Intrinsic value of Quintiles IMS Holdings - Q

Previous Close

$103.03

  Intrinsic Value

$483.50

stock screener

  Rating & Target

str. buy

+369%

Previous close

$103.03

 
Intrinsic value

$483.50

 
Up/down potential

+369%

 
Rating

str. buy

We calculate the intrinsic value of Q 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 2016), $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 22.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.87
  52.90
  48.11
  43.80
  39.92
  36.43
  33.28
  30.46
  27.91
  25.62
  23.56
  21.70
  20.03
  18.53
  17.18
  15.96
  14.86
  13.88
  12.99
  12.19
  11.47
  10.82
  10.24
  9.72
  9.25
  8.82
  8.44
  8.09
  7.79
  7.51
  7.26
Revenue, $m
  6,878
  10,516
  15,576
  22,398
  31,339
  42,755
  56,986
  74,342
  95,091
  119,452
  147,592
  179,622
  215,603
  255,551
  299,443
  347,228
  398,834
  454,176
  513,166
  575,718
  641,757
  711,217
  784,054
  860,241
  939,774
  1,022,669
  1,108,970
  1,198,739
  1,292,065
  1,389,059
  1,489,851
Variable operating expenses, $m
 
  8,782
  12,490
  17,491
  24,046
  32,414
  42,846
  55,568
  70,778
  88,636
  109,263
  131,670
  158,045
  187,329
  219,503
  254,532
  292,361
  332,929
  376,171
  422,024
  470,433
  521,350
  574,742
  630,590
  688,891
  749,656
  812,918
  878,722
  947,134
  1,018,234
  1,092,119
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
  6,267
  8,782
  12,490
  17,491
  24,046
  32,414
  42,846
  55,568
  70,778
  88,636
  109,263
  131,670
  158,045
  187,329
  219,503
  254,532
  292,361
  332,929
  376,171
  422,024
  470,433
  521,350
  574,742
  630,590
  688,891
  749,656
  812,918
  878,722
  947,134
  1,018,234
  1,092,119
Operating income, $m
  611
  1,735
  3,085
  4,907
  7,294
  10,341
  14,140
  18,774
  24,313
  30,816
  38,329
  47,952
  57,558
  68,222
  79,940
  92,696
  106,473
  121,247
  136,995
  153,694
  171,324
  189,867
  209,312
  229,651
  250,883
  273,013
  296,052
  320,017
  344,931
  370,825
  397,732
EBITDA, $m
  900
  2,995
  4,436
  6,379
  8,925
  12,176
  16,229
  21,172
  27,081
  34,019
  42,033
  51,155
  61,403
  72,779
  85,280
  98,889
  113,586
  129,347
  146,147
  163,961
  182,769
  202,551
  223,294
  244,992
  267,642
  291,250
  315,828
  341,394
  367,973
  395,596
  424,301
Interest expense (income), $m
  124
  249
  481
  802
  1,236
  1,805
  2,531
  3,436
  4,539
  5,859
  7,408
  9,197
  11,234
  13,522
  16,062
  18,853
  21,892
  25,174
  28,693
  32,444
  36,422
  40,621
  45,038
  49,670
  54,515
  59,572
  64,844
  70,331
  76,040
  81,974
  88,142
Earnings before tax, $m
  479
  1,486
  2,605
  4,104
  6,057
  8,537
  11,610
  15,338
  19,774
  24,958
  30,921
  38,755
  46,324
  54,700
  63,877
  73,843
  84,581
  96,073
  108,302
  121,250
  134,902
  149,246
  164,274
  179,981
  196,368
  213,441
  231,208
  249,685
  268,891
  288,850
  309,590
Tax expense, $m
  345
  401
  703
  1,108
  1,636
  2,305
  3,135
  4,141
  5,339
  6,739
  8,349
  10,464
  12,507
  14,769
  17,247
  19,938
  22,837
  25,940
  29,242
  32,738
  36,424
  40,296
  44,354
  48,595
  53,019
  57,629
  62,426
  67,415
  72,601
  77,990
  83,589
Net income, $m
  115
  1,085
  1,902
  2,996
  4,422
  6,232
  8,475
  11,197
  14,435
  18,219
  22,572
  28,291
  33,816
  39,931
  46,630
  53,905
  61,744
  70,134
  79,061
  88,513
  98,479
  108,950
  119,920
  131,386
  143,349
  155,812
  168,782
  182,270
  196,291
  210,861
  226,001

