Intrinsic value of Zymeworks - ZYME

Previous Close

$12.79

  Intrinsic Value

$5.39

stock screener

  Rating & Target

str. sell

-58%

Previous close

$12.79

 
Intrinsic value

$5.39

 
Up/down potential

-58%

 
Rating

str. sell

We calculate the intrinsic value of ZYME 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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  83
  128
  191
  278
  392
  539
  723
  949
  1,221
  1,543
  1,916
  2,342
  2,823
  3,359
  3,949
  4,594
  5,292
  6,042
  6,843
  7,693
  8,592
  9,539
  10,533
  11,573
  12,659
  13,792
  14,972
  16,199
  17,475
  18,802
Variable operating expenses, $m
  73
  111
  166
  240
  338
  465
  623
  818
  1,052
  1,328
  1,648
  2,015
  2,429
  2,890
  3,398
  3,952
  4,553
  5,198
  5,887
  6,619
  7,392
  8,207
  9,062
  9,957
  10,891
  11,866
  12,881
  13,937
  15,035
  16,176
Fixed operating expenses, $m
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  55
  57
  58
  59
  60
  62
  63
  65
  66
  67
  69
  70
  72
  74
  75
  77
Total operating expenses, $m
  114
  153
  209
  284
  383
  511
  670
  866
  1,101
  1,378
  1,699
  2,067
  2,482
  2,944
  3,453
  4,009
  4,611
  5,257
  5,947
  6,681
  7,455
  8,272
  9,128
  10,024
  10,960
  11,936
  12,953
  14,011
  15,110
  16,253
Operating income, $m
  -31
  -25
  -17
  -6
  9
  28
  53
  84
  121
  164
  217
  275
  341
  415
  496
  585
  681
  785
  895
  1,013
  1,137
  1,268
  1,405
  1,549
  1,699
  1,856
  2,019
  2,189
  2,365
  2,549
EBITDA, $m
  -26
  -19
  -9
  5
  24
  49
  80
  119
  165
  221
  285
  358
  442
  534
  637
  748
  869
  999
  1,138
  1,286
  1,442
  1,607
  1,780
  1,960
  2,149
  2,346
  2,551
  2,765
  2,987
  3,217
Interest expense (income), $m
  0
  0
  4
  9
  17
  27
  41
  59
  81
  108
  141
  180
  225
  276
  334
  399
  470
  548
  632
  723
  819
  922
  1,030
  1,145
  1,265
  1,390
  1,521
  1,658
  1,800
  1,948
  2,102
Earnings before tax, $m
  -31
  -29
  -26
  -23
  -18
  -13
  -6
  3
  12
  23
  37
  50
  65
  81
  97
  115
  133
  152
  172
  193
  215
  237
  260
  284
  309
  335
  361
  389
  417
  447
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  3
  6
  10
  14
  18
  22
  26
  31
  36
  41
  47
  52
  58
  64
  70
  77
  83
  90
  98
  105
  113
  121
Net income, $m
  -31
  -29
  -26
  -23
  -18
  -13
  -6
  2
  9
  17
  27
  37
  47
  59
  71
  84
  97
  111
  126
  141
  157
  173
  190
  208
  226
  244
  264
  284
  305
  326

