Intrinsic value of Recro Pharma - REPH

Previous Close

$6.84

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$6.84

 
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 0.1

 

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, %
  28.40
  26.06
  23.95
  22.06
  20.35
  18.82
  17.44
  16.19
  15.07
  14.07
  13.16
  12.34
  11.61
  10.95
  10.35
  9.82
  9.34
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
Revenue, $m
  92
  116
  144
  176
  212
  252
  295
  343
  395
  451
  510
  573
  639
  709
  783
  860
  940
  1,023
  1,111
  1,201
  1,295
  1,393
  1,495
  1,601
  1,711
  1,825
  1,944
  2,068
  2,196
  2,330
Variable operating expenses, $m
  113
  141
  174
  211
  254
  301
  352
  409
  470
  535
  601
  675
  753
  836
  922
  1,013
  1,108
  1,206
  1,309
  1,416
  1,527
  1,642
  1,762
  1,887
  2,016
  2,151
  2,291
  2,437
  2,588
  2,746
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
  113
  141
  174
  211
  254
  301
  352
  409
  470
  535
  601
  675
  753
  836
  922
  1,013
  1,108
  1,206
  1,309
  1,416
  1,527
  1,642
  1,762
  1,887
  2,016
  2,151
  2,291
  2,437
  2,588
  2,746
Operating income, $m
  -21
  -25
  -30
  -36
  -42
  -49
  -57
  -65
  -75
  -85
  -91
  -102
  -114
  -127
  -140
  -153
  -168
  -183
  -198
  -214
  -231
  -249
  -267
  -286
  -305
  -326
  -347
  -369
  -392
  -416
EBITDA, $m
  -9
  -12
  -15
  -18
  -22
  -26
  -30
  -35
  -40
  -46
  -52
  -58
  -65
  -72
  -80
  -88
  -96
  -104
  -113
  -123
  -132
  -142
  -153
  -163
  -175
  -186
  -198
  -211
  -224
  -238
Interest expense (income), $m
  5
  17
  29
  45
  64
  85
  108
  135
  164
  196
  230
  267
  306
  348
  392
  439
  487
  538
  592
  647
  705
  765
  828
  893
  960
  1,030
  1,103
  1,179
  1,258
  1,340
  1,426
Earnings before tax, $m
  -37
  -54
  -75
  -99
  -127
  -157
  -192
  -229
  -270
  -315
  -358
  -409
  -462
  -519
  -578
  -641
  -706
  -774
  -845
  -919
  -996
  -1,076
  -1,160
  -1,246
  -1,336
  -1,429
  -1,526
  -1,627
  -1,732
  -1,842
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
  -37
  -54
  -75
  -99
  -127
  -157
  -192
  -229
  -270
  -315
  -358
  -409
  -462
  -519
  -578
  -641
  -706
  -774
  -845
  -919
  -996
  -1,076
  -1,160
  -1,246
  -1,336
  -1,429
  -1,526
  -1,627
  -1,732
  -1,842

