Intrinsic value of Phibro Animal Health - PAHC

Previous Close

$36.05

  Intrinsic Value

$146.87

stock screener

  Rating & Target

str. buy

+307%

Previous close

$36.05

 
Intrinsic value

$146.87

 
Up/down potential

+307%

 
Rating

str. buy

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 0.7

 

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, %
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
Revenue, $m
  841
  921
  1,004
  1,091
  1,181
  1,275
  1,373
  1,474
  1,579
  1,689
  1,803
  1,921
  2,044
  2,173
  2,306
  2,445
  2,590
  2,741
  2,899
  3,063
  3,235
  3,415
  3,602
  3,798
  4,003
  4,218
  4,442
  4,677
  4,924
  5,181
Variable operating expenses, $m
  148
  161
  175
  190
  205
  220
  237
  254
  271
  289
  301
  320
  341
  362
  384
  408
  432
  457
  483
  511
  539
  569
  601
  633
  667
  703
  741
  780
  821
  864
Fixed operating expenses, $m
  557
  569
  582
  595
  608
  621
  635
  649
  663
  677
  692
  708
  723
  739
  755
  772
  789
  806
  824
  842
  861
  880
  899
  919
  939
  960
  981
  1,002
  1,024
  1,047
Total operating expenses, $m
  705
  730
  757
  785
  813
  841
  872
  903
  934
  966
  993
  1,028
  1,064
  1,101
  1,139
  1,180
  1,221
  1,263
  1,307
  1,353
  1,400
  1,449
  1,500
  1,552
  1,606
  1,663
  1,722
  1,782
  1,845
  1,911
Operating income, $m
  136
  190
  247
  306
  369
  433
  501
  572
  645
  722
  810
  893
  980
  1,071
  1,166
  1,266
  1,369
  1,478
  1,592
  1,710
  1,835
  1,966
  2,103
  2,246
  2,397
  2,555
  2,721
  2,895
  3,078
  3,271
EBITDA, $m
  167
  223
  282
  344
  409
  476
  547
  620
  696
  776
  859
  946
  1,036
  1,131
  1,229
  1,333
  1,440
  1,553
  1,671
  1,794
  1,924
  2,059
  2,201
  2,350
  2,507
  2,670
  2,843
  3,023
  3,213
  3,412
Interest expense (income), $m
  15
  17
  19
  22
  25
  28
  31
  34
  37
  41
  44
  48
  52
  56
  60
  64
  68
  73
  78
  83
  88
  94
  99
  105
  112
  118
  125
  132
  140
  148
  156
Earnings before tax, $m
  119
  171
  225
  281
  341
  403
  467
  535
  605
  678
  762
  842
  925
  1,012
  1,102
  1,197
  1,296
  1,400
  1,509
  1,622
  1,741
  1,866
  1,997
  2,135
  2,279
  2,430
  2,589
  2,756
  2,931
  3,115
Tax expense, $m
  32
  46
  61
  76
  92
  109
  126
  144
  163
  183
  206
  227
  250
  273
  298
  323
  350
  378
  407
  438
  470
  504
  539
  576
  615
  656
  699
  744
  791
  841
Net income, $m
  87
  124
  164
  205
  249
  294
  341
  390
  441
  495
  556
  614
  675
  739
  805
  874
  946
  1,022
  1,101
  1,184
  1,271
  1,362
  1,458
  1,558
  1,663
  1,774
  1,890
  2,012
  2,139
  2,274

