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SDGR (Schrodinger) Earnings Power Value (EPV) : $-14.32 (As of Sep24)


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What is Schrodinger Earnings Power Value (EPV)?

As of Sep24, Schrodinger's earnings power value is $-14.32. *

* 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.


Schrodinger Earnings Power Value (EPV) Historical Data

The historical data trend for Schrodinger'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.

Schrodinger Earnings Power Value (EPV) Chart

Schrodinger Annual Data
Trend Dec17 Dec18 Dec19 Dec20 Dec21 Dec22 Dec23
Earnings Power Value (EPV)
Get a 7-Day Free Trial - - - - -8.40

Schrodinger Quarterly Data
Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23 Jun23 Sep23 Dec23 Mar24 Jun24 Sep24
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 -7.30 -8.40 -11.06 -12.74 -14.32

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

For the Health Information Services subindustry, Schrodinger'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.


Schrodinger's Earnings Power Value (EPV) Distribution in the Healthcare Providers & Services Industry

For the Healthcare Providers & Services industry and Healthcare sector, Schrodinger's Earnings Power Value (EPV) distribution charts can be found below:

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



Schrodinger 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.

Schrodinger's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 157.7
DDA 4.3
Operating Margin % -91.50
SGA * 25% 26.0
Tax Rate % 6.27
Maintenance Capex 7.2
Cash and Cash Equivalents 388.7
Short-Term Debt 16.9
Long-Term Debt 103.3
Shares Outstanding (Diluted) 72.8

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 = -91.50%

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 = $157.7 Mil, Average Operating Margin = -91.50%, Average Adjusted SGA = 26.0,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 157.7 * -91.50% +26.0 = $-118.324916897 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 = 6.27%, and "Normalized" EBIT = $-118.324916897 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = -118.324916897 * ( 1 - 6.27% ) = $-110.9118608534 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) = 4.3 * 0.5 * 6.27% = $0.13597556 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = -110.9118608534 + 0.13597556 = $-110.7758852934 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.
Schrodinger's Average Maintenance CAPEX = $7.2 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. Schrodinger's current cash and cash equivalent = $388.7 Mil.
Schrodinger's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 103.3 + 16.9 = $120.144 Mil.
Schrodinger's current Shares Outstanding (Diluted Average) = 72.8 Mil.

Schrodinger's Earnings Power Value (EPV) for Sep24 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( -110.7758852934 - 7.2)/ 9%+388.7-120.144 )/72.8
=-14.32

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( -14.319655265071-20.83 )/-14.319655265071
= 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.


Schrodinger  (NAS:SDGR) 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.


Schrodinger Earnings Power Value (EPV) Related Terms

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


Schrodinger Business Description

Traded in Other Exchanges
Address
1540 Broadway, 24th Floor, New York, NY, USA, 10036
Schrodinger Inc is a healthcare-based software company. Its operating segments are Software and Drug discovery. Through the Software segment, the company is focused on selling software to transform drug discovery across the life sciences industry and customers in materials science industries. In the Drug discovery segment, it is engaged in generating revenue from a portfolio of preclinical and clinical programs, internally and through collaborations. It generates revenue from the sales of software solutions and from research funding and milestone payments from its drug discovery collaborations.
Executives
Margaret Dugan officer: Chief Medical Officer C/O MOURANT GOVERNANCE SERVICES (CAYMAN), 94 SOLARIS AVE, CAMANA BAY, PO BOX 1348, GRAND CAYMAN E9 KY1-1108
Geoffrey Craig Porges officer: EVP & CFO 1540 BROADWAY, 24TH FL., NEW YORK NY 10036
Jenny Herman officer: Vice President, Controller SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Robert Lorne Abel officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Yvonne Tran officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Kenneth Patrick Lorton officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Nancy Thornberry director SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Ramy Farid director, 10 percent owner, officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Arun Oberoi director 100 EAST DAVIE STREET, RALEIGH NC 27601
Karen Akinsanya officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Joel Lebowitz officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
David E Shaw 10 percent owner 120 WEST FORTY-FIFTH STREET, 39TH FLOOR, NEW YORK NY 10036
Jorg Weiser officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
Jennifer Daniel officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036
D'cruz Cony officer: See Remarks SCHRODINGER, INC., 120 WEST 45TH STREET, 17TH FLOOR, NEW YORK NY 10036