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,238
  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
  21,208
  30,571
  45,279
  65,111
  91,102
  124,288
  165,657
  216,109
  276,426
  347,245
  429,047
  522,157
  626,753
  742,880
  870,474
  1,009,384
  1,159,401
  1,320,279
  1,491,761
  1,673,600
  1,865,572
  2,067,492
  2,279,228
  2,500,702
  2,731,900
  2,972,876
  3,223,749
  3,484,707
  3,756,004
  4,037,961
  4,330,962
Adjusted assets (=assets-cash), $m
  19,970
  30,571
  45,279
  65,111
  91,102
  124,288
  165,657
  216,109
  276,426
  347,245
  429,047
  522,157
  626,753
  742,880
  870,474
  1,009,384
  1,159,401
  1,320,279
  1,491,761
  1,673,600
  1,865,572
  2,067,492
  2,279,228
  2,500,702
  2,731,900
  2,972,876
  3,223,749
  3,484,707
  3,756,004
  4,037,961
  4,330,962
Revenue / Adjusted assets
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
Average production assets, $m
  3,677
  5,626
  8,333
  11,983
  16,766
  22,874
  30,487
  39,773
  50,873
  63,907
  78,962
  96,098
  115,348
  136,720
  160,202
  185,767
  213,376
  242,984
  274,544
  308,009
  343,340
  380,501
  419,469
  460,229
  502,779
  547,128
  593,299
  641,325
  691,255
  743,146
  797,070
Working capital, $m
  632
  -789
  -1,168
  -1,680
  -2,350
  -3,207
  -4,274
  -5,576
  -7,132
  -8,959
  -11,069
  -13,472
  -16,170
  -19,166
  -22,458
  -26,042
  -29,913
  -34,063
  -38,487
  -43,179
  -48,132
  -53,341
  -58,804
  -64,518
  -70,483
  -76,700
  -83,173
  -89,905
  -96,905
  -104,179
  -111,739
Total debt, $m
  7,200
  13,732
  22,924
  35,319
  51,564
  72,305
  98,160
  129,693
  167,391
  211,653
  262,779
  320,973
  386,346
  458,925
  538,671
  625,490
  719,250
  819,799
  926,976
  1,040,625
  1,160,607
  1,286,808
  1,419,142
  1,557,563
  1,702,063
  1,852,672
  2,009,468
  2,172,567
  2,342,128
  2,518,351
  2,701,476
Total liabilities, $m
  12,575
  19,107
  28,299
  40,694
  56,939
  77,680
  103,535
  135,068
  172,766
  217,028
  268,154
  326,348
  391,721
  464,300
  544,046
  630,865
  724,625
  825,174
  932,351
  1,046,000
  1,165,982
  1,292,183
  1,424,517
  1,562,938
  1,707,438
  1,858,047
  2,014,843
  2,177,942
  2,347,503
  2,523,726
  2,706,851
Total equity, $m
  8,633
  11,464
  16,980
  24,416
  34,163
  46,608
  62,121
  81,041
  103,660
  130,217
  160,893
  195,809
  235,032
  278,580
  326,428
  378,519
  434,775
  495,105
  559,411
  627,600
  699,589
  775,310
  854,710
  937,763
  1,024,463
  1,114,828
  1,208,906
  1,306,765
  1,408,502
  1,514,235
  1,624,111
Total liabilities and equity, $m
  21,208
  30,571
  45,279
  65,110
  91,102
  124,288
  165,656
  216,109
  276,426
  347,245
  429,047
  522,157
  626,753
  742,880
  870,474
  1,009,384
  1,159,400
  1,320,279
  1,491,762
  1,673,600
  1,865,571
  2,067,493
  2,279,227
  2,500,701
  2,731,901
  2,972,875
  3,223,749
  3,484,707
  3,756,005
  4,037,961
  4,330,962
Debt-to-equity ratio
  0.834
  1.200
  1.350
  1.450
  1.510
  1.550
  1.580
  1.600
  1.610
  1.630
  1.630
  1.640
  1.640
  1.650
  1.650
  1.650
  1.650
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
Adjusted equity ratio
  0.370
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375
  0.375