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
  220
  277
  344
  420
  505
  600
  705
  819
  943
  1,075
  1,217
  1,367
  1,526
  1,693
  1,868
  2,051
  2,243
  2,443
  2,650
  2,867
  3,092
  3,325
  3,568
  3,821
  4,083
  4,356
  4,639
  4,935
  5,242
  5,562
Adjusted assets (=assets-cash), $m
  220
  277
  344
  420
  505
  600
  705
  819
  943
  1,075
  1,217
  1,367
  1,526
  1,693
  1,868
  2,051
  2,243
  2,443
  2,650
  2,867
  3,092
  3,325
  3,568
  3,821
  4,083
  4,356
  4,639
  4,935
  5,242
  5,562
Revenue / Adjusted assets
  0.418
  0.419
  0.419
  0.419
  0.420
  0.420
  0.418
  0.419
  0.419
  0.420
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
Average production assets, $m
  76
  96
  119
  145
  175
  208
  244
  284
  326
  372
  421
  473
  528
  586
  646
  710
  776
  845
  917
  992
  1,070
  1,151
  1,235
  1,322
  1,413
  1,508
  1,606
  1,708
  1,814
  1,925
Working capital, $m
  -35
  -44
  -54
  -66
  -80
  -95
  -111
  -129
  -149
  -169
  -192
  -215
  -240
  -267
  -294
  -323
  -353
  -385
  -418
  -452
  -487
  -524
  -562
  -602
  -643
  -686
  -731
  -777
  -826
  -876
Total debt, $m
  94
  146
  206
  274
  351
  437
  531
  634
  745
  864
  991
  1,127
  1,269
  1,420
  1,577
  1,742
  1,915
  2,095
  2,282
  2,476
  2,679
  2,889
  3,108
  3,335
  3,571
  3,816
  4,072
  4,337
  4,614
  4,902
Total liabilities, $m
  198
  250
  310
  378
  455
  540
  635
  737
  848
  968
  1,095
  1,230
  1,373
  1,523
  1,681
  1,846
  2,019
  2,198
  2,385
  2,580
  2,782
  2,993
  3,211
  3,439
  3,675
  3,920
  4,176
  4,441
  4,718
  5,005
Total equity, $m
  22
  28
  34
  42
  51
  60
  71
  82
  94
  108
  122
  137
  153
  169
  187
  205
  224
  244
  265
  287
  309
  333
  357
  382
  408
  436
  464
  493
  524
  556
Total liabilities and equity, $m
  220
  278
  344
  420
  506
  600
  706
  819
  942
  1,076
  1,217
  1,367
  1,526
  1,692
  1,868
  2,051
  2,243
  2,442
  2,650
  2,867
  3,091
  3,326
  3,568
  3,821
  4,083
  4,356
  4,640
  4,934
  5,242
  5,561
Debt-to-equity ratio
  4.290
  5.260
  5.980
  6.530
  6.950
  7.270
  7.530
  7.730
  7.900
  8.030
  8.150
  8.240
  8.320
  8.390
  8.440
  8.490
  8.540
  8.580
  8.610
  8.640
  8.660
  8.690
  8.710
  8.730
  8.750
  8.760
  8.780
  8.790
  8.800
  8.810
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
  -37
  -54
  -75
  -99
  -127
  -157
  -192
  -229
  -270
  -315
  -358
  -409
  -462
  -519
  -578
  -641
  -706
  -774
  -845
  -919
  -996
  -1,076
  -1,160
  -1,246
  -1,336
  -1,429
  -1,526
  -1,627
  -1,732
  -1,842
Depreciation, amort., depletion, $m
  11
  13
  15
  18
  20
  23
  27
  30
  34
  39
  39
  44
  49
  54
  60
  66
  72
  78
  85
  92
  99
  107
  114
  122
  131
  140
  149
  158
  168
  178
Funds from operations, $m
  -26
  -41
  -60
  -82
  -106
  -134
  -165
  -199
  -236
  -276
  -319
  -365
  -413
  -465
  -519
  -575
  -634
  -696
  -761
  -828
  -897
  -970
  -1,045
  -1,124
  -1,205
  -1,290
  -1,378
  -1,469
  -1,564
  -1,663
Change in working capital, $m
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
Cash from operations, $m
  -18
  -32
  -49
  -70
  -93
  -119
  -149
  -181
  -217
  -255
  -297
  -341
  -388
  -438
  -491
  -546
  -604
  -665
  -728
  -794
  -862
  -933
  -1,007
  -1,084
  -1,164
  -1,247
  -1,333
  -1,423
  -1,516
  -1,613
Maintenance CAPEX, $m
  -6
  -7
  -9
  -11
  -13
  -16
  -19
  -23
  -26
  -30
  -34
  -39
  -44
  -49
  -54
  -60
  -66
  -72
  -78
  -85
  -92
  -99
  -107
  -114
  -122
  -131
  -140
  -149
  -158
  -168
New CAPEX, $m
  -17
  -20
  -23
  -26
  -30
  -33
  -36
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -111
Cash from investing activities, $m
  -23
  -27
  -32
  -37
  -43
  -49
  -55
  -63
  -69
  -76
  -83
  -91
  -99
  -107
  -115
  -123
  -132
  -141
  -150
  -160
  -170
  -180
  -191
  -201
  -213
  -225
  -238
  -251
  -264
  -279
Free cash flow, $m
  -41
