Intrinsic value of United Therapeutics Corporation - UTHR

Previous Close

$81.37

  Intrinsic Value

$189.14

stock screener

  Rating & Target

str. buy

+132%

Previous close

$81.37

 
Intrinsic value

$189.14

 
Up/down potential

+132%

 
Rating

str. buy

We calculate the intrinsic value of UTHR 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 3.6

 

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
  1,661
  1,699
  1,742
  1,791
  1,846
  1,905
  1,970
  2,040
  2,116
  2,197
  2,284
  2,377
  2,476
  2,581
  2,692
  2,810
  2,935
  3,067
  3,206
  3,354
  3,509
  3,673
  3,846
  4,028
  4,220
  4,421
  4,634
  4,858
  5,093
  5,340
Variable operating expenses, $m
  876
  896
  919
  944
  972
  1,003
  1,037
  1,073
  1,112
  1,154
  1,182
  1,230
  1,281
  1,335
  1,393
  1,454
  1,519
  1,587
  1,659
  1,735
  1,816
  1,901
  1,990
  2,084
  2,184
  2,288
  2,398
  2,514
  2,636
  2,764
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
  876
  896
  919
  944
  972
  1,003
  1,037
  1,073
  1,112
  1,154
  1,182
  1,230
  1,281
  1,335
  1,393
  1,454
  1,519
  1,587
  1,659
  1,735
  1,816
  1,901
  1,990
  2,084
  2,184
  2,288
  2,398
  2,514
  2,636
  2,764
Operating income, $m
  784
  803
  824
  847
  873
  902
  934
  967
  1,004
  1,043
  1,102
  1,147
  1,195
  1,245
  1,299
  1,356
  1,416
  1,480
  1,547
  1,618
  1,693
  1,772
  1,856
  1,943
  2,036
  2,133
  2,236
  2,344
  2,457
  2,577
EBITDA, $m
  835
  854
  876
  901
  928
  958
  991
  1,026
  1,064
  1,105
  1,149
  1,195
  1,245
  1,298
  1,354
  1,413
  1,476
  1,542
  1,612
  1,687
  1,765
  1,847
  1,934
  2,026
  2,122
  2,224
  2,330
  2,443
  2,561
  2,686
Interest expense (income), $m
  2
  14
  15
  16
  16
  17
  19
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  42
  44
  47
  50
  54
  57
  61
  65
  69
  73
  77
  82
  87
Earnings before tax, $m
  770
  788
  808
  831
  856
  884
  914
  946
  981
  1,019
  1,076
  1,119
  1,165
  1,213
  1,265
  1,319
  1,377
  1,438
  1,503
  1,571
  1,643
  1,719
  1,798
  1,883
  1,971
  2,065
  2,163
  2,266
  2,375
  2,490
Tax expense, $m
  208
  213
  218
  224
  231
  239
  247
  255
  265
  275
  291
  302
  314
  328
  341
  356
  372
  388
  406
  424
  444
  464
  486
  508
  532
  557
  584
  612
  641
  672
Net income, $m
  562
  575
  590
  607
  625
  645
  667
  691
  716
  744
  786
  817
  850
  886
  923
  963
  1,005
  1,050
  1,097
  1,147
  1,199
  1,255
  1,313
  1,374
  1,439
  1,507
  1,579
  1,654
  1,734
  1,817