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
  94
  145
  216
  314
  443
  609
  818
  1,074
  1,382
  1,745
  2,167
  2,649
  3,193
  3,800
  4,468
  5,197
  5,986
  6,835
  7,741
  8,703
  9,720
  10,791
  11,915
  13,091
  14,320
  15,602
  16,936
  18,325
  19,768
  21,269
Adjusted assets (=assets-cash), $m
  94
  145
  216
  314
  443
  609
  818
  1,074
  1,382
  1,745
  2,167
  2,649
  3,193
  3,800
  4,468
  5,197
  5,986
  6,835
  7,741
  8,703
  9,720
  10,791
  11,915
  13,091
  14,320
  15,602
  16,936
  18,325
  19,768
  21,269
Revenue / Adjusted assets
  0.883
  0.883
  0.884
  0.885
  0.885
  0.885
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
  0.884
Average production assets, $m
  21
  33
  49
  71
  100
  138
  185
  243
  313
  395
  490
  600
  723
  860
  1,011
  1,176
  1,355
  1,547
  1,752
  1,969
  2,200
  2,442
  2,696
  2,963
  3,241
  3,531
  3,833
  4,147
  4,474
  4,813
Working capital, $m
  -16
  -25
  -37
  -54
  -76
  -105
  -141
  -185
  -238
  -301
  -374
  -457
  -550
  -655
  -770
  -896
  -1,032
  -1,178
  -1,334
  -1,500
  -1,676
  -1,860
  -2,054
  -2,257
  -2,469
  -2,689
  -2,919
  -3,159
  -3,408
  -3,666
Total debt, $m
  9
  23
  42
  67
  101
  145
  200
  268
  349
  445
  557
  684
  828
  988
  1,164
  1,356
  1,565
  1,789
  2,028
  2,282
  2,551
  2,833
  3,130
  3,441
  3,765
  4,103
  4,456
  4,822
  5,203
  5,599
Total liabilities, $m
  25
  38
  57
  83
  117
  161
  216
  283
  365
  461
  572
  699
  843
  1,003
  1,179
  1,372
  1,580
  1,804
  2,044
  2,298
  2,566
  2,849
  3,146
  3,456
  3,781
  4,119
  4,471
  4,838
  5,219
  5,615
Total equity, $m
  69
  107
  159
  231
  326
  448
  602
  790
  1,017
  1,284
  1,595
  1,950
  2,350
  2,796
  3,288
  3,825
  4,406
  5,030
  5,697
  6,405
  7,154
  7,942
  8,769
  9,635
  10,540
  11,483
  12,465
  13,487
  14,550
  15,654
Total liabilities and equity, $m
  94
  145
  216
  314
  443
  609
  818
  1,073
  1,382
  1,745
  2,167
  2,649
  3,193
  3,799
  4,467
  5,197
  5,986
  6,834
  7,741
  8,703
  9,720
  10,791
  11,915
  13,091
  14,321
  15,602
  16,936
  18,325
  19,769
  21,269
Debt-to-equity ratio
  0.130
  0.210
  0.260
  0.290
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
Adjusted equity ratio
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -31
  -29
  -26
  -23
  -18
  -13
  -6
  2
  9
  17
  27
  37
  47
  59
  71
  84
  97
  111
  126
  141
  157
  173
  190
  208
  226
  244
  264
  284
  305
  326
Depreciation, amort., depletion, $m
  4
  6
  8
  11
  15
  20
  27
  35
  45
  56
  68
  83
  100
  119
  140
  163
  188
  215
  243
  274
  306
  339
  374
  411
  450
  490
  532
  576
  621
  669
Funds from operations, $m
  -26
  -23
  -18
  -12
  -3
  8
  21
  37
  54
  73
  95
  120
  148
  178
  211
  247
  285
  326
  369
  415
  462
  512
  565
  619
  676
  735
  796
  860
  926
  995
Change in working capital, $m
  -6
  -9
  -12
  -17
  -22
  -29
  -36
  -44
  -53
  -63
  -73
  -83
  -94
  -104
