Intrinsic value of Spectrum Pharmaceuticals - SPPI

Previous Close

$12.84

  Intrinsic Value

$0.47

stock screener

  Rating & Target

str. sell

-96%

Previous close

$12.84

 
Intrinsic value

$0.47

 
Up/down potential

-96%

 
Rating

str. sell

We calculate the intrinsic value of SPPI 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 1.3

 

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
  131
  134
  137
  141
  146
  150
  155
  161
  167
  173
  180
  187
  195
  203
  212
  222
  231
  242
  253
  264
  277
  290
  303
  318
  333
  349
  365
  383
  402
  421
Variable operating expenses, $m
  187
  191
  195
  200
  206
  212
  219
  226
  234
  242
  236
  245
  256
  266
  278
  290
  303
  317
  331
  346
  362
  379
  397
  416
  436
  456
  478
  501
  526
  551
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
  187
  191
  195
  200
  206
  212
  219
  226
  234
  242
  236
  245
  256
  266
  278
  290
  303
  317
  331
  346
  362
  379
  397
  416
  436
  456
  478
  501
  526
  551
Operating income, $m
  -56
  -57
  -58
  -59
  -61
  -62
  -64
  -65
  -67
  -69
  -56
  -58
  -60
  -63
  -66
  -68
  -72
  -75
  -78
  -82
  -85
  -89
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
EBITDA, $m
  -26
  -27
  -28
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
Interest expense (income), $m
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
Earnings before tax, $m
  -60
  -61
  -62
  -64
  -65
  -67
  -69
  -71
  -73
  -76
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -116
  -121
  -127
  -134
  -141
  -148
  -155
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
  -60
  -61
  -62
  -64
  -65
  -67
  -69
  -71
  -73
  -76
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -116
  -121
  -127
  -134
  -141
  -148
  -155

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
  339
  347
  356
  366
  377
  389
  402
  417
  432
  449
  467
  486
  506
  527
  550
  574
  599
  626
  655
  685
  717
  750
  786
  823
  862
  903
  947
  992
  1,040
  1,091
Adjusted assets (=assets-cash), $m
  339
  347
  356
  366
  377
  389
  402
  417
  432
  449
  467
  486
  506
  527
  550
  574
  599
  626
  655
  685
  717
  750
  786
  823
  862
  903
  947
  992
  1,040
  1,091
Revenue / Adjusted assets
  0.386
  0.386
  0.385
  0.385
  0.387
  0.386
  0.386
  0.386
  0.387
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.387
  0.386
  0.387
  0.386
  0.385
  0.386
  0.387
  0.385
  0.386
  0.386
  0.386
  0.385
  0.386
  0.387
  0.386
Average production assets, $m
  87
  89
  91
  94
  96
  100
  103
  107
  111
  115
  119
  124
  129
  135
  141
  147
  153
  160
  168
  175
  183
  192
  201
  211
  221
  231
  242
  254
  266
  279
Working capital, $m
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
Total debt, $m
  40
  43
  45
  48
  52
  55
  59
  63
  68
  73
  78
  84
  90
  96
  103
  110
  117
  125
  134
  142
  152
  162
  172
  183
  195
  207
  220
  233
  247
  262
Total liabilities, $m
  100
  102
  105
  108
  111
  115
  119
  123
  128
  132
  138
  143
  149
  156
  162
  169
  177
  185
  193
  202
  211
  221
  232
  243
  254
  266
  279
  293
  307
  322
Total equity, $m
  239
  245
  251
  258
  266
  274
  284
  294
  305
  316
  329
  342
  357
  372
  388
  405
  423
  442
  462
  483
  505
  529
  554
  580
  608
  637
  667
  700
  733
  769
Total liabilities and equity, $m
  339
  347
  356
  366
  377
  389
  403
  417
  433
  448
  467
  485
  506
  528
  550
  574
  600
  627
  655
  685
  716
  750
  786
  823
  862
  903
  946
  993
  1,040
  1,091
Debt-to-equity ratio
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.220
  0.220
  0.230
  0.240
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
Adjusted equity ratio
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -60
  -61
  -62
  -64
  -65
  -67
  -69
  -71
  -73
  -76
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -116
  -121
  -127
  -134
  -141
  -148
  -155
Depreciation, amort., depletion, $m
  30
  30
  30
  31
  31
  32
  32
  33
  34
  34
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
Funds from operations, $m
  -30
  -31
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
Change in working capital, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  -30
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -91
  -96
  -101
  -106
Maintenance CAPEX, $m
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -16
  -16
  -17
  -18
  -18
  -19
  -19
  -21
  -21
  -22
  -24
  -25
  -25
  -26
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -39
  -40
  -43
  -45
  -47
  -49
  -52
  -54
  -57
Free cash flow, $m
  -46
  -47
  -48
  -50
  -52
  -53
  -56
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -134
  -140
  -147
  -155
  -163
Issuance/(repayment) of debt, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
Issuance/(repurchase) of shares, $m
  65
  67
  69
  71
  73
  76
  78
  81
  84
  88
  76
  79
  83
  87
  91
  96
  101
  106
  111
  116
  122
  128
  135
  142
  149
  156
  164
  173
  182
  191
Cash from financing (excl. dividends), $m  
  67
  69
  72
  74
  76
  80
  82
  85
  89
  93
  81
  85
  89
  93
  98
  103
  109
  114
  119
  125
  131
  138
  145
  153
  161
  168
  177
  186
  196
  206
Total cash flow (excl. dividends), $m
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
Retained Cash Flow (-), $m
  -65
  -67
  -69
  -71
  -73
  -76
  -78
  -81
  -84
  -88
  -76
  -79
  -83
  -87
  -91
  -96
  -101
  -106
  -111
  -116
  -122
  -128
  -135
  -142
  -149
  -156
  -164
  -173
  -182
  -191
Prev. year cash balance distribution, $m
  118
  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
  75
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -116
  -121
  -127
  -134
  -141
  -148
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
  71
  -41
  -40
  -39
  -37
  -36
  -35
  -33
  -32
  -30
  -29
  -27
  -25
  -23
  -21
  -19
  -17
  -15
  -13
  -12
  -10
  -8
  -7
  -6
  -4
  -4
  -3
  -2
  -2
  -1
Current shareholders' claim on cash, %
  93.1
  86.8
  80.8
  75.2
  70.0
  65.1
  60.6
  56.3
  52.4
  48.7
  45.8
  43.1
  40.5
  38.1
  35.8
  33.6
  31.5
  29.6
  27.7
  26.0
  24.4
  22.9
  21.4
  20.1
  18.8
  17.6
  16.5
  15.4
  14.5
  13.5