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
  2,306
  2,359
  2,420
  2,488
  2,564
  2,646
  2,736
  2,834
  2,939
  3,052
  3,173
  3,301
  3,438
  3,584
  3,739
  3,903
  4,076
  4,259
  4,453
  4,658
  4,874
  5,101
  5,341
  5,594
  5,861
  6,141
  6,436
  6,747
  7,073
  7,417
Adjusted assets (=assets-cash), $m
  2,306
  2,359
  2,420
  2,488
  2,564
  2,646
  2,736
  2,834
  2,939
  3,052
  3,173
  3,301
  3,438
  3,584
  3,739
  3,903
  4,076
  4,259
  4,453
  4,658
  4,874
  5,101
  5,341
  5,594
  5,861
  6,141
  6,436
  6,747
  7,073
  7,417
Revenue / Adjusted assets
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
Average production assets, $m
  691
  707
  725
  745
  768
  793
  820
  849
  880
  914
  950
  989
  1,030
  1,074
  1,120
  1,169
  1,221
  1,276
  1,334
  1,395
  1,460
  1,528
  1,600
  1,676
  1,755
  1,839
  1,928
  2,021
  2,119
  2,222
Working capital, $m
  76
  78
  80
  82
  85
  88
  91
  94
  97
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  246
Total debt, $m
  263
  277
  293
  312
  332
  355
  379
  406
  434
  465
  497
  532
  569
  609
  651
  695
  742
  792
  844
  900
  958
  1,020
  1,085
  1,154
  1,226
  1,302
  1,382
  1,466
  1,554
  1,648
Total liabilities, $m
  625
  639
  656
  674
  695
  717
  742
  768
  796
  827
  860
  895
  932
  971
  1,013
  1,058
  1,105
  1,154
  1,207
  1,262
  1,321
  1,382
  1,448
  1,516
  1,588
  1,664
  1,744
  1,828
  1,917
  2,010
Total equity, $m
  1,681
  1,720
  1,764
  1,814
  1,869
  1,929
  1,995
  2,066
  2,143
  2,225
  2,313
  2,407
  2,507
  2,613
  2,726
  2,845
  2,971
  3,105
  3,246
  3,396
  3,553
  3,719
  3,894
  4,078
  4,272
  4,477
  4,692
  4,918
  5,157
  5,407
Total liabilities and equity, $m
  2,306
  2,359
  2,420
  2,488
  2,564
  2,646
  2,737
  2,834
  2,939
  3,052
  3,173
  3,302
  3,439
  3,584
  3,739
  3,903
  4,076
  4,259
  4,453
  4,658
  4,874
  5,101
  5,342
  5,594
  5,860
  6,141
  6,436
  6,746
  7,074
  7,417
Debt-to-equity ratio
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
  0.260
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729
  0.729

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  562
  575
  590
  607
  625
  645
  667
  691
  716
  744
  786
  817
  850
  886
  923
  963
  1,005
  1,050
  1,097
  1,147
  1,199
  1,255
  1,313
  1,374
  1,439
  1,507
  1,579
  1,654
  1,734
  1,817
Depreciation, amort., depletion, $m
  51
  52
  53
  54
  55
  56
  57
  59
  60
  62
  47
  48
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  78
  82
  86
  90
  94
  99
  104
  109
Funds from operations, $m
  613
  627
  643
  660
  680
  701
  724
  749
  777
  806
  832
  865
  901
  938
  978
  1,020
  1,065
  1,112
  1,162
  1,215
  1,271
  1,329
  1,391
  1,456
  1,525
  1,597
  1,673
  1,754
  1,838
  1,926
Change in working capital, $m
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Cash from operations, $m
  612
  625
  641
  658
  677
  698
  721
  746
  773
  802
  828
  861
  896
  933
  973
  1,015
  1,059
  1,106
  1,156
  1,208
  1,264
  1,322
  1,383
  1,448
  1,516
  1,588
  1,664
  1,743
  1,827
  1,915
Maintenance CAPEX, $m
  -33
  -34
  -35
  -36
  -37
  -38
  -39
  -40
  -42
  -43
  -45
  -47
  -48
  -50
  -53
  -55
  -57
  -60
  -63
  -65
  -68
  -72
  -75
  -78
  -82
  -86
  -90
  -94
  -99
  -104
New CAPEX, $m
  -14
  -16
  -18
  -20
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -103
Cash from investing activities, $m
  -47
  -50
  -53
  -56
  -60
  -63
  -66
  -69
  -73
  -77
  -81
  -86
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -126
  -133
  -140
  -147
  -154
  -162
  -170
  -178
  -187
  -197
  -207
Free cash flow, $m
  564
  575
  588
  602
  618
  636
  655
  677
  700
  725
  747
  776
  807
  839
  874
  911
  950
  992
  1,035
  1,082
  1,131
  1,182
  1,237
  1,294
  1,354
  1,418
  1,485
  1,556
  1,630
  1,708
Issuance/(repayment) of debt, $m
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  35
  37
  39
  42
  44
  47
  50
  53
  55
  59
  62
  65
  69
  72
  76
  80
  84
  89
  93
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  
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  35
  37
  39
  42
  44
  47
  50
  53
  55
  59
  62
  65
  69
  72
  76
  80
  84
  89
  93
Total cash flow (excl. dividends), $m
  577
  590
  604
  620
  638
  658
  680
  703
  728
  756
  780
  811
  844
  879
  916
  955
  997
  1,041
  1,088
  1,137
  1,189
  1,244
  1,302
  1,362
  1,427
  1,494
  1,565
  1,640
  1,719
  1,801
Retained Cash Flow (-), $m
  -32
  -39
  -44
  -50
  -55
  -60
  -66
  -71
  -77
  -82
  -88
  -94
  -100
  -106
  -113
  -119
  -126
  -134
  -141
  -149
  -157
  -166
  -175
  -184
  -194
  -204
  -215
  -226
  -238
  -251
Prev. year cash balance distribution, $m
  1,139
  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
  1,684
  551
  560
  571
  583
  598
  614
  632
  652
  673
  692
  717
  744
  773
  803
  836
  871
  908
  947
  988
  1,032
  1,078
  1,127
  1,178
  1,232
  1,290
  1,350
  1,413
  1,480
  1,551
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
  1,615
  504
  487
  470
  452
  434
  415
  395
  374
  353
  329
  306
  283
  259
  236
  212
  189
  167
  146
  126
  107
  89
  74
  60
  48
  38
  29
  22
  16
  12
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