  -115
  -126
  -136
  -146
  -156
  -166
  -175
  -185
  -194
  -203
  -212
  -221
  -230
  -239
  -249
  -259
Cash from operations, $m
  -20
  -14
  -6
  5
  19
  36
  57
  81
  107
  136
  168
  203
  242
  283
  326
  373
  421
  472
  525
  581
  638
  697
  758
  822
  888
  956
  1,026
  1,099
  1,175
  1,253
Maintenance CAPEX, $m
  -2
  -3
  -5
  -7
  -10
  -14
  -19
  -26
  -34
  -43
  -55
  -68
  -83
  -100
  -119
  -140
  -163
  -188
  -215
  -243
  -274
  -306
  -339
  -374
  -411
  -450
  -490
  -532
  -576
  -621
New CAPEX, $m
  -8
  -12
  -16
  -22
  -29
  -38
  -47
  -58
  -70
  -82
  -95
  -109
  -123
  -137
  -151
  -165
  -179
  -192
  -205
  -218
  -230
  -242
  -254
  -266
  -278
  -290
  -302
  -314
  -327
  -340
Cash from investing activities, $m
  -10
  -15
  -21
  -29
  -39
  -52
  -66
  -84
  -104
  -125
  -150
  -177
  -206
  -237
  -270
  -305
  -342
  -380
  -420
  -461
  -504
  -548
  -593
  -640
  -689
  -740
  -792
  -846
  -903
  -961
Free cash flow, $m
  -30
  -29
  -27
  -24
  -20
  -15
  -9
  -2
  3
  10
  17
  26
  35
  45
  56
  67
  79
  92
  106
  119
  134
  149
  165
  181
  198
  215
  234
  253
  272
  292
Issuance/(repayment) of debt, $m
  9
  13
  19
  26
  34
  44
  55
  68
  81
  96
  111
  127
  144
  160
  176
  193
  208
  224
  239
  254
  269
  283
  297
  311
  324
  338
  352
  367
  381
  396
Issuance/(repurchase) of shares, $m
  56
  66
  79
  95
  113
  135
  159
  186
  218
  250
  284
  318
  353
  387
  421
  453
  484
  513
  541
  567
  592
  615
  637
  658
  679
  699
  719
  738
  758
  778
Cash from financing (excl. dividends), $m  
  65
  79
  98
  121
  147
  179
  214
  254
  299
  346
  395
  445
  497
  547
  597
  646
  692
  737
  780
  821
  861
  898
  934
  969
  1,003
  1,037
  1,071
  1,105
  1,139
  1,174
Total cash flow (excl. dividends), $m
  36
  51
  71
  97
  127
  164
  205
  252
  302
  357
  412
  472
  532
  592
  653
  713
  772
  829
  886
  941
  994
  1,047
  1,099
  1,150
  1,201
  1,253
  1,304
  1,357
  1,411
  1,467
Retained Cash Flow (-), $m
  -56
  -66
  -79
  -95
  -113
  -135
  -159
  -188
  -227
  -268
  -311
  -355
  -400
  -446
  -492
  -537
  -581
  -624
  -667
  -708
  -749
  -788
  -827
  -866
  -904
  -943
  -982
  -1,022
  -1,063
  -1,104
Prev. year cash balance distribution, $m
  73
  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
  52
  -15
  -8
  2
  14
  29
  46
  63
  76
  89
  102
  116
  131
  146
  161
  176
  191
  205
  219
  232
  246
  259
  271
  284
  297
  309
  322
  335
  349
  362
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
  50
  -14
  -7
  2
  11
  21
  31
  39
  43
  47
  48
  50
  50
  49
  47
  45
  41
  38
  34
  30
  25
  21
  18
  14
  12
  9
  7
  5
  4
  3
Current shareholders' claim on cash, %
  73.0
  57.3
  47.3
  40.4
  35.5
  31.7
  28.8
  26.5
  24.5
  22.9
  21.6
  20.4
  19.4
  18.5
  17.8
  17.1
  16.5
  16.0
  15.5
  15.1
  14.7
  14.3
  14.0
  13.7
  13.5
  13.2
  13.0
  12.8
  12.6
  12.4

