Intrinsic value of Recro Pharma, Inc. - REPH

Previous Close

$10.09

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$10.09

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of REPH 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 0.2

 

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
  79
  80
  82
  85
  87
  90
  93
  97
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
  241
  253
Variable operating expenses, $m
  108
  110
  113
  116
  120
  123
  127
  132
  137
  142
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  253
  265
  277
  291
  305
  319
  335
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
  108
  110
  113
  116
  120
  123
  127
  132
  137
  142
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  253
  265
  277
  291
  305
  319
  335
Operating income, $m
  -30
  -30
  -31
  -32
  -32
  -33
  -34
  -35
  -37
  -38
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -82
EBITDA, $m
  -20
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
Interest expense (income), $m
  5
  10
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  45
Earnings before tax, $m
  -39
  -34
  -35
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -45
  -48
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -121
  -127
Tax expense, $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
Net income, $m
  -39
  -34
  -35
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -45
  -48
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -121
  -127

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
  149
  152
  156
  161
  166
  171
  177
  183
  190
  197
  205
  213
  222
  232
  242
  252
  263
  275
  288
  301
  315
  330
  345
  361
  379
  397
  416
  436
  457
  479
Adjusted assets (=assets-cash), $m
  149
  152
  156
  161
  166
  171
  177
  183
  190
  197
  205
  213
  222
  232
  242
  252
  263
  275
  288
  301
  315
  330
  345
  361
  379
  397
  416
  436
  457
  479
Revenue / Adjusted assets
  0.530
  0.526
  0.526
  0.528
  0.524
  0.526
  0.525
  0.530
  0.526
  0.528
  0.527
  0.526
  0.527
  0.526
  0.525
  0.528
  0.529
  0.527
  0.528
  0.528
  0.527
  0.527
  0.528
  0.529
  0.528
  0.526
  0.526
  0.528
  0.527
  0.528
Average production assets, $m
  64
  65
  67
  69
  71
  73
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  112
  117
  123
  128
  134
  141
  147
  154
  162
  169
  178
  186
  195
  205
Working capital, $m
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Total debt, $m
  23
  26
  30
  34
  38
  43
  48
  54
  60
  67
  74
  81
  89
  98
  107
  116
  126
  137
  148
  160
  173
  186
  200
  215
  230
  246
  264
  282
  301
  321
Total liabilities, $m
  134
  137
  141
  145
  149
  154
  159
  165
  171
  177
  185
  192
  200
  208
  217
  227
  237
  248
  259
  271
  283
  297
  311
  325
  341
  357
  374
  392
  411
  431
Total equity, $m
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
  48
Total liabilities and equity, $m
  149
  152
  157
  161
  166
  171
  177
  183
  190
  197
  206
  213
  222
  231
  241
  252
  263
  276
  288
  301
  314
  330
  346
  361
  379
  397
  416
  436
  457
  479
Debt-to-equity ratio
  1.570
  1.740
  1.920
  2.110
  2.310
  2.520
  2.740
  2.950
  3.170
  3.380
  3.600
  3.810
  4.020
  4.220
  4.420
  4.610
  4.800
  4.980
  5.150
  5.320
  5.480
  5.640
  5.790
  5.940
  6.080
  6.210
  6.340
  6.460
  6.580
  6.690
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
  -39
  -34
  -35
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -45
  -48
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -121
  -127
Depreciation, amort., depletion, $m
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
Funds from operations, $m
  -29
  -24
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -82
  -86
  -91
  -97
  -102
  -108
Change in working capital, $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
  1
  1
Cash from operations, $m
  -29
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -55
  -59
  -62
  -66
  -69
  -73
  -78
  -82
  -87
  -92
  -97
  -103
  -108
Maintenance CAPEX, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
Cash from investing activities, $m
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Free cash flow, $m
  -36
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -99
  -104
  -110
  -116
  -122
  -129
  -136
Issuance/(repayment) of debt, $m
  -41
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
Issuance/(repurchase) of shares, $m
  83
  34
  35
  36
  38
  40
  41
  43
  45
  48
  46
  49
  51
  54
  57
  60
  64
  67
  71
  75
  79
  84
  89
  94
  99
  104
  110
  116
  123
  129
Cash from financing (excl. dividends), $m  
  42
  37
  39
  40
  42
  45
  46
  49
  51
  55
  53
  56
  59
  62
  66
  70
  74
  78
  82
  87
  92
  97
  103
  109
  114
  120
  127
  134
  142
  149
Total cash flow (excl. dividends), $m
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Retained Cash Flow (-), $m
  -83
  -34
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -46
  -49
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -123
  -129
Prev. year cash balance distribution, $m
  9
  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
  -68
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -104
  -110
  -116
Discount rate, %
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
  -61
  -23
  -21
  -19
  -17
  -15
  -14
  -12
  -10
  -9
  -8
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  15.3
  4.6
  1.4
  0.4
  0.1
  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
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Recro Pharma, Inc. is a clinical-stage specialty pharmaceutical company. The Company is engaged in developing products for hospitals and ambulatory care settings that is developing non-opioid products for treatment of serious acute pain. The Company's lead product candidate is an injectable form of meloxicam. Its product candidates for pain indications include injectable meloxicam, a product candidate in development for the treatment of acute post-operative pain; Dex-IN, a product candidate under development for the treatment of post-operative pain; Dex-SL, a product candidate for the treatment of chronic pain, and Fadolmidine (Fado), a product candidate used by injection into the spine for pain associated with surgery or certain types of chronic pain and which the Company pursues as a topical product for local application to treat serious pain associated with nerve damage to local tissues (neuropathies), especially of the lower extremities, which can occur in diabetic patients.

