Intrinsic value of Simulations Plus - SLP

Previous Close

$20.30

  Intrinsic Value

$18.65

stock screener

  Rating & Target

hold

-8%

Previous close

$20.30

 
Intrinsic value

$18.65

 
Up/down potential

-8%

 
Rating

hold

We calculate the intrinsic value of SLP 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 0.4

 

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, %
  26.70
  24.53
  22.58
  20.82
  19.24
  17.81
  16.53
  15.38
  14.34
  13.41
  12.57
  11.81
  11.13
  10.52
  9.96
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
Revenue, $m
  31
  38
  47
  56
  67
  79
  92
  107
  122
  138
  155
  174
  193
  214
  235
  257
  280
  304
  330
  356
  383
  411
  440
  471
  503
  536
  570
  605
  643
  681
Variable operating expenses, $m
  18
  22
  27
  32
  37
  44
  50
  58
  66
  74
  81
  90
  100
  111
  122
  133
  146
  158
  171
  185
  199
  213
  229
  245
  261
  278
  296
  314
  334
  354
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
  18
  22
  27
  32
  37
  44
  50
  58
  66
  74
  81
  90
  100
  111
  122
  133
  146
  158
  171
  185
  199
  213
  229
  245
  261
  278
  296
  314
  334
  354
Operating income, $m
  12
  16
  20
  25
  30
  36
  42
  49
  56
  64
  75
  84
  93
  103
  113
  124
  135
  146
  158
  171
  184
  198
  212
  226
  242
  257
  274
  291
  309
  328
EBITDA, $m
  15
  19
  23
  28
  33
  39
  46
  53
  60
  68
  77
  86
  96
  106
  116
  127
  139
  151
  163
  176
  190
  204
  218
  233
  249
  265
  282
  300
  318
  337
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  12
  16
  19
  24
  29
  34
  40
  47
  54
  61
  71
  80
  89
  98
  107
  118
  128
  139
  150
  162
  175
  187
  201
  214
  229
  244
  259
  275
  292
  310
Tax expense, $m
  3
  4
  5
  6
  8
  9
  11
  13
  14
  16
  19
  22
  24
  26
  29
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  74
  79
  84
Net income, $m
  9
  11
  14
  17
  21
  25
  29
  34
  39
  45
  52
  58
  65
  71
  78
  86
  93
  101
  110
  118
  127
  137
  146
  157
  167
  178
  189
  201
  213
  226