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  115
  1,085
  1,902
  2,996
  4,422
  6,232
  8,475
  11,197
  14,435
  18,219
  22,572
  28,291
  33,816
  39,931
  46,630
  53,905
  61,744
  70,134
  79,061
  88,513
  98,479
  108,950
  119,920
  131,386
  143,349
  155,812
  168,782
  182,270
  196,291
  210,861
  226,001
Depreciation, amort., depletion, $m
  289
  1,260
  1,350
  1,472
  1,632
  1,835
  2,089
  2,398
  2,768
  3,203
  3,705
  3,203
  3,845
  4,557
  5,340
  6,192
  7,113
  8,099
  9,151
  10,267
  11,445
  12,683
  13,982
  15,341
  16,759
  18,238
  19,777
  21,378
  23,042
  24,772
  26,569
Funds from operations, $m
  1,072
  2,345
  3,252
  4,468
  6,054
  8,067
  10,564
  13,595
  17,203
  21,422
  26,277
  31,494
  37,661
  44,488
  51,970
  60,098
  68,857
  78,233
  88,212
  98,780
  109,923
  121,633
  133,902
  146,727
  160,108
  174,049
  188,559
  203,648
  219,332
  235,632
  252,570
Change in working capital, $m
  212
  -273
  -379
  -512
  -671
  -856
  -1,067
  -1,302
  -1,556
  -1,827
  -2,110
  -2,402
  -2,699
  -2,996
  -3,292
  -3,584
  -3,870
  -4,151
  -4,424
  -4,691
  -4,953
  -5,210
  -5,463
  -5,714
  -5,965
  -6,217
  -6,473
  -6,733
  -6,999
  -7,274
  -7,559
Cash from operations, $m
  860
  2,618
  3,631
  4,980
  6,724
  8,923
  11,631
  14,897
  18,759
  23,249
  28,387
  33,897
  40,360
  47,484
  55,262
  63,681
  72,727
  82,384
  92,636
  103,471
  114,876
  126,843
  139,365
  152,441
  166,073
  180,266
  195,031
  210,380
  226,332
  242,907
  260,129
Maintenance CAPEX, $m
  0
  -123
  -188
  -278
  -399
  -559
  -762
  -1,016
  -1,326
  -1,696
  -2,130
  -2,632
  -3,203
  -3,845
  -4,557
  -5,340
  -6,192
  -7,113
  -8,099
  -9,151
  -10,267
  -11,445
  -12,683
  -13,982
  -15,341
  -16,759
  -18,238
  -19,777
  -21,378
  -23,042
  -24,772
New CAPEX, $m
  -164
  -1,950
  -2,707
  -3,650
  -4,783
  -6,108
  -7,613
  -9,285
  -11,101
  -13,033
  -15,055
  -17,136
  -19,250
  -21,372
  -23,482
  -25,565
  -27,609
  -29,608
  -31,560
  -33,466
  -35,330
  -37,161
  -38,968
  -40,760
  -42,550
  -44,349
  -46,171
  -48,027
  -49,930
  -51,891
  -53,924
Cash from investing activities, $m
  1,731
  -2,073
  -2,895
  -3,928
  -5,182
  -6,667
  -8,375
  -10,301
  -12,427
  -14,729
  -17,185
  -19,768
  -22,453
  -25,217
  -28,039
  -30,905
  -33,801
  -36,721
  -39,659
  -42,617
  -45,597
  -48,606
  -51,651
  -54,742
  -57,891
  -61,108
  -64,409
  -67,804
  -71,308
  -74,933
  -78,696
Free cash flow, $m
  2,591
  546
  737
  1,052
  1,541
  2,257
  3,255
  4,595
  6,333
  8,520
  11,202
  14,128
  17,907
  22,267
  27,223
  32,776
  38,926
  45,663
  52,977
  60,854
  69,279
  78,236
  87,714
  97,699
  108,182
  119,158
  130,623
  142,577
  155,025
  167,973
  181,434
Issuance/(repayment) of debt, $m
  -1,313
  6,624
  9,192
  12,395
  16,245
  20,741
  25,855
  31,533
  37,698
  44,262
  51,126
  58,194
  65,373
  72,579
  79,746
  86,819
  93,760
  100,549
  107,177
  113,649
  119,982
  126,200
  132,335
  138,421
  144,499
  150,610
  156,796
  163,099
  169,561
  176,223
  183,125
Issuance/(repurchase) of shares, $m
  -1,000
  2,892
  3,614
  4,441
  5,325
  6,213
  7,038
  7,723
  8,184
  8,338
  8,104
  6,625
  5,407
  3,617
  1,217
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,284
  9,516
  12,806
  16,836
  21,570
  26,954
  32,893
  39,256
  45,882
  52,600
  59,230
  64,819
  70,780
  76,196
  80,963
  86,819
  93,760
  100,549
  107,177
  113,649
  119,982
  126,200
  132,335
  138,421
  144,499
  150,610
  156,796
  163,099
  169,561
  176,223
  183,125
Total cash flow (excl. dividends), $m
  221
  10,062
  13,543
  17,888
  23,111
  29,211
  36,149
  43,851
  52,215
  61,119
  70,432
  78,948
  88,686
  98,464
  108,186
  119,595
  132,686
  146,212
  160,154
  174,503
  189,261
  204,437
  220,048
  236,120
  252,681
  269,768
  287,418
  305,676
  324,586
  344,197
  364,559
Retained Cash Flow (-), $m
  -9,197
  -3,977
  -5,515
  -7,437
  -9,747
  -12,445
  -15,513
  -18,920
  -22,619
  -26,557
  -30,676
  -34,916
  -39,224
  -43,548
  -47,848
  -52,091
  -56,256
  -60,329
  -64,306
  -68,190
  -71,989
  -75,720
  -79,401
  -83,053
  -86,699
  -90,366
  -94,077
  -97,859
  -101,737
  -105,734
  -109,875
Prev. year cash balance distribution, $m
 
