Intrinsic value of Pacira Pharmaceuticals - PCRX

Previous Close

$47.25

  Intrinsic Value

$64.33

stock screener

  Rating & Target

buy

+36%

Previous close

$47.25

 
Intrinsic value

$64.33

 
Up/down potential

+36%

 
Rating

buy

We calculate the intrinsic value of PCRX 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 1.9

 

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, %
  18.60
  17.24
  16.02
  14.91
  13.92
  13.03
  12.23
  11.50
  10.85
  10.27
  9.74
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
Revenue, $m
  340
  399
  462
  531
  605
  684
  768
  856
  949
  1,047
  1,149
  1,255
  1,366
  1,481
  1,602
  1,727
  1,856
  1,991
  2,132
  2,277
  2,429
  2,586
  2,750
  2,921
  3,099
  3,284
  3,477
  3,678
  3,888
  4,108
Variable operating expenses, $m
  101
  117
  135
  155
  175
  198
  221
  246
  272
  299
  322
  352
  383
  416
  450
  485
  521
  559
  598
  639
  682
  726
  772
  820
  870
  922
  976
  1,033
  1,092
  1,153
Fixed operating expenses, $m
  236
  241
  247
  252
  258
  263
  269
  275
  281
  287
  293
  300
  307
  313
  320
  327
  334
  342
  349
  357
  365
  373
  381
  389
  398
  407
  416
  425
  434
  444
Total operating expenses, $m
  337
  358
  382
  407
  433
  461
  490
  521
  553
  586
  615
  652
  690
  729
  770
  812
  855
  901
  947
  996
  1,047
  1,099
  1,153
  1,209
  1,268
  1,329
  1,392
  1,458
  1,526
  1,597
Operating income, $m
  3
  40
  80
  125
  172
  223
  278
  335
  396
  460
  533
  603
  676
  752
  832
  915
  1,001
  1,091
  1,184
  1,281
  1,382
  1,487
  1,597
  1,712
  1,831
  1,955
  2,085
  2,221
  2,363
  2,511
EBITDA, $m
  22
  61
  105
  152
  202
  256
  314
  375
  440
  508
  579
  653
  731
  812
  896
  984
  1,076
  1,171
  1,270
  1,373
  1,480
  1,592
  1,708
  1,829
  1,956
  2,087
  2,225
  2,369
  2,519
  2,676
Interest expense (income), $m
  4
  26
  31
  37
  44
  52
  60
  68
  78
  87
  98
  108
  119
  131
  143
  156
  169
  183
  197
  212
  227
  243
  260
  277
  295
  314
  334
  354
  375
  397
  420
Earnings before tax, $m
  -23
  9
  43
  81
  121
  164
  209
  258
  309
  363
  424
  483
  545
  609
  676
  745
  818
  893
  972
  1,054
  1,139
  1,227
  1,320
  1,416
  1,517
  1,622
  1,731
  1,846
  1,965
  2,090
Tax expense, $m
  0
  3
  12
  22
  33
  44
  57
  70
  83
  98
  115
  130
  147
  164
  182
  201
  221
  241
  262
  284
  307
  331
  356
  382
  409
  438
  467
  498
  531
  564
Net income, $m
  -23
  7
  32
  59
  88
  119
  153
  188
  225
  265
  310
  353
  398
  445
  493
  544
  597
  652
  709
  769
  831
  896
  963
  1,034
  1,107
  1,184
  1,264
  1,347
  1,435
  1,526