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
  44
  54
  67
  81
  96
  113
  132
  152
  174
  198
  222
  249
  276
  305
  336
  368
  401
  435
  471
  509
  548
  588
  630
  674
  719
  766
  815
  866
  919
  975
Adjusted assets (=assets-cash), $m
  44
  54
  67
  81
  96
  113
  132
  152
  174
  198
  222
  249
  276
  305
  336
  368
  401
  435
  471
  509
  548
  588
  630
  674
  719
  766
  815
  866
  919
  975
Revenue / Adjusted assets
  0.705
  0.704
  0.701
  0.691
  0.698
  0.699
  0.697
  0.704
  0.701
  0.697
  0.698
  0.699
  0.699
  0.702
  0.699
  0.698
  0.698
  0.699
  0.701
  0.699
  0.699
  0.699
  0.698
  0.699
  0.700
  0.700
  0.699
  0.699
  0.700
  0.698
Average production assets, $m
  13
  16
  20
  24
  29
  34
  40
  46
  53
  60
  67
  75
  83
  92
  101
  111
  121
  131
  142
  154
  165
  178
  190
  203
  217
  231
  246
  262
  278
  294
Working capital, $m
  6
  7
  9
  10
  12
  15
  17
  20
  22
  25
  29
  32
  36
  39
  43
  47
  52
  56
  61
  65
  70
  76
  81
  87
  92
  99
  105
  111
  118
  125
Total debt, $m
  3
  7
  12
  17
  23
  29
  36
  44
  52
  60
  70
  79
  90
  100
  112
  123
  136
  148
  162
  176
  190
  205
  220
  237
  253
  271
  289
  308
  327
  348
Total liabilities, $m
  16
  20
  25
  30
  36
  42
  49
  56
  64
  73
  82
  92
  102
  113
  124
  136
  148
  161
  174
  188
  203
  218
  233
  249
  266
  283
  302
  320
  340
  361
Total equity, $m
  28
  34
  42
  51
  61
  71
  83
  96
  110
  125
  140
  157
  174
  192
  212
  232
  253
  274
  297
  321
  345
  370
  397
  424
  453
  483
  514
  546
  579
  614
Total liabilities and equity, $m
  44
  54
  67
  81
  97
  113
  132
  152
  174
  198
  222
  249
  276
  305
  336
  368
  401
  435
  471
  509
  548
  588
  630
  673
  719
  766
  816
  866
  919
  975
Debt-to-equity ratio
  0.130
  0.220
  0.290
  0.340
  0.380
  0.410
  0.430
  0.450
  0.470
  0.490
  0.500
  0.510
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.540
  0.550
  0.550
  0.550
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.570
  0.570
Adjusted equity ratio
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  11
  14
  17
  21
  25
  29
  34
  39
  45
  52
  58
  65
  71
  78
  86
  93
  101
  110
  118
  127
  137
  146
  157
  167
  178
  189
  201
  213
  226
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
Funds from operations, $m
  12
  14
  17
  21
  25
  29
  33
  38
  43
  49
  54
  61
  67
  74
  82
  90
  98
  106
  115
  124
  133
  143
  153
  163
  174
  186
  197
  210
  223
  236
Change in working capital, $m
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
Cash from operations, $m
  11
  13
  16
  19
  23
  27
  31
  36
  41
  46
  51
  57
  64
  71
  78
  85
  93
  101
  110
  119
  128
  137
  147
  158
  168
  180
  191
  203
  216
  229
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
Cash from investing activities, $m
  -3
  -3
  -5
  -5
  -6
  -6
  -7
  -7
  -9
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -21
  -21
  -23
  -23
  -25
  -26
Free cash flow, $m
  7
  9
  12
  14
  17
  20
  24
  28
  33
  37
  42
  47
  53
  59
  66
  72
  80
  87
  95
  103
  111
  120
  129
  138
  148
  158
  169
  180
  191
  203
Issuance/(repayment) of debt, $m
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
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  
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
Total cash flow (excl. dividends), $m
  11
  13
  16
  19
  23
  27
  31
  36
  41
  46
  51
  57
  63
  70
  77
  84
  92
  100
  108
  117
  125
  135
  144
  154
  165
  176
  187
  199
  211
  223
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -33
  -35
Prev. year cash balance distribution, $m
  4
  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
  9
  7
  8
  11
  13
  16
  19
  23
  27
  31
  35
  40
  46
  52
  58
  64
  71
  78
  85
  93
  101
  109
  118
  127
  136
  146
  156
  166
  177
  189
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
  9
  6
  7
  9
  10
  12
  13
  14
  15
  16
  17
  17
  17
  17
  17
  16
  15
  14
  13
  12
  10
  9
  8
  6
  5
  4
  3
  3
  2
  1
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

Simulations Plus, Inc. (Simulations Plus) develops and produces software for use in pharmaceutical research and for education, and provides consulting and contract research services to the pharmaceutical industry. The Company offers five software products for pharmaceutical research. ADMET (Absorption, Distribution, Metabolism, Excretion and Toxicity) Predictor is a computer program that takes molecular structures as inputs and predicts over 140 different properties for them at the rate of about 200,000 compounds per hour. MedChem Designer includes a small set of ADMET Predictor property predictions, allowing the chemist to modify molecular structures. MedChem Studio is a tool for medicinal and computational chemists for both data mining and for designing new drug-like molecules. DDDPlus simulates in-vitro laboratory experiments used to measure the rate of dissolution of the drug. GastroPlus simulates the absorption, pharmacokinetics, and pharmacodynamics of drugs.

