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Intercept Pharmaceuticals (NAS:ICPT) Earnings Power Value (EPV)

: $-61.29 (As of Mar23)
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As of Mar23, Intercept Pharmaceuticals's earnings power value is $-61.29. *

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

Margin of Safety is N/A.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future. Assumption: Current profitability is sustainable.


Intercept Pharmaceuticals Earnings Power Value (EPV) Historical Data

The historical data trend for Intercept Pharmaceuticals's Earnings Power Value (EPV) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Intercept Pharmaceuticals Annual Data
Trend Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21 Dec22
Earnings Power Value (EPV)
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -1,323.09 -1,577.79 -972.57 -123.20 -63.50

Intercept Pharmaceuticals Quarterly Data
Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23
Earnings Power Value (EPV) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -119.96 -113.75 -83.06 -63.50 -61.29

Competitive Comparison

For the Biotechnology subindustry, Intercept Pharmaceuticals's Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

   

Intercept Pharmaceuticals Earnings Power Value (EPV) Distribution

For the Biotechnology industry and Healthcare sector, Intercept Pharmaceuticals's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where Intercept Pharmaceuticals's Earnings Power Value (EPV) falls in comparison to its industry or sector. The grey bar indicates the Earnings Power Value (EPV)'s extreme value range as defined by GuruFocus.



Intercept Pharmaceuticals Earnings Power Value (EPV) Calculation

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.

Intercept Pharmaceuticals's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 253.7
DDA 2.7
Operating Margin % -117.17
SGA * 25% 59.8
Tax Rate % 0.00
Maintenance Capex 1.5
Cash and Cash Equivalents 433.6
Short-Term Debt 109.7
Long-Term Debt 223.4
Shares Outstanding (Diluted) 41.7

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.

2. Look at average margins over a business/Industry cycle: Average Operating Margin = -117.17%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = $253.7 Mil, Average Operating Margin = -117.17%, Average Adjusted SGA = 59.8,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 253.7 * -117.17% +59.8 = $-237.461795178 Mil.

4. Multiply by one minus Average Tax Rate (NOPAT):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = 0.00%, and "Normalized" EBIT = $-237.461795178 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = -237.461795178 * ( 1 - 0.00% ) = $-237.461795178 Mil.

5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 2.7 * 0.5 * 0.00% = $0 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = -237.461795178 + 0 = $-237.461795178 Mil.

6. Adjusted for Maintenance Capital Expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
Intercept Pharmaceuticals's Average Maintenance CAPEX = $1.5 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. Intercept Pharmaceuticals's current cash and cash equivalent = $433.6 Mil.
Intercept Pharmaceuticals's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 223.4 + 109.7 = $333.04 Mil.
Intercept Pharmaceuticals's current Shares Outstanding (Diluted Average) = 41.7 Mil.

Intercept Pharmaceuticals's Earnings Power Value (EPV) for Mar23 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( -237.461795178 - 1.5)/ 9%+433.6-333.04 )/41.7
=-61.29

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( -61.292228669173-11.855 )/-61.292228669173
= N/A

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.


Intercept Pharmaceuticals  (NAS:ICPT) Earnings Power Value (EPV) Explanation

Assumption: Current profitability is sustainable.

Earnings power value (EPV) uses a very basic equation which assumes no growth, although it does rely on an assumption about the cost of capital as well as the fact that current earnings are sustainable. It also involves several adjustments to clean up the underlying Earnings figures.


Be Aware

Though using today's earnings in calculating Earnings Power Value, GuruFocus is normalizing these earnings to the business cycle. This eliminates the effects on profitability of valuing the firm at different points in the business cycle. This means that we are considering the average earnings over 5 years.


Intercept Pharmaceuticals Earnings Power Value (EPV) Related Terms

Thank you for viewing the detailed overview of Intercept Pharmaceuticals's Earnings Power Value (EPV) provided by GuruFocus.com. Please click on the following links to see related term pages.


Intercept Pharmaceuticals (NAS:ICPT) Business Description

Intercept Pharmaceuticals logo
Traded in Other Exchanges
Address
10 Hudson Yards, 37th Floor, New York, NY, USA, 10001
Intercept Pharmaceuticals is a biotech company focused on developing and commercializing novel therapeutics to treat chronic liver diseases. Obeticholic acid, or OCA, is an agonist of the farnesoid X receptor. OCA was approved as Ocaliva to treat primary biliary cirrhosis in 2016 and is being developed for a variety of chronic liver diseases, including nonalcoholic steatohepatitis, or NASH.
Executives
Andrew Saik officer: EVP & Chief Financial Officer 640 LEE ROAD, CHESTERBROOK PA 19087
M Michelle Berrey officer: President, R&D and CMO 303A COLLEGE ROAD EAST, PRINCETON NJ 08450
Dagmar Rosa-bjorkeson director C/O BAXALTA INCORPORATED, 1200 LAKESIDE DRIVE, BANNOCKBURN IL 60015
Rocco Venezia officer: Chief Accounting Officer C/O INTERCEPT PHARMACEUTICALS, INC., 10 HUDSON YARDS, 37TH FLOOR, NEW YORK NY 10001
Lisa Defrancesco officer: SVP, IR & Corp. Affairs C/O INTERCEPT PHARMACEUTICALS, INC., 10 HUDSON YARDS, FLOOR 37, NEW YORK NY 10001
Linda M Richardson officer: EVP & Chief Commercial Officer 2505 MERIDIAN PKWY, SUITE 340, C/O CHIMERIX, INC., DURHAM NC 27713
Jared Freedberg officer: General Counsel and Secretary 300 THE AMERICAN ROAD, MORRIS PLAINS NJ 07950
Bryan Ball officer: Chief Quality Officer 300 THE AMERICAN ROAD, MORRIS PLAINS NJ 07950
Paolo Fundaro director, 10 percent owner C/O GENEXTRA S.P.A.,, VIA G. DE GRASSI, 11, MILAN L6 20123
Keith Michael Gottesdiener director 900 FIFTH AVENUE, #8C, NEW YORK NY 10021
Luca Benatti director C/O INTERCEPT PHARMACEUTICALS, INC., 450 WEST 15TH STREET, SUITE 505, NEW YORK NY 10011
Daniel G Welch director 4611 UNIVERSITY DR, 4 UNIVERSITY PLACE, DURHAM NC 27707
Daniel Bradbury director BIOBRIT, LLC, 2223 AVENIDA DE LA PLAYA, SUITE 108, LA JOLLA CA 92037
Nancy Miller-rich director C/O INTERCEPT PHARMACEUTICALS, INC., 10 HUDSON YARDS, 37TH FL, NEW YORK NY 10001
Gino Santini director C/O AMAG PHARMACEUTICALS, INC., 1100 WINTER STREET, WALTHAM MA 02451

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