  1,146
  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
 
  7,231
  8,028
  10,451
  13,364
  16,766
  20,636
  24,931
  29,596
  34,562
  39,756
  44,031
  49,463
  54,916
  60,338
  67,504
  76,430
  85,883
  95,848
  106,314
  117,272
  128,717
  140,648
  153,067
  165,982
  179,402
  193,341
  207,817
  222,849
  238,463
  254,684
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  6,714
  6,872
  8,185
  9,497
  10,719
  11,759
  12,537
  12,997
  13,106
  12,863
  12,003
  11,208
  10,197
  9,042
  8,035
  7,103
  6,122
  5,141
  4,205
  3,349
  2,595
  1,955
  1,431
  1,017
  701
  468
  302
  189
  114
  66
Current shareholders' claim on cash, %
  100
  86.9
  77.4
  70.3
  64.8
  60.5
  57.1
  54.5
  52.4
  50.8
  49.6
  48.8
  48.3
  48.0
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9
  47.9

Quintiles IMS Holdings, Inc., formerly Quintiles Transnational Holdings Inc., provides integrated information and technology-enabled healthcare services. The Company operates through segments, including Commercial Solutions; Research & Development Solutions, and Integrated Engagement Services. The Commercial Solutions segment offerings include national information offerings, sub-national information offerings, technology solutions, and workflow analytics and consulting services. The Research & Development Solutions segment provides biopharmaceutical development services. It offers project management and clinical monitoring, clinical trial support services, Q2 solutions, and strategic planning and design. The Integrated Engagement Services segment offerings include healthcare provider engagement services, patient engagement services, and scientific strategy and medical affairs services. The Company has its operations in the Americas, Europe and Africa, and the Asia-Pacific.

FINANCIAL RATIOS  of  Quintiles IMS Holdings (Q)

Valuation Ratios
P/E Ratio 210.9
Price to Sales 3.5
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 28.2
Price to Free Cash Flow 34.8
Growth Rates
Sales Growth Rate 19.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 110.3%
Cap. Spend. - 3 Yr. Gr. Rate 13.3%
Financial Strength
Quick Ratio 13
Current Ratio 0.1
LT Debt to Equity 82.3%
Total Debt to Equity 83.4%
Interest Coverage 5
Management Effectiveness
Return On Assets 1.2%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 15.9%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. -36.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 30.9%
Gross Margin - 3 Yr. Avg. 28.7%
EBITDA Margin 13%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 10.3%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 8.5%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 72%
Eff/ Tax Rate - 3 Yr. Avg. 43.8%
Payout Ratio 0%

Q stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the Q stock intrinsic value calculation we used $6878 million for the last fiscal year's total revenue generated by Quintiles IMS Holdings. The default revenue input number comes from 2016 income statement of Quintiles IMS Holdings. 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 Q stock valuation model: a) initial revenue growth rate of 52.9% 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 7.7%, whose default value for Q is calculated based on our internal credit rating of Quintiles IMS Holdings, 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 Quintiles IMS Holdings.
    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 Q stock the variable cost ratio is equal to 88.9%.

