Intrinsic value of Retrophin, Inc. - RTRX

Previous Close

$22.43

  Intrinsic Value

$2.62

stock screener

  Rating & Target

str. sell

-88%

Previous close

$22.43

 
Intrinsic value

$2.62

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of RTRX 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 0.9

 

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, %
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  170
  177
  184
  192
  200
  208
  217
  227
  237
  248
  259
  271
  284
  297
  311
  326
  342
  358
  375
  393
  413
  433
  454
  476
  499
  524
  550
  577
  605
  635
Variable operating expenses, $m
  207
  214
  222
  231
  240
  249
  259
  270
  281
  293
  287
  300
  314
  329
  344
  360
  378
  396
  415
  435
  456
  478
  502
  526
  552
  579
  608
  637
  669
  702
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
  207
  214
  222
  231
  240
  249
  259
  270
  281
  293
  287
  300
  314
  329
  344
  360
  378
  396
  415
  435
  456
  478
  502
  526
  552
  579
  608
  637
  669
  702
Operating income, $m
  -37
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -45
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
EBITDA, $m
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
Interest expense (income), $m
  2
  16
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  40
  43
  46
  48
  51
  54
  58
  61
  65
  68
Earnings before tax, $m
  -53
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -49
  -51
  -54
  -57
  -61
  -64
  -68
  -71
  -75
  -80
  -84
  -89
  -93
  -99
  -104
  -110
  -116
  -122
  -128
  -135
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
  -53
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -49
  -51
  -54
  -57
  -61
  -64
  -68
  -71
  -75
  -80
  -84
  -89
  -93
  -99
  -104
  -110
  -116
  -122
  -128
  -135

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
  332
  345
  359
  374
  389
  406
  424
  442
  462
  483
  505
  529
  553
  579
  607
  636
  666
  698
  732
  767
  804
  843
  884
  928
  973
  1,021
  1,071
  1,124
  1,180
  1,238
Adjusted assets (=assets-cash), $m
  332
  345
  359
  374
  389
  406
  424
  442
  462
  483
  505
  529
  553
  579
  607
  636
  666
  698
  732
  767
  804
  843
  884
  928
  973
  1,021
  1,071
  1,124
  1,180
  1,238
Revenue / Adjusted assets
  0.512
  0.513
  0.513
  0.513
  0.514
  0.512
  0.512
  0.514
  0.513
  0.513
  0.513
  0.512
  0.514
  0.513
  0.512
  0.513
  0.514
  0.513
  0.512
  0.512
  0.514
  0.514
  0.514
  0.513
  0.513
  0.513
  0.514
  0.513
  0.513
  0.513
Average production assets, $m
  100
  104
  108
  113
  118
  123
  128
  134
  140
  146
  153
  160
  167
  175
  183
  192
  201
  211
  221
  232
  243
  255
  267
  280
  294
  309
  324
  340
  356
  374
Working capital, $m
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -153
  -161
  -168
  -177
  -185
  -195
  -204
  -214
  -225
Total debt, $m
  148
  159
  172
  185
  199
  214
  230
  247
  265
  284
  304
  325
  347
  371
  395
  421
  448
  477
  507
  539
  573
  608
  645
  684
  725
  768
  813
  861
  911
  963
Total liabilities, $m
  299
  310
  323
  336
  350
  365
  381
  398
  416
  435
  455
  476
  498
  521
  546
  572
  599
  628
  658
  690
  724
  759
  796
  835
  876
  919
  964
  1,012
  1,062
  1,114
Total equity, $m
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  112
  118
  124
Total liabilities and equity, $m
  332
  344
  359
  373
  389
  406
  423
  442
  462
  483
  506
  529
  553
  579
  607
  636
  666
  698
  731
  767
  804
  843
  884
  928
  973
  1,021
  1,071
  1,124
  1,180
  1,238
Debt-to-equity ratio
  4.450
  4.620
  4.790
  4.960
  5.120
  5.280
  5.440
  5.590
  5.740
  5.880
  6.010
  6.150
  6.270
  6.400
  6.510
  6.630
  6.730
  6.840
  6.940
  7.030
  7.120
  7.210
  7.290
  7.370
  7.450
  7.520
  7.590
  7.660
  7.720
  7.780
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
  -53
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -49
  -51
  -54
  -57
  -61
  -64
  -68
  -71
  -75
  -80
  -84
  -89
  -93
  -99
  -104
  -110
  -116
  -122
  -128
  -135
Depreciation, amort., depletion, $m
  29
  29
  29
  30
  30
  31
  31
  32
  32
  33
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
Funds from operations, $m
  -24
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -99
Change in working capital, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  -22
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -38
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -88
Maintenance CAPEX, $m
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
New CAPEX, $m
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
Cash from investing activities, $m
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
Free cash flow, $m
  -35
  -31
  -33
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -51
  -53
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -102
  -108
  -114
  -120
  -127
  -133
  -141
Issuance/(repayment) of debt, $m
  -70
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  48
  50
  52
Issuance/(repurchase) of shares, $m
  135
  50
  52
  53
  55
  57
  60
  62
  64
  67
  51
  54
  57
  60
  63
  67
  71
  75
  79
  83
  88
  92
  98
  103
  108
  114
  121
  127
  134
  141
Cash from financing (excl. dividends), $m  
  65
  62
  65
  66
  69
  72
  76
  79
  82
  86
  71
  75
  79
  83
  88
  93
  98
  104
  109
  115
  122
  127
  135
  142
  149
  157
  166
  175
  184
  193
Total cash flow (excl. dividends), $m
  30
  31
  31
  32
  33
  34
  35
  36
  37
  38
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
Retained Cash Flow (-), $m
  -135
  -50
  -52
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -88
  -92
  -98
  -103
  -108
  -114
  -121
  -127
  -134
  -141
Prev. year cash balance distribution, $m
  367
  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
  262
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
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
  251
  -18
  -18
  -17
  -17
  -17
  -17
  -16
  -16
  -15
  -15
  -14
  -13
  -12
  -11
  -10
  -9
  -8
  -7
  -6
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
Current shareholders' claim on cash, %
  50.0
  33.0
  21.8
  14.5
  9.6
  6.4
  4.2
  2.8
  1.9
  1.3
  0.9
  0.7
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Retrophin, Inc. is a biopharmaceutical company. The Company is focused on the development, acquisition and commercialization of therapies for the treatment of serious, catastrophic or rare diseases. The Company sells three products, including Chenodal (chenodeoxycholic acid), Cholbam (cholic acid) and Thiola (tiopronin). Its Chenodal is approved in the United States for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age. Chenodal has also been care for cerebrotendinous xanthomatosis (CTX) patients. Its Cholbam is approved in the United States for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders. Its Thiola is approved in the United States for the prevention of cystine (kidney) stone formation in patients with severe homozygous cystinuria.