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
  686
  751
  819
  890
  963
  1,040
  1,120
  1,202
  1,288
  1,378
  1,471
  1,567
  1,668
  1,772
  1,881
  1,994
  2,113
  2,236
  2,365
  2,499
  2,639
  2,785
  2,938
  3,098
  3,265
  3,440
  3,623
  3,815
  4,016
  4,226
Adjusted assets (=assets-cash), $m
  686
  751
  819
  890
  963
  1,040
  1,120
  1,202
  1,288
  1,378
  1,471
  1,567
  1,668
  1,772
  1,881
  1,994
  2,113
  2,236
  2,365
  2,499
  2,639
  2,785
  2,938
  3,098
  3,265
  3,440
  3,623
  3,815
  4,016
  4,226
Revenue / Adjusted assets
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.225
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
  1.226
Average production assets, $m
  184
  202
  220
  239
  259
  279
  301
  323
  346
  370
  395
  421
  448
  476
  505
  536
  567
  600
  635
  671
  709
  748
  789
  832
  877
  924
  973
  1,024
  1,078
  1,135
Working capital, $m
  218
  238
  260
  282
  306
  330
  355
  382
  409
  437
  467
  498
  530
  563
  597
  633
  671
  710
  751
  793
  838
  884
  933
  984
  1,037
  1,092
  1,151
  1,211
  1,275
  1,342
Total debt, $m
  361
  410
  462
  515
  571
  629
  689
  752
  817
  885
  956
  1,029
  1,105
  1,184
  1,267
  1,353
  1,442
  1,536
  1,633
  1,735
  1,841
  1,952
  2,068
  2,189
  2,316
  2,449
  2,588
  2,733
  2,885
  3,044
Total liabilities, $m
  520
  569
  621
  674
  730
  788
  849
  911
  976
  1,044
  1,115
  1,188
  1,264
  1,343
  1,426
  1,512
  1,601
  1,695
  1,792
  1,894
  2,000
  2,111
  2,227
  2,348
  2,475
  2,608
  2,747
  2,892
  3,044
  3,203
Total equity, $m
  166
  182
  198
  215
  233
  252
  271
  291
  312
  333
  356
  379
  404
  429
  455
  483
  511
  541
  572
  605
  639
  674
  711
  750
  790
  833
  877
  923
  972
  1,023
Total liabilities and equity, $m
  686
  751
  819
  889
  963
  1,040
  1,120
  1,202
  1,288
  1,377
  1,471
  1,567
  1,668
  1,772
  1,881
  1,995
  2,112
  2,236
  2,364
  2,499
  2,639
  2,785
  2,938
  3,098
  3,265
  3,441
  3,624
  3,815
  4,016
  4,226
Debt-to-equity ratio
  2.170
  2.260
  2.330
  2.390
  2.450
  2.500
  2.540
  2.590
  2.620
  2.660
  2.690
  2.710
  2.740
  2.760
  2.780
  2.800
  2.820
  2.840
  2.850
  2.870
  2.880
  2.900
  2.910
  2.920
  2.930
  2.940
  2.950
  2.960
  2.970
  2.980
Adjusted equity ratio
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  87
  124
  164
  205
  249
  294
  341
  390
  441
  495
  556
  614
  675
  739
  805
  874
  946
  1,022
  1,101
  1,184
  1,271
  1,362
  1,458
  1,558
  1,663
  1,774
  1,890
  2,012
  2,139
  2,274
Depreciation, amort., depletion, $m
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  49
  53
  56
  59
  63
  67
  71
  75
  79
  84
  89
  93
  99
  104
  110
  115
  122
  128
  135
  142
Funds from operations, $m
  118
  158
  199
  243
  289
  337
  386
  438
  493
  549
  606
  667
  731
  798
  868
  941
  1,017
  1,097
  1,181
  1,268
  1,360
  1,456
  1,557
  1,662
  1,773
  1,889
  2,011
  2,140
  2,274
  2,416
Change in working capital, $m
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
Cash from operations, $m
  98
  137
  178
  221
  266
  312
  361
  412
  465
  521
  576
  636
  699
  765
  833
  905
  980
  1,058
  1,140
  1,226
  1,315
  1,409
  1,508
  1,611
  1,720
  1,834
  1,953
  2,079
  2,210
  2,349
Maintenance CAPEX, $m
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -49
  -53
  -56
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -89
  -93
  -99
  -104
  -110
  -115
  -122
  -128
  -135
New CAPEX, $m
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
Cash from investing activities, $m
  -38
  -40
  -43
  -46
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -80
  -84
  -88
  -93
  -99
  -104
  -110
  -115
  -122
  -128
  -134
  -142
  -149
  -157
  -164
  -173
  -182
  -191
Free cash flow, $m
  60
  96
  134
  174
  216
  259
  305
  352
  402
  453
  505
  561
  620
  681
  745
  811
  881
  954
  1,030
  1,110
  1,194
  1,282
  1,373
  1,470
  1,571
  1,677
  1,789
  1,906
  2,029
  2,158
Issuance/(repayment) of debt, $m
  48
  49
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  93
  97
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
  159
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  
  48
  49
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  93
  97
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
  159
Total cash flow (excl. dividends), $m
  108
  146
  186
  228
  272
  318
  365
  415
  467
  521
  575
  634
  696
  760
  827
  897
  971
  1,047
  1,128
  1,212
  1,300
  1,392
  1,489
  1,591
  1,698
  1,810
  1,927
  2,051
  2,181
  2,317
Retained Cash Flow (-), $m
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
  -51
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
  93
  130
  169
  211
  254
  299
  346
  395
  446
  499
  553
  611
  671
  735
  801
  870
  942
  1,018
  1,097
  1,179
  1,266
  1,357
  1,452
  1,552
  1,657
  1,767
  1,883
  2,005
  2,132
  2,266
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
  87
  113
  137
  156
  172
  183
  190
  192
  191
  186
  177
  166
  153
  139
  124
  108
  93
  78
  64
  52
  41
  31
  24
  17
  12
  9
  6
  4
  2
  2
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

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 (PAHC)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 1.9
Price to Book 9.5
Price to Tangible Book
Price to Cash Flow 14.7
Price to Free Cash Flow 18.7
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 $764.281 million for the last fiscal year's total revenue generated by Phibro Animal Health. The default revenue input number comes from 0001 income statement of Phibro Animal 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 PAHC stock valuation model: a) initial revenue growth rate of 10% 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, 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.
    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 17.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $545 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.

Corporate tax rate of 27% is the nominal tax rate for Phibro Animal 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 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 21.9%.

Life of production assets of 8 years is the average useful life of capital assets used in Phibro Animal 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 PAHC is equal to 25.9%. 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 - $151.157 million for Phibro Animal 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 19.809 million for Phibro Animal 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 Phibro Animal Health at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Phibro: Fiscal 1Q Earnings Snapshot   [Nov-06-18 06:58PM  Associated Press]
▶ Phibro: Fiscal 4Q Earnings Snapshot   [Aug-27-18 05:34PM  Associated Press]
▶ [$$] Phibro Plans Ireland Biotech Facility, Creating Up to 150 Jobs   [Jul-05-18 01:51PM  The Wall Street Journal]
▶ Phibro: Fiscal 3Q Earnings Snapshot   [May-07-18 06:27PM  Associated Press]
▶ Phibro beats 2Q profit forecasts   [Feb-05-18 04:38PM  Associated Press]
▶ Phibro beats 1Q profit forecasts   [Nov-06-17 05:49PM  Associated Press]
▶ Phibro beats 4Q profit forecasts   [08:04PM  Associated Press]

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