FINANCIAL RATIOS  of  Simulations Plus (SLP)

Valuation Ratios
P/E Ratio 58.5
Price to Sales 14.6
Price to Book 13.5
Price to Tangible Book
Price to Cash Flow 50.1
Price to Free Cash Flow 70.2
Growth Rates
Sales Growth Rate 20%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.5
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 17.9%
Ret/ On Assets - 3 Yr. Avg. 17.6%
Return On Total Capital 24.5%
Ret/ On T. Cap. - 3 Yr. Avg. 23.5%
Return On Equity 24.5%
Return On Equity - 3 Yr. Avg. 23.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 75%
Gross Margin - 3 Yr. Avg. 75.9%
EBITDA Margin 41.7%
EBITDA Margin - 3 Yr. Avg. 43.7%
Operating Margin 33.3%
Oper. Margin - 3 Yr. Avg. 33.9%
Pre-Tax Margin 33.3%
Pre-Tax Margin - 3 Yr. Avg. 33.9%
Net Profit Margin 25%
Net Profit Margin - 3 Yr. Avg. 24.1%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 29%
Payout Ratio 50%

SLP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SLP stock intrinsic value calculation we used $24.137913 million for the last fiscal year's total revenue generated by Simulations Plus. The default revenue input number comes from 0001 income statement of Simulations Plus. 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 SLP stock valuation model: a) initial revenue growth rate of 26.7% 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 SLP is calculated based on our internal credit rating of Simulations Plus, 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 Simulations Plus.
    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 SLP stock the variable cost ratio is equal to 62.5%.

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 SLP 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 Simulations Plus.

Corporate tax rate of 27% is the nominal tax rate for Simulations Plus. 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 SLP 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 SLP are equal to 43.2%.

Life of production assets of 135 years is the average useful life of capital assets used in Simulations Plus 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 SLP is equal to 18.4%. 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 - $25.804887 million for Simulations Plus - 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 17.365 million for Simulations Plus 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 Simulations Plus at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Simulations Plus: Fiscal 4Q Earnings Snapshot   [04:50PM  Associated Press]
▶ Simulations Plus Receives New Grant Award from the FDA   [Sep-12-18 08:30AM  Business Wire]
▶ Simulations Plus: Fiscal 3Q Earnings Snapshot   [Jul-10-18 04:05PM  Associated Press]
▶ Company Profile for Simulations Plus, Inc.   [Jul-03-18 05:58PM  Business Wire]
▶ Simulations Plus Releases ADMET Predictor Version 9   [Jun-28-18 08:30AM  Business Wire]
▶ Simulations Plus Names Shawn OConnor as CEO   [Jun-26-18 08:30AM  Business Wire]
▶ Simulations Plus Releases GastroPlus Version 9.6   [May-23-18 08:30AM  Business Wire]
▶ US FDA Procures DILIsym Software License Package   [May-08-18 08:30AM  Business Wire]
▶ Simulations Plus: Fiscal 2Q Earnings Snapshot   [Apr-09-18 04:14PM  Associated Press]
▶ Simulations Plus Launches Version 2.0 of PKPlus   [Feb-01-18 08:30AM  Business Wire]
▶ Simulations Plus posts 1Q profit   [Jan-09-18 04:06PM  Associated Press]
▶ Wildfire Forces Cancellation of LD Micro Conference   [Dec-06-17 12:20PM  ACCESSWIRE]
▶ Simulations Plus Releases ADMET Predictor Version 8.5   [Nov-30-17 08:30AM  Business Wire]
▶ Simulations Plus posts 4Q profit   [05:15AM  Associated Press]
▶ At $16.7, Is It Time To Buy Simulations Plus Inc (SLP)?   [Oct-06-17 08:59AM  Simply Wall St.]
▶ Simulations Plus Sees Composite Rating Move Up To 96   [Sep-28-17 03:00AM  Investor's Business Daily]
▶ Simulations Plus Announces Senior Management Changes   [Aug-31-17 08:30AM  Business Wire]
▶ Simulations Plus Releases MembranePlus Version 2   [Aug-23-17 08:30AM  Business Wire]
▶ Company News for July 12, 2017   [10:25AM  Zacks]
▶ Simulations Plus posts 3Q profit   [Jul-10-17 11:55PM  Associated Press]
▶ Simulations Plus to Acquire DILIsym Services, Inc.   [May-01-17 08:30AM  Business Wire]

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