Spectrum Pharmaceuticals, Inc. is a biotechnology company. The Company operates through developing and commercializing oncology and hematology drug products segment. It has a product portfolio consisting of both commercial stage and development stage products that address various cancer types. The Company has six approved oncology/hematology products that target different types of cancer, including non-Hodgkin's lymphoma (NHL), advanced metastatic colorectal cancer (mCRC), acute lymphoblastic leukemia (ALL) and multiple myeloma (MM). It also has three drugs in mid-to-late stage development, which include ROLONTIS for chemotherapy-induced neutropenia; QAPZOLA for immediate intravesical instillation in post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer (NMIBC), and POZIOTINIB, a pan-human epidermal growth factor receptor (HER) inhibitor used in the treatment of patients with a range of solid tumors, including breast and lung cancer.

FINANCIAL RATIOS  of  Spectrum Pharmaceuticals (SPPI)

Valuation Ratios
P/E Ratio -15
Price to Sales 7.1
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow -25.8
Price to Free Cash Flow -25.8
Growth Rates
Sales Growth Rate -10.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 41.1%
Total Debt to Equity 41.1%
Interest Coverage -23
Management Effectiveness
Return On Assets -15.6%
Ret/ On Assets - 3 Yr. Avg. -11.6%
Return On Total Capital -21.4%
Ret/ On T. Cap. - 3 Yr. Avg. -16.5%
Return On Equity -30.7%
Return On Equity - 3 Yr. Avg. -23.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 76%
Gross Margin - 3 Yr. Avg. 81.5%
EBITDA Margin -28.8%
EBITDA Margin - 3 Yr. Avg. -15.5%
Operating Margin -42.5%
Oper. Margin - 3 Yr. Avg. -27.9%
Pre-Tax Margin -48.6%
Pre-Tax Margin - 3 Yr. Avg. -34.3%
Net Profit Margin -47.3%
Net Profit Margin - 3 Yr. Avg. -34.4%
Effective Tax Rate 2.8%
Eff/ Tax Rate - 3 Yr. Avg. -1.2%
Payout Ratio 0%

SPPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPPI stock intrinsic value calculation we used $128.367 million for the last fiscal year's total revenue generated by Spectrum Pharmaceuticals. The default revenue input number comes from 0001 income statement of Spectrum 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 SPPI 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 4.3%, whose default value for SPPI is calculated based on our internal credit rating of Spectrum 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 Spectrum 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 SPPI stock the variable cost ratio is equal to 143%.

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 SPPI 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 10.1% for Spectrum Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Spectrum 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 SPPI 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 SPPI are equal to 66.3%.

Life of production assets of 6.1 years is the average useful life of capital assets used in Spectrum 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 SPPI is equal to -16.7%. 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 - $351.339 million for Spectrum 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 104.055 million for Spectrum 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 Spectrum Pharmaceuticals at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Spectrum Pharma: 3Q Earnings Snapshot   [04:08PM  Associated Press]
▶ Top 4 Small-Cap Stocks for 2018   [Oct-03-18 06:45PM  Investopedia]
▶ Spectrum Pharma: 2Q Earnings Snapshot   [04:19PM  Associated Press]
▶ Harry Boxers four momentum stocks breaking out   [Jun-27-18 12:03PM  MarketWatch]
▶ Here's Why Spectrum Pharmaceuticals Inc. Is Soaring   [Jun-26-18 10:36AM  Motley Fool]
▶ Spectrum Pharma Is Weighing a Sale   [04:24AM  Bloomberg]
▶ Why Spectrum Pharmaceuticals, Inc. Is Up Big Today   [May-17-18 01:17PM  Motley Fool]
▶ Spectrum Pharma: 1Q Earnings Snapshot   [May-03-18 05:06PM  Associated Press]
▶ Can These Top-Performing Biotech Stocks Keep Climbing?   [Apr-30-18 04:47PM  Motley Fool]
▶ Company Profile for SPECTRUM PHARMACEUTICALS   [Apr-27-18 10:40AM  Business Wire]
▶ Heres What Happened Last Week In Biotech   [06:56AM  Market Exclusive]
▶ 3 Biotech Stocks That Soared This Week: Are They Buys?   [Apr-14-18 07:17AM  Motley Fool]
▶ Company News For Apr 11, 2018   [10:15AM  Zacks]
▶ Spectrum Pharma reports 4Q loss   [Mar-06-18 04:47PM  Associated Press]

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