Stock Analysis on Net
Stock Analysis on Net

Allergan PLC (NYSE:AGN)

This company has been moved to the archive! The financial data has not been updated since May 7, 2020.

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)

Allergan PLC, 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 15.28%
01 FCFF0 7,515,688
1 FCFF1 7,515,688 = 7,515,688 × (1 + 0.00%) 6,519,586
2 FCFF2 7,515,688 = 7,515,688 × (1 + 0.00%) 5,655,504
3 FCFF3 7,515,688 = 7,515,688 × (1 + 0.00%) 4,905,944
4 FCFF4 7,515,688 = 7,515,688 × (1 + 0.00%) 4,255,728
5 FCFF5 7,515,688 = 7,515,688 × (1 + 0.00%) 3,691,689
5 Terminal value (TV5) 49,190,924 = 7,515,688 × (1 + 0.00%) ÷ (15.28% – 0.00%) 24,162,474
Intrinsic value of Allergan PLC capital 49,190,924
Less: Preferred shares, $0.0001 par value per share (book value) 0
Less: Long-term debt and capital leases, including current portion (fair value) 23,751,700
Intrinsic value of Allergan PLC common stock 25,439,224
 
Intrinsic value of Allergan PLC common stock (per share) $77.13
Current share price $192.99

Based on: 10-K (reporting date: 2019-12-31).

1 See details »

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)

Allergan PLC, cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 63,649,220 0.73 20.14%
Preferred shares, $0.0001 par value per share (book value) 0 0.00 0.00%
Long-term debt and capital leases, including current portion (fair value) 23,751,700 0.27 2.26% = 3.50% × (1 – 35.48%)

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 329,805,791 × $192.99
= $63,649,219,605.09

   Long-term debt and capital leases, including current portion (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
= (12.50% + 25.60% + 37.00% + 67.00% + 35.30%) ÷ 5
= 35.48%

WACC = 15.28%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Allergan PLC, PRAT model

Microsoft Excel
Average Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Interest expense 783,000 911,200 1,095,600 1,295,600 1,193,300
Income (loss) from discontinued operations, net of tax — — (402,900) 15,914,500 6,787,700
Net income (loss) attributable to shareholders (5,271,000) (5,096,400) (4,125,500) 14,973,400 3,915,200
 
Effective income tax rate (EITR)1 12.50% 25.60% 37.00% 67.00% 35.30%
 
Interest expense, after tax2 685,125 677,933 690,228 427,548 772,065
Add: Dividends declared 974,400 1,026,600 1,218,200 278,400 232,000
Interest expense (after tax) and dividends 1,659,525 1,704,533 1,908,428 705,948 1,004,065
 
EBIT(1 – EITR)3 (4,585,875) (4,418,467) (3,032,372) (513,552) (2,100,435)
 
Current portion of long-term debt and capital leases 4,532,500 868,300 4,231,800 2,797,900 2,432,800
Long-term debt and capital leases, excluding current portion 18,116,500 22,929,400 25,843,500 29,970,800 40,293,400
Shareholders’ equity 58,173,600 65,114,100 73,821,100 76,192,700 76,591,400
Total capital 80,822,600 88,911,800 103,896,400 108,961,400 119,317,600
Financial Ratios
Retention rate (RR)4 — — — — —
Return on invested capital (ROIC)5 -5.67% -4.97% -2.92% -0.47% -1.76%
Averages
RR —
ROIC -3.16%
 
FCFF growth rate (g)6 0.00%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

1 See details »

2019 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 783,000 × (1 – 12.50%)
= 685,125

3 EBIT(1 – EITR) = Net income (loss) attributable to shareholders – Income (loss) from discontinued operations, net of tax + Interest expense, after tax
= -5,271,000 – 0 + 685,125
= -4,585,875

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [-4,585,875 – 1,659,525] ÷ -4,585,875
= —

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × -4,585,875 ÷ 80,822,600
= -5.67%

6 g = RR × ROIC
= — × -3.16%
= 0.00%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (87,400,920 × 15.28% – 7,515,688) ÷ (87,400,920 + 7,515,688)
= 0.00%

where:

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

FCFF growth rate (g) forecast

Allergan PLC, H-model

Microsoft Excel
Year Value gt
1 g1 0.00%
2 g2 0.00%
3 g3 0.00%
4 g4 0.00%
5 and thereafter g5 0.00%

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)
= 0.00% + (0.00% – 0.00%) × (2 – 1) ÷ (5 – 1)
= 0.00%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 0.00% + (0.00% – 0.00%) × (3 – 1) ÷ (5 – 1)
= 0.00%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 0.00% + (0.00% – 0.00%) × (4 – 1) ÷ (5 – 1)
= 0.00%