Zymeworks Inc is a Canada-based clinical-stage biopharmaceutical company. The Company focuses on the discovery, development and commercialization of multifunctional biotherapeutics. The Company's ZymeCAD platform is for protein modeling and structure-guided protein engineering. The Company's platforms include Azymetric Platform, AlbuCORE Platform, EFECT Platform and Zymelink Conjugation Platform + Cytotoxins. The Company's lead product candidate, ZW25, is a bispecific antibody, which is being evaluated in an adaptive Phase I clinical trial. Its ZW33 is a bi-specific antibody that delivers a cytotoxic payload to cancers cells by binding to different epitopes (bi-paratopic targeting) of the overexpressed HER2 protein. It focuses on developing a pipeline of preclinical product candidates and discovery-stage programs in immuno-oncology and other therapeutic areas. It analyzes protein characteristics to develop the scope of protein engineering to tackle biological systems.

FINANCIAL RATIOS  of  Zymeworks (ZYME)

Valuation Ratios
P/E Ratio -9.1
Price to Sales 28.1
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow -8.8
Price to Free Cash Flow -7.7
Growth Rates
Sales Growth Rate 10%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 400%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 5.9%
Total Debt to Equity 5.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -58.1%
Ret/ On Assets - 3 Yr. Avg. -53.5%
Return On Total Capital -75.6%
Ret/ On T. Cap. - 3 Yr. Avg. -68.7%
Return On Equity -79.1%
Return On Equity - 3 Yr. Avg. -69.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -345.5%
EBITDA Margin - 3 Yr. Avg. -395.2%
Operating Margin -345.5%
Oper. Margin - 3 Yr. Avg. -381.8%
Pre-Tax Margin -354.5%
Pre-Tax Margin - 3 Yr. Avg. -398.2%
Net Profit Margin -309.1%
Net Profit Margin - 3 Yr. Avg. -383%
Effective Tax Rate 12.8%
Eff/ Tax Rate - 3 Yr. Avg. 4.3%
Payout Ratio 0%

ZYME stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ZYME stock intrinsic value calculation we used $51.762 million for the last fiscal year's total revenue generated by Zymeworks. The default revenue input number comes from 0001 income statement of Zymeworks. 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 ZYME stock valuation model: a) initial revenue growth rate of 60% 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 ZYME is calculated based on our internal credit rating of Zymeworks, 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 Zymeworks.
    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 ZYME stock the variable cost ratio is equal to 88.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $40 million in the base year in the intrinsic value calculation for ZYME 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 40.4% for Zymeworks.

Corporate tax rate of 27% is the nominal tax rate for Zymeworks. 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 ZYME 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 ZYME are equal to 25.6%.

Life of production assets of 7.2 years is the average useful life of capital assets used in Zymeworks 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 ZYME is equal to -19.5%. 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 - $116.428 million for Zymeworks - 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 31.96 million for Zymeworks 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 Zymeworks at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Zymeworks to Present at Upcoming Investor Conferences   [Nov-07-18 04:30PM  Business Wire]
▶ Zymeworks to Webcast R&D Briefing   [Oct-04-18 06:45AM  Business Wire]
▶ Eli Lilly Is Selling More Shares of This Biopharma Firm   [Sep-14-18 05:09PM  Barrons.com]
▶ Zymeworks to Present at Wells Fargo Healthcare Conference   [Aug-29-18 04:30PM  Business Wire]
▶ Zymeworks Closes Previously Announced Public Offering   [Jun-11-18 09:36AM  Business Wire]
▶ Zymeworks Announces Pricing of Public Offering   [Jun-06-18 10:49PM  Business Wire]
▶ Zymeworks Reports 2018 First Quarter Financial Results   [May-01-18 04:05PM  Business Wire]
▶ Zymeworks Reports 2017 Year-End Financial Results   [Mar-14-18 04:05PM  Business Wire]
▶ Zymeworks Opening Clinical Sites in Canada   [Feb-28-18 04:05PM  Business Wire]
▶ 2 Names Barclays Is Now Bearish On In Biotech   [Sep-07-17 01:59PM  Benzinga]
▶ Zymeworks Reports Second Quarter 2017 Financial Results   [Aug-08-17 04:01PM  Business Wire]
▶ Zymeworks Reports First Quarter 2017 Financial Results   [May-15-17 04:01PM  Business Wire]

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