United Therapeutics Corporation is a biotechnology company. The Company is focused on the development and commercialization of products for the treatment of chronic and life-threatening conditions. The Company markets and sells four commercial therapies in the United States to treat pulmonary arterial hypertension (PAH): Remodulin (treprostinil) Injection; Tyvaso (treprostinil) Inhalation Solution (Tyvaso); Orenitram (treprostinil) Extended-Release Tablets (Orenitram); and Adcirca (tadalafil) Tablets (Adcirca). The Company markets and sells an oncology product in the United States, Unituxin (dinutuximab) Injection (Unituxin), which is approved for treatment of neuroblastoma. The Company is also engaged in early-stage research and development of a number of organ transplantation-related technologies.

FINANCIAL RATIOS  of  United Therapeutics Corporation (UTHR)

Valuation Ratios
P/E Ratio 4.9
Price to Sales 2.2
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 5.8
Growth Rates
Sales Growth Rate 9.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14%
Cap. Spend. - 3 Yr. Gr. Rate 6.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 531
Management Effectiveness
Return On Assets 31.7%
Ret/ On Assets - 3 Yr. Avg. 27%
Return On Total Capital 41.2%
Ret/ On T. Cap. - 3 Yr. Avg. 35.8%
Return On Equity 41.2%
Return On Equity - 3 Yr. Avg. 37.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 95.4%
Gross Margin - 3 Yr. Avg. 93.7%
EBITDA Margin 68.4%
EBITDA Margin - 3 Yr. Avg. 61.9%
Operating Margin 66.4%
Oper. Margin - 3 Yr. Avg. 52%
Pre-Tax Margin 66.3%
Pre-Tax Margin - 3 Yr. Avg. 59.4%
Net Profit Margin 44.7%
Net Profit Margin - 3 Yr. Avg. 38.5%
Effective Tax Rate 32.6%
Eff/ Tax Rate - 3 Yr. Avg. 35.1%
Payout Ratio 0%

UTHR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UTHR stock intrinsic value calculation we used $1628 million for the last fiscal year's total revenue generated by United Therapeutics Corporation. The default revenue input number comes from 0001 income statement of United Therapeutics Corporation. 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 UTHR 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 UTHR is calculated based on our internal credit rating of United Therapeutics Corporation, 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 United Therapeutics Corporation.
    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 UTHR stock the variable cost ratio is equal to 52.8%.

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 UTHR 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 5.6% for United Therapeutics Corporation.

Corporate tax rate of 27% is the nominal tax rate for United Therapeutics Corporation. 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 UTHR 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 UTHR are equal to 41.6%.

Life of production assets of 20.4 years is the average useful life of capital assets used in United Therapeutics Corporation 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 UTHR is equal to 4.6%. 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 - $2788.6 million for United Therapeutics Corporation - 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 43.733 million for United Therapeutics Corporation 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 United Therapeutics Corporation at the current share price and the inputted number of shares is $3.6 billion.

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