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 Q 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 3.5% for Quintiles IMS Holdings.

Corporate tax rate of 27% is the nominal tax rate for Quintiles IMS Holdings. 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 Q 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 Q are equal to 53.5%.

Life of production assets of 32.5 years is the average useful life of capital assets used in Quintiles IMS Holdings 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 Q is equal to -7.5%. 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 - $8633 million for Quintiles IMS Holdings - 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 215.083 million for Quintiles IMS Holdings 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 Quintiles IMS Holdings at the current share price and the inputted number of shares is $22.2 billion.

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COMPANY NEWS

▶ QuintilesIMS Announces Pricing on Offering of Senior Notes   [Sep-11-17 04:59PM  Business Wire]
▶ A list of executives that have sold $3M-plus in stock of Triangle companies   [Sep-08-17 03:40PM  American City Business Journals]
▶ 3 Stocks That Could Soar More Than McDonald's   [Aug-17-17 09:15AM  Motley Fool]
▶ Quintiles IMS Holdings Continues to Execute   [Aug-04-17 04:03PM  Motley Fool]
▶ QuintilesIMS Reports Second-Quarter 2017 Results   [Aug-03-17 07:00AM  Business Wire]
▶ 3 Top Stocks You've Been Overlooking   [Jul-27-17 05:33PM  Motley Fool]
▶ Colleen Goggins Joins QuintilesIMS Board of Directors   [Jul-25-17 09:01PM  Business Wire]
▶ Billionaire Investors Backing A Marijuana Boom In 2017   [Jul-16-17 07:30PM  Oilprice.com]
▶ QuintilesIMS may offload contract sales business, says report   [Jun-22-17 05:40PM  American City Business Journals]
▶ [$$] Health-Care Investor NovaQuest Adds Partner   [Jun-16-17 06:03PM  The Wall Street Journal]
▶ High court won't hear appeal from former Qwest CEO   [Jun-12-17 09:42AM  Associated Press]
▶ Just one Triangle firm makes Fortune 500 cut for 2017   [Jun-07-17 12:45PM  American City Business Journals]
▶ QuintilesIMS Announces Pricing of Secondary Public Offering   [May-25-17 08:00AM  Business Wire]
▶ Biotech And Pharma Industry And Stock News   [May-12-17 04:02PM  Investor's Business Daily]
▶ Quintiles IMS Holdings Starts 2017 Strong   [May-04-17 10:07AM  Motley Fool]
▶ Quintiles beats 1Q profit forecasts   [May-03-17 07:24AM  Associated Press]
▶ QuintilesIMS in Deal to Use Salesforce.coms Cloud Technology   [Apr-25-17 12:35AM  The Wall Street Journal]
▶ Triangle CROs among best to work with, says survey   [Apr-03-17 03:10PM  at bizjournals.com]
▶ Triangle CROs among best to work with, says survey   [03:10PM  American City Business Journals]
▶ 9 New Stocks in the Wide Moat Focus   [Mar-28-17 06:00AM  Morningstar]
▶ Parexel Investors: Swimming With the Whales   [Mar-03-17 10:16AM  GuruFocus.com]
▶ QuintilesIMS Announces Pricing of Senior Notes   [Feb-23-17 06:16PM  Business Wire]
▶ QuintilesIMS releases first earnings report as a combined company   [Feb-14-17 04:05PM  at bizjournals.com]
▶ LabCorp In Talks to Buy Contract Researcher PPD   [Feb-06-17 11:15AM  at Investopedia]
▶ [$$] Quintiles Is a Play on the Cures Act   [Jan-03-17 01:27PM  at Barrons.com]
Financial statements of Q
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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