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NovoCure (NovoCure) Earnings Power Value (EPV) : $-0.18 (As of Mar24)


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What is NovoCure Earnings Power Value (EPV)?

As of Mar24, NovoCure's earnings power value is $-0.18. *

* 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.


NovoCure Earnings Power Value (EPV) Historical Data

The historical data trend for NovoCure'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.

NovoCure Earnings Power Value (EPV) Chart

NovoCure Annual Data
Trend Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21 Dec22 Dec23
Earnings Power Value (EPV)
Get a 7-Day Free Trial Premium Member Only Premium Member Only -44.00 -12.95 5.94 8.12 1.44

NovoCure Quarterly Data
Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23 Jun23 Sep23 Dec23 Mar24
Earnings Power Value (EPV) Get a 7-Day Free Trial 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 6.94 4.93 2.87 1.44 -0.18

Competitive Comparison of NovoCure's Earnings Power Value (EPV)

For the Medical Devices subindustry, NovoCure'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.


NovoCure's Earnings Power Value (EPV) Distribution in the Medical Devices & Instruments Industry

For the Medical Devices & Instruments industry and Healthcare sector, NovoCure's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where NovoCure's Earnings Power Value (EPV) falls into.



NovoCure 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.

NovoCure's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 498.6
DDA 10.1
Operating Margin % -14.33
SGA * 25% 71.1
Tax Rate % -125.50
Maintenance Capex 19.5
Cash and Cash Equivalents 870.1
Short-Term Debt 0.0
Long-Term Debt 595.3
Shares Outstanding (Diluted) 107.3

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 = -14.33%

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 = $498.6 Mil, Average Operating Margin = -14.33%, Average Adjusted SGA = 71.1,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 498.6 * -14.33% +71.1 = $-0.321659594 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 = -125.50%, and "Normalized" EBIT = $-0.321659594 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = -0.321659594 * ( 1 - -125.50% ) = $-0.7253472093639 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) = 10.1 * 0.5 * -125.50% = $-6.3176200085 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = -0.7253472093639 + -6.3176200085 = $-7.0429672178639 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.
NovoCure's Average Maintenance CAPEX = $19.5 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. NovoCure's current cash and cash equivalent = $870.1 Mil.
NovoCure's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 595.3 + 0.0 = $595.26 Mil.
NovoCure's current Shares Outstanding (Diluted Average) = 107.3 Mil.

NovoCure's Earnings Power Value (EPV) for Mar24 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( -7.0429672178639 - 19.5)/ 9%+870.1-595.26 )/107.3
=-0.18

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( -0.18272717852648-19.245 )/-0.18272717852648
= 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.


NovoCure  (NAS:NVCR) 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.


NovoCure Earnings Power Value (EPV) Related Terms

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


NovoCure (NovoCure) Business Description

Traded in Other Exchanges
Address
Grenville Street, No. 4 The Forum, Second Floor, St. Helier, JEY, JE2 4UF
NovoCure Ltd serves in the healthcare sector of the United States. Its business involves the development, manufacture and commercialization of Tumor Treating Fields (TTFields) devices, including Optune and Optune Lua, for the treatment of solid tumor cancers. Its pipeline consists of Ovarian Cancer, Pancreatic Cancer, Non-Small Cell Lung Cancer, and Brain Metastasis. Products are comprised of two main components: electric field generator and arrays and related accessories. NovoCure derives its major revenues in the United States.
Executives
Pritesh Shah officer: Chief Commercial Officer C/O NOVOCURE INC., 20 VALLEY STREAM PARKWAY, SUITE 300, MALVERN PA 19355
Michal Nath Puri officer: Chief Human Resources Officer BUSINESS VILLAGE D4, PARK 6/PLATZ10, ROOT V8 6039
Wilhelmus Cm Groenhuysen officer: Chief Financial Officer C/O NAVTEQ CORPORATION, 222 MERCHANDISE MART STE 900, CHICAGO IL 60654
Ashley Cordova officer: Chief Financial Officer 20 VALLEY STREAM PARKWAY,, SUITE 300, MALVERN PA 19355
Arye Barak Ben officer: General Counsel TOPAZ BUILDING, 4TH FLOOR, MATAM CENTER, PO BOX 15022, SH'AR HACARMEL, HAIFA L3 31905
Timothy J Scannell director 2825 AIRVIEW BOULEVARD, KALAMAZOO MI 49002
Kristin Stafford director 1550 LIBERTY RIDGE DRIVE, SUITE 115, WAYNE PA 19087
Frank X Leonard officer: President, CNS Cancers US 20 VALLEY STREAM PARKWAY,, SUITE 300, MALVERN PA 19355
William Patrick Burke officer: Chief Human Resources Officer 195 COMMERCE WAY, PORTSMOUTH NH 03801
Uri Weinberg officer: Chief Innovation Officer NOVOCURE INC., 20 VALLEY STREAM PARKWAY, SUITE 300, MALVERN PA 19355
Allyson J Ocean director 1550 LIBERTY RIDGE DRIVE, SUITE 115, WAYNE PA 19087
Asaf Danziger director, officer: Chief Executive Officer 5 NACHUM CHAT ST., TIRAT HACARMEL L3 5112302
Ely Benaim officer: Chief Medical Officer C/O REXAHN PHARMACEUTICALS, INC., 15245 SHADY GROVE ROAD, SUITE 455, ROCKVILLE MD 20850
William F Doyle director, 10 percent owner
Jeryl L Hilleman director C/O INTERSECT ENT, INC., 1555 ADAMS DRIVE, MENLO PARK CA 94025

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