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
  441
  518
  600
  690
  786
  889
  997
  1,112
  1,233
  1,359
  1,492
  1,630
  1,774
  1,924
  2,080
  2,242
  2,411
  2,586
  2,768
  2,958
  3,154
  3,359
  3,572
  3,794
  4,024
  4,265
  4,516
  4,777
  5,050
  5,335
Adjusted assets (=assets-cash), $m
  441
  518
  600
  690
  786
  889
  997
  1,112
  1,233
  1,359
  1,492
  1,630
  1,774
  1,924
  2,080
  2,242
  2,411
  2,586
  2,768
  2,958
  3,154
  3,359
  3,572
  3,794
  4,024
  4,265
  4,516
  4,777
  5,050
  5,335
Revenue / Adjusted assets
  0.771
  0.770
  0.770
  0.770
  0.770
  0.769
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
Average production assets, $m
  153
  180
  209
  240
  273
  309
  346
  386
  428
  472
  518
  566
  616
  668
  722
  779
  837
  898
  961
  1,027
  1,095
  1,166
  1,240
  1,317
  1,398
  1,481
  1,568
  1,659
  1,754
  1,853
Working capital, $m
  28
  33
  38
  44
  50
  57
  64
  71
  79
  87
  95
  104
  113
  123
  133
  143
  154
  165
  177
  189
  202
  215
  228
  242
  257
  273
  289
  305
  323
  341
Total debt, $m
  325
  394
  468
  549
  635
  728
  825
  929
  1,037
  1,151
  1,270
  1,395
  1,525
  1,660
  1,800
  1,946
  2,098
  2,255
  2,419
  2,590
  2,767
  2,951
  3,143
  3,342
  3,550
  3,766
  3,992
  4,227
  4,473
  4,729
Total liabilities, $m
  397
  466
  540
  621
  708
  800
  897
  1,001
  1,109
  1,223
  1,342
  1,467
  1,597
  1,732
  1,872
  2,018
  2,170
  2,328
  2,491
  2,662
  2,839
  3,023
  3,215
  3,414
  3,622
  3,838
  4,064
  4,299
  4,545
  4,801
Total equity, $m
  44
  52
  60
  69
  79
  89
  100
  111
  123
  136
  149
  163
  177
  192
  208
  224
  241
  259
  277
  296
  315
  336
  357
  379
  402
  426
  452
  478
  505
  533
Total liabilities and equity, $m
  441
  518
  600
  690
  787
  889
  997
  1,112
  1,232
  1,359
  1,491
  1,630
  1,774
  1,924
  2,080
  2,242
  2,411
  2,587
  2,768
  2,958
  3,154
  3,359
  3,572
  3,793
  4,024
  4,264
  4,516
  4,777
  5,050
  5,334
Debt-to-equity ratio
  7.370
  7.610
  7.800
  7.960
  8.080
  8.190
  8.280
  8.350
  8.420
  8.470
  8.520
  8.560
  8.590
  8.630
  8.650
  8.680
  8.700
  8.720
  8.740
  8.760
  8.770
  8.790
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
  8.860
  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
  -23
  7
  32
  59
  88
  119
  153
  188
  225
  265
  310
  353
  398
  445
  493
  544
  597
  652
  709
  769
  831
  896
  963
  1,034
  1,107
  1,184
  1,264
  1,347
  1,435
  1,526
Depreciation, amort., depletion, $m
  19
  22
  24
  27
  30
  33
  36
  40
  44
  48
  46
  51
  55
  60
  64
  70
  75
  80
  86
  92
  98
  104
  111
  118
  125
  132
  140
  148
  157
  165
Funds from operations, $m
  -4
  28
  56
  86
  118
  153
  189
  228
  269
  312
  356
  403
  453
  504
  558
  614
  672
  732
  795
  861
  929
  1,000
  1,074
  1,151
  1,232
  1,316
  1,404
  1,495
  1,591
  1,691
Change in working capital, $m
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
Cash from operations, $m
  -8
  23
  51
  80
  112
  146
  182
  221
  262
  304
  348
  395
  444
  495
  548
  603
  661
  721
  784
  849
  916
  987
  1,061
  1,137
  1,217
  1,301
  1,388
  1,479
  1,574
  1,673
Maintenance CAPEX, $m
  -12
  -14
  -16
  -19
  -21
  -24
  -28
  -31
  -34
  -38
  -42
  -46
  -51
  -55
  -60
  -64
  -70
  -75
  -80
  -86
  -92
  -98
  -104
  -111
  -118
  -125
  -132
  -140
  -148
  -157
New CAPEX, $m
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -99
Cash from investing activities, $m
  -36
  -40
  -45
  -50
  -54
  -60
  -66
  -71
  -76
  -82
  -88
  -94
  -101
  -107
  -114
  -120
  -129
  -136
  -143
  -152
  -160
  -169
  -178
  -188
  -198
  -209
  -219
  -231
  -243
  -256
Free cash flow, $m
  -44
  -17
  6
  30
  57
  86
  117
  150
  185
  222
  259
  300
  343
  388
  434
  482
  533
  586
  640
  697
  756
  818
  882
  950
  1,019
  1,092
  1,168
  1,248
  1,331
  1,418
Issuance/(repayment) of debt, $m
  49
  69
  75
  81
  86
  92
  98
  103
  109
  114
  119
  124
  130
  135
  140
  146
  152
  158
  164
  170
  177
  184
  192
  199
  208
  216
  226
  235
  246
  256
Issuance/(repurchase) of shares, $m
  43
  1
  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  
  92
  70
  75
  81
  86
  92
  98
  103
  109
  114
  119
  124
  130
  135
  140
  146
  152
  158
  164
  170
  177
  184
  192
  199
  208
  216
  226
  235
  246
  256
Total cash flow (excl. dividends), $m
  48
  53
  80
  111
  144
  178
  215
  253
  294
  336
  379
  425
  473
  523
  574
  629
  685
  743
  804
  867
  934
  1,002
  1,074
  1,149
  1,227
  1,309
  1,394
  1,483
  1,576
  1,674
Retained Cash Flow (-), $m
  -43
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
Prev. year cash balance distribution, $m
  255
  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
  260
  45
  72
  102
  134
  168
  204
  242
  282
  323
  365
  411
  458
  508
  559
  612
  668
  726
  786
  849
  914
  982
  1,053
  1,127
  1,204
  1,285
  1,369
  1,457
  1,549
  1,646
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
  250
  41
  63
  84
  104
  122
  138
  151
  162
  170
  174
  175
  174
  170
  164
  156
  145
  134
  121
  108
  95
  81
  69
  57
  47
  37
  29
  23
  17
  12
Current shareholders' claim on cash, %
  79.6
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4
  79.4

