Intrinsic value of Vericel Corporation - VCEL

Previous Close

$18.34

  Intrinsic Value

$34.42

stock screener

  Rating & Target

str. buy

+88%

Previous close

$18.34

 
Intrinsic value

$34.42

 
Up/down potential

+88%

 
Rating

str. buy

We calculate the intrinsic value of VCEL 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 0.8

 

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, %
  34.20
  31.28
  28.65
  26.29
  24.16
  22.24
  20.52
  18.97
  17.57
  16.31
  15.18
  14.16
  13.25
  12.42
  11.68
  11.01
  10.41
  9.87
  9.38
  8.94
  8.55
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
Revenue, $m
  122
  160
  206
  260
  323
  395
  476
  567
  666
  775
  893
  1,019
  1,154
  1,298
  1,449
  1,609
  1,776
  1,952
  2,135
  2,326
  2,524
  2,731
  2,946
  3,170
  3,402
  3,644
  3,895
  4,156
  4,427
  4,709
Variable operating expenses, $m
  71
  93
  120
  152
  188
  230
  277
  330
  388
  451
  520
  593
  672
  755
  843
  936
  1,034
  1,136
  1,242
  1,354
  1,469
  1,590
  1,715
  1,845
  1,980
  2,121
  2,267
  2,419
  2,576
  2,741
Fixed operating expenses, $m
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  60
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
Total operating expenses, $m
  115
  138
  166
  199
  236
  279
  327
  381
  440
  504
  575
  649
  729
  813
  903
  997
  1,096
  1,200
  1,307
  1,420
  1,537
  1,659
  1,786
  1,917
  2,054
  2,197
  2,344
  2,498
  2,657
  2,824
Operating income, $m
  7
  22
  40
  62
  87
  116
  149
  186
  226
  271
  319
  370
  425
  484
  546
  612
  680
  752
  827
  906
  987
  1,072
  1,161
  1,253
  1,348
  1,447
  1,551
  1,658
  1,770
  1,886
EBITDA, $m
  8
  24
  43
  65
  91
  121
  154
  192
  234
  279
  328
  381
  438
  498
  562
  629
  700
  774
  851
  931
  1,015
  1,102
  1,193
  1,287
  1,386
  1,487
  1,593
  1,704
  1,818
  1,938
Interest expense (income), $m
  0
  0
  1
  3
  4
  6
  8
  11
  14
  17
  21
  25
  29
  34
  39
  44
  49
  55
  61
  68
  74
  81
  89
  96
  104
  112
  121
  129
  138
  148
  158
Earnings before tax, $m
  7
  21
  38
  58
  81
  108
  138
  172
  209
  250
  294
  341
  392
  445
  502
  562
  625
  691
  760
  831
  906
  984
  1,065
  1,149
  1,236
  1,327
  1,421
  1,519
  1,622
  1,728
Tax expense, $m
  2
  6
  10
  16
  22
  29
  37
  46
  56
  67
  79
  92
  106
  120
  136
  152
  169
  187
  205
  224
  245
  266
  287
  310
  334
  358
  384
  410
  438
  467
Net income, $m
  5
  15
  28
  42
  59
  79
  101
  125
  153
  182
  214
  249
  286
  325
  367
  410
  456
  504
  554
  607
  661
  718
  777
  838
  902
  969
  1,038
  1,109
  1,184
  1,261