FINANCIAL RATIOS  of  Retrophin, Inc. (RTRX)

Valuation Ratios
P/E Ratio -17.7
Price to Sales 6.3
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow -425.2
Price to Free Cash Flow -60.7
Growth Rates
Sales Growth Rate 34%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 71.4%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 14.3%
Total Debt to Equity 14.3%
Interest Coverage -28
Management Effectiveness
Return On Assets -8.9%
Ret/ On Assets - 3 Yr. Avg. -36%
Return On Total Capital -13.8%
Ret/ On T. Cap. - 3 Yr. Avg. -231.4%
Return On Equity -15.8%
Return On Equity - 3 Yr. Avg. 154.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 96.3%
Gross Margin - 3 Yr. Avg. 98.1%
EBITDA Margin -29.9%
EBITDA Margin - 3 Yr. Avg. -92.4%
Operating Margin -43.3%
Oper. Margin - 3 Yr. Avg. -122.7%
Pre-Tax Margin -43.3%
Pre-Tax Margin - 3 Yr. Avg. -114%
Net Profit Margin -35.8%
Net Profit Margin - 3 Yr. Avg. -105.1%
Effective Tax Rate 17.2%
Eff/ Tax Rate - 3 Yr. Avg. 2.5%
Payout Ratio 0%

RTRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RTRX stock intrinsic value calculation we used $164 million for the last fiscal year's total revenue generated by Retrophin, Inc.. The default revenue input number comes from 0001 income statement of Retrophin, 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 RTRX stock valuation model: a) initial revenue growth rate of 3.8% 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 RTRX is calculated based on our internal credit rating of Retrophin, 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 Retrophin, 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 RTRX stock the variable cost ratio is equal to 122%.

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 RTRX 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 7.5% for Retrophin, Inc..

Corporate tax rate of 27% is the nominal tax rate for Retrophin, 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 RTRX 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 RTRX are equal to 58.9%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Retrophin, 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 RTRX is equal to -35.4%. 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 - $318.253 million for Retrophin, 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 41.413 million for Retrophin, 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 Retrophin, Inc. at the current share price and the inputted number of shares is $0.9 billion.

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