Pacira Pharmaceuticals, Inc. is a holding company. The Company is a pharmaceutical company focused on the development, manufacture and commercialization of pharmaceutical products, based on its DepoFoam extended release drug delivery technology, for use primarily in hospitals and ambulatory surgery centers. Its lead product candidate is EXPAREL (bupivacaine liposome injectable suspension), which consists of bupivacaine, an amide-type local anesthetic, encapsulated in DepoFoam and is indicated for single-dose infiltration into the surgical site to produce postsurgical analgesia. In addition to EXPAREL, DepoFoam is also the basis for its other Food and Drug Administration-approved commercial product, DepoCyt(e), which it manufactures for its commercial partners, as well as its product candidates. The Company's other product candidates include DepoMeloxicam (DepoMLX) and DepoTranexamic Acid (DepoTXA). DepoCyt(e) is indicated for the intrathecal treatment of lymphomatous meningitis.

FINANCIAL RATIOS  of  Pacira Pharmaceuticals (PCRX)

Valuation Ratios
P/E Ratio -46.6
Price to Sales 6.4
Price to Book 8.1
Price to Tangible Book
Price to Cash Flow 53.7
Price to Free Cash Flow 221.4
Growth Rates
Sales Growth Rate 10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.5%
Cap. Spend. - 3 Yr. Gr. Rate 15.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 49.8%
Total Debt to Equity 49.8%
Interest Coverage -9
Management Effectiveness
Return On Assets -8.7%
Ret/ On Assets - 3 Yr. Avg. -3.6%
Return On Total Capital -11.7%
Ret/ On T. Cap. - 3 Yr. Avg. -5.9%
Return On Equity -17.4%
Return On Equity - 3 Yr. Avg. -9.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 60.1%
Gross Margin - 3 Yr. Avg. 63.9%
EBITDA Margin -7.6%
EBITDA Margin - 3 Yr. Avg. -0.1%
Operating Margin -11.6%
Oper. Margin - 3 Yr. Avg. -3.5%
Pre-Tax Margin -13.8%
Pre-Tax Margin - 3 Yr. Avg. -6.7%
Net Profit Margin -13.8%
Net Profit Margin - 3 Yr. Avg. -6.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PCRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCRX stock intrinsic value calculation we used $286.63 million for the last fiscal year's total revenue generated by Pacira Pharmaceuticals. The default revenue input number comes from 0001 income statement of Pacira Pharmaceuticals. 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 PCRX stock valuation model: a) initial revenue growth rate of 18.6% 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 4.3%, whose default value for PCRX is calculated based on our internal credit rating of Pacira Pharmaceuticals, 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 Pacira Pharmaceuticals.
    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 PCRX stock the variable cost ratio is equal to 30%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $231 million in the base year in the intrinsic value calculation for PCRX 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 9.4% for Pacira Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Pacira Pharmaceuticals. 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 PCRX 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 PCRX are equal to 45.1%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Pacira Pharmaceuticals 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 PCRX is equal to 8.3%. 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 - $279.483 million for Pacira Pharmaceuticals - 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 40.732 million for Pacira Pharmaceuticals 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 Pacira Pharmaceuticals at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ Pacira: 3Q Earnings Snapshot   [Nov-01-18 08:56AM  Associated Press]
▶ Pacira: 2Q Earnings Snapshot   [09:07AM  Associated Press]
▶ Why Pacira Pharmaceuticals Stock Is on the Rise Today   [Jul-26-18 12:31PM  Motley Fool]
▶ Pacira: 1Q Earnings Snapshot   [May-03-18 09:55AM  Associated Press]
▶ Company News For Apr 9, 2018   [10:13AM  Zacks]
▶ Why Heron Therapeutics Stock Soared Today   [Mar-19-18 05:47PM  Motley Fool]
▶ Pacira tops Street 4Q forecasts   [10:00AM  Associated Press]
▶ This Biotech Stock May Need Anesthesia After Collapsing Nearly 20%   [Feb-16-18 04:15PM  Investor's Business Daily]
▶ FDA Panel Votes 6-4 Against Recommending This Biotech's Pain Blocker   [Feb-15-18 05:26PM  Investor's Business Daily]

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