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
  68
  89
  115
  145
  180
  220
  265
  315
  370
  431
  496
  566
  641
  721
  805
  894
  987
  1,084
  1,186
  1,292
  1,402
  1,517
  1,637
  1,761
  1,890
  2,024
  2,164
  2,309
  2,459
  2,616
Adjusted assets (=assets-cash), $m
  68
  89
  115
  145
  180
  220
  265
  315
  370
  431
  496
  566
  641
  721
  805
  894
  987
  1,084
  1,186
  1,292
  1,402
  1,517
  1,637
  1,761
  1,890
  2,024
  2,164
  2,309
  2,459
  2,616
Revenue / Adjusted assets
  1.794
  1.798
  1.791
  1.793
  1.794
  1.795
  1.796
  1.800
  1.800
  1.798
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.799
  1.801
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
Average production assets, $m
  7
  9
  11
  14
  18
  22
  26
  31
  37
  43
  49
  56
  63
  71
  80
  88
  98
  107
  117
  128
  139
  150
  162
  174
  187
  200
  214
  229
  243
  259
Working capital, $m
  20
  27
  34
  43
  54
  66
  79
  94
  111
  129
  148
  169
  192
  215
  241
  267
  295
  324
  354
  386
  419
  453
  489
  526
  565
  605
  647
  690
  735
  782
Total debt, $m
  6
  13
  21
  31
  42
  55
  70
  86
  104
  124
  145
  168
  193
  219
  246
  275
  305
  337
  370
  405
  441
  478
  517
  558
  600
  643
  689
  736
  785
  836
Total liabilities, $m
  22
  29
  37
  47
  59
  72
  86
  103
  121
  140
  162
  185
  209
  235
  262
  291
  322
  353
  387
  421
  457
  495
  534
  574
  616
  660
  705
  753
  802
  853
Total equity, $m
  46
  60
  77
  98
  121
  148
  178
  212
  250
  290
  334
  382
  432
  486
  543
  602
  665
  731
  799
  871
  945
  1,023
  1,103
  1,187
  1,274
  1,364
  1,458
  1,556
  1,658
  1,763
Total liabilities and equity, $m
  68
  89
  114
  145
  180
  220
  264
  315
  371
  430
  496
  567
  641
  721
  805
  893
  987
  1,084
  1,186
  1,292
  1,402
  1,518
  1,637
  1,761
  1,890
  2,024
  2,163
  2,309
  2,460
  2,616
Debt-to-equity ratio
  0.120
  0.210
  0.270
  0.310
  0.350
  0.370
  0.390
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.450
  0.450
  0.460
  0.460
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
Adjusted equity ratio
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  15
  28
  42
  59
  79
  101
  125
  153
  182
  214
  249
  286
  325
  367
  410
  456
  504
  554
  607
  661
  718
  777
  838
  902
  969
  1,038
  1,109
  1,184
  1,261
Depreciation, amort., depletion, $m
  1
  2
  2
  3
  4
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  20
  21
  23
  26
  28
  30
  32
  35
  37
  40
  43
  46
  49
  52
Funds from operations, $m
  7
  17
  30
  45
  63
  83
  106
  132
  160
  191
  224
  260
  299
  339
  383
  428
  476
  526
  578
  632
  689
  748
  810
  873
  940
  1,009
  1,080
  1,155
  1,232
  1,313
Change in working capital, $m
  5
  6
  8
  9
  10
  12
  13
  15
  17
  18
  20
  21
  22
  24
  25
  26
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
Cash from operations, $m
  1
  11
  22
  36
  52
  71
  93
  117
  143
  173
  205
  239
  276
  316
  357
  402
  448
  497
  548
  601
  656
  714
  774
  836
  901
  969
  1,039
  1,112
  1,187
  1,266
Maintenance CAPEX, $m
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
New CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
Cash from investing activities, $m
  -3
  -3
  -5
  -5
  -6
  -8
  -8
  -10
  -11
  -13
  -15
  -17
  -18
  -21
  -22
  -25
  -27
  -30
  -31
  -34
  -37
  -39
  -42
  -44
  -48
  -50
  -54
  -57
  -61
  -65
Free cash flow, $m
  -1
  7
  18
  31
  46
  64
  84
  106
  132
  159
  190
  222
  258
  295
  335
  377
  421
  467
  516
  567
  620
  675
  732
  792
  853
  918
  985
  1,054
  1,127
  1,202
Issuance/(repayment) of debt, $m
  6
  7
  8
  10
  11
  13
  15
  16
  18
  20
  21
  23
  24
  26
  27
  29
  30
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
Issuance/(repurchase) of shares, $m
  6
  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  
  12
  7
  8
  10
  11
  13
  15
  16
  18
  20
  21
  23
  24
  26
  27
  29
  30
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
Total cash flow (excl. dividends), $m
  11
  14
  26
  41
  57
  77
  98
  123
  150
  179
  211
  245
  282
  321
  362
  406
  451
  499
  549
  601
  656
  712
  771
  832
  896
  962
  1,030
  1,102
  1,176
  1,253
Retained Cash Flow (-), $m
  -12
  -14
  -17
  -20
  -24
  -27
  -30
  -34
  -37
  -41
  -44
  -47
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -71
  -74
  -77
  -81
  -84
  -87
  -90
  -94
  -98
  -102
  -106
Prev. year cash balance distribution, $m
  68
  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
  67
  0
  9
  20
  34
  50
  68
  89
  112
  138
  167
  198
  231
  267
  305
  346
  389
  434
  481
  530
  581
  635
  690
  748
  809
  871
  936
  1,004
  1,074
  1,148
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
  64
  0
  8
  17
  26
  36
  46
  56
  65
  73
  79
  84
  88
  90
  90
  88
  85
  80
  74
  67
  60
  53
  45
  38
  31
  25
  20
  16
  12
  9
Current shareholders' claim on cash, %
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6

