Student Investment Fund Stock Report Analysts: Mat Overbaugh & Zachary Wilson
Bristol‐Myers Squibb CoNYSE: BMY
Recommendation: Buy/Limit Order
Market Cap: $50.28B
Recent Price: $25.38 (11/27/09)
Target Price: $24.38
Sector: Healthcare
Sub‐Sector: Drug Manufacturers
Overview and Highlights
Bristol‐Myers Squibb is a leading
worldwide healthcare company
focused on the development and
sale of name‐brand
pharmaceuticals.
With fifty‐one drugs, BMY has an
above‐average pipeline with
compounds that have
blockbuster potential in key
therapeutic areas
BMY has increased or maintained
dividend payments every year for
thirty‐nine years, even during
periods that saw earnings per
share decline.
BMY has a solid and proven track
record of cutting costs and is on
pace to achieve $2.5B in annual
cost savings by 2012.
BMY is set to finish FY 2009 with
$10B in cash on the balance
sheet.
BMY is currently divesting out of
all non‐biopharma assets to
transform into a next generation
BioPharma company.
BMY faces a steep patent cliff
through 2015. Patent expirations
of key drugs Plavix, Abilify, and
Avapro will put over 30% of
BMY’s TTM revenue at risk.
Investment Thesis
Worldwide, the Pharmaceutical business is around $785B. IMS Health, a
leading provider of market healthcare research, predicts an annual growth
rate of 4% ‐ 7%.
Bristol‐Myers has taken aggressive measures to combat the patent cliff, an
industry wide problem in which the R&D engine cannot create new products
to fill voids left by patent expirations on existing drugs.
With a healthy ROIC v. WACC spread protected by legal patents, BMY
continues to create and deliver value to shareholders with a sustainable
5.01% dividend yield.
While healthcare reform remains a risk, prescription medication remains the
most cost‐effective treatment method used by modern medicine.
Financial Statistics vs. the Industry
Insider Trading – Net Purchases
Recommendation
Limit Order with a $24.15 Strike
Price
Economic Summary & Industry Analysis
Economic fundamentals remain weak with unemployment
over 10% and consumer spending down significantly. While
there are many things people have chosen to live without in
the downturn, pharmaceutical isn’t one of them. Throughout
the down economy revenue of pharmaceutical companies
has continued to grow. The resiliency of pharmaceutical
sales, strong cash flows, and attractive dividend yields make
the bio‐pharma sector an attractive choice in uncertain
economic times. The chart shows the outperformance of the
bio‐pharma index vs. S&P 500 over the past two years.
An aging world population will fuel consistent growth in
pharmaceutical sales. Despite the near term domestic threat
of healthcare reform, the pharmaceutical industry is
positioned to increase revenues over the next several
decades thanks to a rapidly aging world population that is
increasingly dependent on life‐extending medication.
The United Nations projects that the number of people over
the age of sixty will nearly quadruple by 2050 to almost 2
billion. An aging population requires more medication to stay
healthy and active.
Source: United Nations
The average number of prescriptions filled annually by age
group shows the explosive growth in prescriptions filled for
the 65+ age group.
Source: Kaiser Family Foundation (www.statehealthfacts.org)
It’s important to note that pharmaceutical products sold by
Bristol‐Myers extend life. Even in a down economy, people
will pay for life‐saving medication.
The pending patent cliff over the next 10 years is an industry
wide problem. Across the industry over $74B worth of
branded drugs will lose patent protection by 2012. The fast
approaching patent cliff has led healthy companies to pursue
acquisition and licensing strategies instead of internal
product development to expand their pipeline and get drugs
to market more quickly. Many major drug companies have
turned to diversification to help cushion the revenue blow of
the pending patent cliff. This plan provides for more
consistent revenue but at the cost of operating margins. The
other path, the one BMY has undertaken, is to focus on core
competencies, cut costs, aggressively expand margins, and
grow the pipeline through pharmaceutical and biologic
acquisitions. Roughly half of the acquisitions by big
pharmaceutical over the past decade have been in “ex‐
pharmaceutical” sectors such as OTC products, medical
devices, animal health, and retail pharmacy. However, firms
that have 90% or more of 2008 revenues from
pharmaceutical sales had above average margins, where
those that have diversified showed below average operating
margins. The fury of acquisitions in big pharmaceutical is
likely to continue as each company continues on its respected
path to dampen the impacts of the pending patent cliff.
Healthy cash rich companies, like BMY, will be the ones that
take full advantage of current tight credit markets to continue
to expand pipelines or diversify through acquisitions.