FINANCIAL RATIOS  of  Recro Pharma, Inc. (REPH)

Valuation Ratios
P/E Ratio -6.4
Price to Sales 2.8
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow -64
Price to Free Cash Flow -27.4
Growth Rates
Sales Growth Rate 32.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 32
Current Ratio 0
LT Debt to Equity 30.6%
Total Debt to Equity 33.3%
Interest Coverage -5
Management Effectiveness
Return On Assets -15.6%
Ret/ On Assets - 3 Yr. Avg. -55.2%
Return On Total Capital -36.1%
Ret/ On T. Cap. - 3 Yr. Avg. -65.9%
Return On Equity -53.6%
Return On Equity - 3 Yr. Avg. -166.8%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 46.4%
Gross Margin - 3 Yr. Avg. 30.8%
EBITDA Margin -26.1%
EBITDA Margin - 3 Yr. Avg. -10%
Operating Margin -37.7%
Oper. Margin - 3 Yr. Avg. -17%
Pre-Tax Margin -44.9%
Pre-Tax Margin - 3 Yr. Avg. -23.3%
Net Profit Margin -43.5%
Net Profit Margin - 3 Yr. Avg. -12.6%
Effective Tax Rate 3.2%
Eff/ Tax Rate - 3 Yr. Avg. 42.1%
Payout Ratio 0%

REPH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REPH stock intrinsic value calculation we used $77 million for the last fiscal year's total revenue generated by Recro Pharma, Inc.. The default revenue input number comes from 0001 income statement of Recro Pharma, Inc.. 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 REPH 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 10.3%, whose default value for REPH is calculated based on our internal credit rating of Recro Pharma, Inc., 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 Recro Pharma, Inc..
    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 REPH stock the variable cost ratio is equal to 137.7%.

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 REPH 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 14.9% for Recro Pharma, Inc..

Corporate tax rate of 27% is the nominal tax rate for Recro Pharma, Inc.. 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 REPH 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 REPH are equal to 81%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Recro Pharma, Inc. 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 REPH is equal to 4.7%. 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 - $-19.5 million for Recro Pharma, Inc. - 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 21.872 million for Recro Pharma, Inc. 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 Recro Pharma, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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