Stock Analysis on Net
Stock Analysis on Net

Regeneron Pharmaceuticals Inc. (NASDAQ:REGN)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Regeneron Pharmaceuticals Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 5.59%
01 FCFF0 3,944,187
1 FCFF1 4,826,967 = 3,944,187 × (1 + 22.38%) 4,571,389
2 FCFF2 5,647,605 = 4,826,967 × (1 + 17.00%) 5,065,380
3 FCFF3 6,303,881 = 5,647,605 × (1 + 11.62%) 5,354,631
4 FCFF4 6,697,228 = 6,303,881 × (1 + 6.24%) 5,387,539
5 FCFF5 6,754,761 = 6,697,228 × (1 + 0.86%) 5,146,112
5 Terminal value (TV5) 143,980,123 = 6,754,761 × (1 + 0.86%) ÷ (5.59% – 0.86%) 109,691,189
Intrinsic value of Regeneron Pharmaceuticals Inc. capital 135,216,240
Less: Long-term debt and finance lease liabilities (fair value) 2,248,000
Intrinsic value of Regeneron Pharmaceuticals Inc. common stock 132,968,240
 
Intrinsic value of Regeneron Pharmaceuticals Inc. common stock (per share) $1,210.02
Current share price $744.60

Based on: 10-K (reporting date: 2023-12-31).

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Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Regeneron Pharmaceuticals Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 81,823,745 0.97 5.67%
Long-term debt and finance lease liabilities (fair value) 2,248,000 0.03 2.62% = 2.92% × (1 – 10.14%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 109,889,531 × $744.60
= $81,823,744,782.60

   Long-term debt and finance lease liabilities (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (5.90% + 10.70% + 13.40% + 7.80% + 12.90%) ÷ 5
= 10.14%

WACC = 5.59%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Regeneron Pharmaceuticals Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Interest expense 73,000 59,400 57,300 56,900 30,200
Net income 3,953,600 4,338,400 8,075,300 3,513,200 2,115,800
 
Effective income tax rate (EITR)1 5.90% 10.70% 13.40% 7.80% 12.90%
 
Interest expense, after tax2 68,693 53,044 49,622 52,462 26,304
Interest expense (after tax) and dividends 68,693 53,044 49,622 52,462 26,304
 
EBIT(1 – EITR)3 4,022,293 4,391,444 8,124,922 3,565,662 2,142,104
 
Finance lease liabilities, current portion — — 719,700 — —
Long-term debt 1,982,900 1,981,400 1,980,000 1,978,500 —
Finance lease liabilities, excluding current portion 720,000 720,000 — 717,200 713,900
Stockholders’ equity 25,973,100 22,664,000 18,768,800 11,025,300 11,089,700
Total capital 28,676,000 25,365,400 21,468,500 13,721,000 11,803,600
Financial Ratios
Retention rate (RR)4 0.98 0.99 0.99 0.99 0.99
Return on invested capital (ROIC)5 14.03% 17.31% 37.85% 25.99% 18.15%
Averages
RR 0.99
ROIC 22.66%
 
FCFF growth rate (g)6 22.38%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 73,000 × (1 – 5.90%)
= 68,693

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 3,953,600 + 68,693
= 4,022,293

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [4,022,293 – 68,693] ÷ 4,022,293
= 0.98

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 4,022,293 ÷ 28,676,000
= 14.03%

6 g = RR × ROIC
= 0.99 × 22.66%
= 22.38%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (84,071,745 × 5.59% – 3,944,187) ÷ (84,071,745 + 3,944,187)
= 0.86%

where:

Total capital, fair value0 = current fair value of Regeneron Pharmaceuticals Inc. debt and equity (US$ in thousands)
FCFF0 = the last year Regeneron Pharmaceuticals Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Regeneron Pharmaceuticals Inc. capital

FCFF growth rate (g) forecast

Regeneron Pharmaceuticals Inc., H-model

Microsoft Excel
Year Value gt
1 g1 22.38%
2 g2 17.00%
3 g3 11.62%
4 g4 6.24%
5 and thereafter g5 0.86%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 22.38% + (0.86% – 22.38%) × (2 – 1) ÷ (5 – 1)
= 17.00%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 22.38% + (0.86% – 22.38%) × (3 – 1) ÷ (5 – 1)
= 11.62%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 22.38% + (0.86% – 22.38%) × (4 – 1) ÷ (5 – 1)
= 6.24%