  -59
  -81
  -107
  -136
  -168
  -204
  -243
  -286
  -331
  -380
  -432
  -487
  -545
  -606
  -670
  -736
  -806
  -878
  -953
  -1,032
  -1,113
  -1,198
  -1,286
  -1,377
  -1,472
  -1,571
  -1,673
  -1,780
  -1,892
Issuance/(repayment) of debt, $m
  41
  52
  60
  68
  77
  86
  94
  103
  111
  119
  127
  135
  143
  150
  158
  165
  172
  180
  187
  195
  202
  210
  219
  227
  236
  245
  255
  266
  276
  288
Issuance/(repurchase) of shares, $m
  45
  60
  82
  107
  135
  167
  202
  241
  283
  328
  372
  424
  478
  536
  596
  659
  725
  794
  866
  941
  1,019
  1,100
  1,184
  1,271
  1,362
  1,457
  1,555
  1,657
  1,763
  1,874
Cash from financing (excl. dividends), $m  
  86
  112
  142
  175
  212
  253
  296
  344
  394
  447
  499
  559
  621
  686
  754
  824
  897
  974
  1,053
  1,136
  1,221
  1,310
  1,403
  1,498
  1,598
  1,702
  1,810
  1,923
  2,039
  2,162
Total cash flow (excl. dividends), $m
  45
  53
  60
  68
  76
  84
  92
  100
  108
  116
  119
  127
  134
  141
  148
  155
  162
  168
  175
  182
  190
  197
  205
  213
  221
  230
  239
  249
  259
  270
Retained Cash Flow (-), $m
  -45
  -60
  -82
  -107
  -135
  -167
  -202
  -241
  -283
  -328
  -372
  -424
  -478
  -536
  -596
  -659
  -725
  -794
  -866
  -941
  -1,019
  -1,100
  -1,184
  -1,271
  -1,362
  -1,457
  -1,555
  -1,657
  -1,763
  -1,874
Prev. year cash balance distribution, $m
  15
  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
  15
  -7
  -21
  -39
  -59
  -83
  -110
  -140
  -174
  -212
  -253
  -297
  -344
  -395
  -448
  -504
  -564
  -626
  -691
  -759
  -829
  -903
  -979
  -1,058
  -1,141
  -1,226
  -1,315
  -1,408
  -1,504
  -1,604
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
  14
  -7
  -19
  -32
  -46
  -60
  -74
  -88
  -100
  -111
  -120
  -127
  -131
  -132
  -132
  -128
  -123
  -115
  -106
  -96
  -86
  -75
  -64
  -54
  -44
  -36
  -28
  -22
  -16
  -12
Current shareholders' claim on cash, %
  61.0
  39.3
  24.6
  15.1
  9.1
  5.4
  3.2
  1.9
  1.1
  0.7
  0.4
  0.2
  0.1
  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
  0.0
  0.0

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 (REPH)

Valuation Ratios
P/E Ratio -4.3
Price to Sales 1.9
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow -43.4
Price to Free Cash Flow -18.6
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 $71.834 million for the last fiscal year's total revenue generated by Recro Pharma. The default revenue input number comes from 0001 income statement of Recro Pharma. 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 28.4% 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 REPH is calculated based on our internal credit rating of Recro Pharma, 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.
    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 123.6%.

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 30.9% for Recro Pharma.

Corporate tax rate of 27% is the nominal tax rate for Recro Pharma. 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 82.6%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Recro Pharma 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 -37.6%. 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 - $28.848 million for Recro Pharma - 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 20.718 million for Recro Pharma 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 at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Recro Pharma: 3Q Earnings Snapshot   [10:44AM  Associated Press]
▶ Recro Announces Expansion of CDMO Service Capabilities   [Oct-01-18 07:00AM  GlobeNewswire]
▶ Recro Pharma to resubmit application for non-opioid pain medicine   [Sep-04-18 10:50AM  American City Business Journals]
▶ Recro Pharma: 2Q Earnings Snapshot   [09:33AM  Associated Press]
▶ Recro Pharma Q2 Earnings Preview   [Aug-06-18 03:39PM  Benzinga]

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