174
  182
  191
  201
  211
  221
  232
  244
  256
  268
  281
  295
  310
  325
  341
Retained Cash Flow (-), $m
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
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
  75
  78
  82
  86
  91
  95
  100
  105
  110
  116
  119
  125
  132
  138
  145
  152
  160
  168
  176
  185
  194
  204
  214
  224
  235
  247
  259
  272
  285
  299
Discount rate, %
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
  70
  68
  66
  64
  61
  58
  55
  51
  47
  43
  38
  34
  30
  26
  22
  19
  16
  13
  10
  8
  6
  5
  3
  3
  2
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Phibro Animal Health Corporation (Phibro) is a global diversified animal health and mineral nutrition company. The Company operates in three segments, which include Animal Health, Mineral Nutrition and Performance Products. The Company offers various products, which include Animal health products, such as antibacterials, anticoccidials, vaccines, nutritional specialty products and mineral nutrition products. The Company also manufactures and markets specific ingredients for use in the personal care, automotive, industrial chemical and chemical catalyst industries. The Company's Medicated Feed Additives (MFAs) and other business consist of concentrated medicated products, which are administered through animal feeds. The Company's MFAs and other business consists of the production and sale of antibacterials, including Stafac, Terramycin, Neo-Terramycin and Mecadox and anticoccidials, including Nicarb, Aviax, Aviax Plus, Coxistac and amprolium.

FINANCIAL RATIOS  of  Phibro Animal Health Corporation (PAHC)

Valuation Ratios
P/E Ratio 12.7
Price to Sales 1.1
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 10.7
Growth Rates
Sales Growth Rate 1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -41.7%
Cap. Spend. - 3 Yr. Gr. Rate 1%
Financial Strength
Quick Ratio 9
Current Ratio 0.2
LT Debt to Equity 203.3%
Total Debt to Equity 207.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 12.5%
Ret/ On Assets - 3 Yr. Avg. 14.9%
Return On Total Capital 14.4%
Ret/ On T. Cap. - 3 Yr. Avg. 18.5%
Return On Equity 53.9%
Return On Equity - 3 Yr. Avg. 153%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 32.5%
Gross Margin - 3 Yr. Avg. 31.8%
EBITDA Margin 16%
EBITDA Margin - 3 Yr. Avg. 15.4%
Operating Margin 12.4%
Oper. Margin - 3 Yr. Avg. 11.9%
Pre-Tax Margin 10.6%
Pre-Tax Margin - 3 Yr. Avg. 10.5%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 9.2%
Effective Tax Rate 19.8%
Eff/ Tax Rate - 3 Yr. Avg. 12%
Payout Ratio 24.6%

PAHC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PAHC stock intrinsic value calculation we used $820 million for the last fiscal year's total revenue generated by Phibro Animal Health Corporation. The default revenue input number comes from 0001 income statement of Phibro Animal Health Corporation. 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 PAHC stock valuation model: a) initial revenue growth rate of 6% 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 6.7%, whose default value for PAHC is calculated based on our internal credit rating of Phibro Animal Health Corporation, 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 Phibro Animal Health Corporation.
    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 PAHC stock the variable cost ratio is equal to 87.2%.

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 PAHC 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 Phibro Animal Health Corporation.

Corporate tax rate of 27% is the nominal tax rate for Phibro Animal Health Corporation. 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 PAHC 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 PAHC are equal to 20.5%.

Life of production assets of 7.7 years is the average useful life of capital assets used in Phibro Animal Health Corporation 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 PAHC is equal to 25.1%. 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 - $184.954 million for Phibro Animal Health Corporation - 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 40.596 million for Phibro Animal Health Corporation 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 Phibro Animal Health Corporation at the current share price and the inputted number of shares is $0.8 billion.

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