Domestic healthcare reform could completely change the
healthcare system, including pharmaceuticals. The current
health care reform under consideration includes a Medicare
Part D clawback, public plan option, Medicare/Medicaid cuts,
and legislation for the approval of biosimilars to name a few
of its points. Significant changes are likely to directly affect
the pharmaceutical industry. This includes fees to help cover
the “donut hole” in Medicare Part D. Pharmaceutical
companies are also at risk from decreased subsidies from
Medicare/Medicaid, increasing pressure for use of generics,
and the push through of biosimilar legislation. These areas of
reform would negatively impact the industry. However, big
pharmaceutical has taken an active role in the legislative
process thus far. PhRMA, the biggest trade association for
the prescription drug industry, worked directly with President
Obama to get a compromise in place. The current deal that
has been struck calls for an $80B payment from
pharmaceutical companies that will cover costs not covered
by Medicaid. While this is viewed as a compromise between
congress and PhRMA, the street has viewed it as a win for big
pharma. Geographical diversification will also play a part in
what percent of revenues are at stake for reform. BMY’s
international revenue represented 42% of total TTM sales
Financial Modeling
Modeling Approach
When modeling Bristol‐Myers several assumptions were used
to ensure BMY represents a sound investment for the
Washburn Student Investment Fund. Our assumptions
assume a less than ideal environment for BMY.
Our model assumed a 2.5% terminal growth rate and used an
increased beta. Additionally, we increased SG&A, R&D and
Net PPE. This would represent a reversal to a successful cost
cutting trend (the Productivity Transformation Initative,
above) but would serve to dampen valuations by increasing
the cost of capital and decreasing effeciency on the balance
sheet.
We used an average revenue growth slightly below 5%. This is
below Thompson‐Baseline’s predicted 6% and is in line with
the IMS Health prediction of 4% ‐ 7% growth for the industry.
We assumed significant revenue loss in 2012E and 2015E
which represents lost revenue due to patent expirations,
specifically Plavix and Abilify.
Modeling Results
As of 12/4 BMY traded with a Dividend Yield just over 5%.
BMY has historically increased dividend payments even when
EPS fell. We project a continued increase in DPS throughout
the forecast.
With such a high dividend yield it is important to verify that
Bristol‐Myers will be able to sustain it. One method of
financial stability is the Piotroski’s Financial Fitness Scorecard.
BMY shows an average value well above 8 indicating that
BMY has a solid financial foundation. Additionally, BMY
scores well in the safe zone on the Altman Z‐Score
Bankruptcy test which suggests that BMY has no significant
risk of bankruptcy.
Bristol‐Myers sustains this financial stability through a strong
value‐creation engine. The spread between ROIC and WACC
averages 20% throughout the forecast. This spread is well
protected by legal patents.
While Economic Value Added takes a slight dip in 2009E due
to the conservative modeling approach and two more slight
dips in 2012E and 2015E due to patent expirations, BMY is
able to increase Market Value Added throughout the
forecast.
Recommendation
Due to Bristol‐Myers strong dividend, healthy balance sheet
and strong pipeline we view BMY as an attractive buy and
hold stock for the Student Investment Fund at or below
$24.15 per share. That price would secure a sustainable
5.13% dividend yield for the Studend Investment Fund. In
addition to being an attractive investment based on
fundamental analysis, Bristol‐Myers offers a low correlational
coefficient to the stocks held in the fund.
A portfolio of low correlation stocks will decrease the volitility
of the portfolio as a whole. Exclusing indexes, BMY does not
have a correlational coefficient over .48 with any stock held in
the fund.
Bristol‐Myers continues to have significant upside for capital
gains. The well‐positioned drug could likely generate a
surprise blockbuster drug. Furthermore, macro‐economic
trends regarding an aging and increasingly unhealthy
population could provide a tailwind to Bristol‐Myers’ revenue
as modern medicine dictates prescription medication as the
first and most cost effective treatment.
Our forecasts represent Bristol‐Myers’ performance in a less
than ideal environment. Bristol‐Myers should meet and likely
surpass our conservative modeling assumptions making our
discounted cash flow target price a conservative estimate.
Management and Business Initiative
We view BMY’s management team as an asset to the
company. Since the 2006 appointment of James Cornelius as
CEO the company has significantly grown revenues and cut
costs through two key strategies titled “string of pearls” for
its pipeline expansion strategy, and “PTI” for its productivity
transformation initiative strategy. BMY’s management has
strengthened the company’s balance sheet through divesture
of non‐biopharma assets, addressed the coming patent cliff
head on, shown restraint in acquisition pricing, and
successfully increased operating leverage through cost
cutting initiatives.