Vericel Corporation, formerly Aastrom Biosciences, Inc., is a commercial-stage biopharmaceutical company dedicated to the identification, development and commercialization of therapies that enable the body to repair and regenerate damaged tissues and organs to restore normal structure and function. The Company operates through the research, product development, manufacture and distribution of patient-specific, expanded cellular therapies for use in the treatment of specific diseases segment. Its autologous cell therapy products include Carticel (autologous cultured chondrocytes), which is an autologous chondrocyte implant for the treatment of cartilage defects in the knee, and Epicel (cultured epidermal autografts), which is a permanent skin replacement for the treatment of patients with deep-dermal or full-thickness burns. The Company is developing MACI, which is a third-generation autologous chondrocyte implant and ixmyelocel-T, which is a patient-specific multicellular therapy.

FINANCIAL RATIOS  of  Vericel Corporation (VCEL)

Valuation Ratios
P/E Ratio -29
Price to Sales 10.7
Price to Book 23.2
Price to Tangible Book
Price to Cash Flow -29
Price to Free Cash Flow -27.6
Growth Rates
Sales Growth Rate 5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 23
Current Ratio 0.1
LT Debt to Equity 36%
Total Debt to Equity 40%
Interest Coverage 0
Management Effectiveness
Return On Assets -48.2%
Ret/ On Assets - 3 Yr. Avg. -52.5%
Return On Total Capital -70.2%
Ret/ On T. Cap. - 3 Yr. Avg. -75.1%
Return On Equity -85.1%
Return On Equity - 3 Yr. Avg. -80.1%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 48.1%
Gross Margin - 3 Yr. Avg. 48.5%
EBITDA Margin -33.3%
EBITDA Margin - 3 Yr. Avg. -42.1%
Operating Margin -37%
Oper. Margin - 3 Yr. Avg. -49.9%
Pre-Tax Margin -37%
Pre-Tax Margin - 3 Yr. Avg. -45.8%
Net Profit Margin -37%
Net Profit Margin - 3 Yr. Avg. -45.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

VCEL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VCEL stock intrinsic value calculation we used $91 million for the last fiscal year's total revenue generated by Vericel Corporation. The default revenue input number comes from 0001 income statement of Vericel 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 VCEL stock valuation model: a) initial revenue growth rate of 34.2% 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 VCEL is calculated based on our internal credit rating of Vericel 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 Vericel 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 VCEL stock the variable cost ratio is equal to 58.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $43 million in the base year in the intrinsic value calculation for VCEL 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 20.1% for Vericel Corporation.

Corporate tax rate of 27% is the nominal tax rate for Vericel 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 VCEL 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 VCEL are equal to 5.5%.

Life of production assets of 3.5 years is the average useful life of capital assets used in Vericel 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 VCEL is equal to 16.6%. 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 - $102.231 million for Vericel 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 43.753 million for Vericel 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 Vericel Corporation at the current share price and the inputted number of shares is $0.8 billion.

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