“String of Pearls” Strategy
In 2007 BMY launched a new strategy titled “string of pearls”.
The new strategic plan sought to acquire new compounds,
pipelines, and companies that would strategically help
address areas not currently covered by the company, or build
onto its existing pipeline. The strategy also has led to the
divestiture of non‐core businesses. Over the past two years
BMY has sold its OTC line, its generics businesses, medical
supply division, and most recently is in the process of
spinning of its nutritionals business, Mead Johnson, to
shareholders. These divestures have improved operating
margins, and provided significant cash to allow for the “string
of pearls” strategy to continue while building an even larger
war chest. The most recent, and the eight pearl acquired,
was Medarex. Through the $2.1B acquisition of Medarex
BMY gained full rights to phase III monoclonal antibody
Ipilimumab, and Medarex’s state of the art biologics
platform. Other firms full acquired are Kosan Bioscience
($235m) and Adnexus Therapuetics ($430m). The other
pearls have been acquired through partnering agreements
such as with AZN and Pfizer, as well as purchasing licensing
agreements. While the company has been aggressive in its
pursuit of promising compounds and companies it has shown
restraint in regards to price. BMY walked away from a
bidding war with LLY for ImClone after LLY bid up the price
20% over BMY’s offer.
Below is a graph of some of the anticipated launch dates of
some of the drugs developed/acquired through this strategy,
with Onglyza being the first to be approved in July of 2009.
Productivity Transformation Initiative
As BMY states “the Company’s productivity transformation
initiative is designed to fundamentally change the way it runs
its business to meet the challenges of a changing business
environment, to take advantage of the diverse opportunities
in the marketplace as the Company is transforming into a
next‐generation biopharmaceutical company, and to create a
total of $2.5 billion in annual productivity cost savings and
cost avoidance by 2012.
In connection with the PTI, the Company aims to achieve a
culture of continuous improvement to enhance its efficiency,
effectiveness and competitiveness and to substantially
improve its cost base.
BMY has already achieved annual cost savings of $1.5B
through the PTI strategy, and is on pace to reach its goal of
another $1B by 2012. It has reduced its number of
manufacturing facilities, decreased its geographic footprint,
sold and spun off non‐biopharma assets, and reduced its
sales force by over 50%. This has led to expanding margins,
and has had no negative impact to revenue growth.
Investment Risks
Healthcare Reform
Healthcare reform may be more prohibitive to
pharmaceutical companies than anticipated.
The drug industry’s share of cuts to Medicare/Medicaid in the
bill’s current form appears to be about $80‐$110B over the
next ten years according to industry experts. This sum
represents about 3‐4% of US pharma 2008 sales.
It is estimated that the 30‐40m estimated people additionally
insured through the current reform bill would likely increase
drug pharmaceutical revenues creating a neutral impact on
drug companies.
If reform were to turn unfavorable on drug companies, it
could cause a compression to earnings that is not in our
forecast. Similarly, if reform continues to be delayed or
becomes watered down through the approval process, drug
companies could experience a positive change in investor
sentiment in the short term.
Mergers and Acquisitions
A change in BMY’s acquisition strategy could negatively
affect our forecast.
BMY currently is operating under an acquisition strategy
called “string of pearls”. Through the strategy, BMY has been
able to strategically acquire small biotech companies,
compounds, platforms, and build collaborative partnership to
help expand its pipeline.
BMY will likely continue this acquisition strategy but may
consider acquiring a large company, which could cause
earnings dilution and put their attractive dividend at risk.
Recent moves by Merck/Schering Plow, Pfizer/Weth, and
Roche/Genentech have brought the megamerger back to big
pharmaceutical companies.
Furthermore, this trend has put BMY on the list of potential
takeout targets. An acquisition of BMY would provide a
significant premium to shareholders. We view the acquisition
of BMY by another firm as less likely in the near term due to
current market conditions.
Patent Expiration
BMY’s patent cliff may be more severe than forecasted.
BMY faces a large patent cliff with the expiration of patents
to some of its best selling drugs through 2015. Plavix, BMY’s
top selling drug, represents about 20% of 2008 revenues.
While our forecast does anticipate a revenue contraction of
10% in 2012 and 5% in 2015 for the expiration of patents to
Plavix and Abilify, revenues could face a steeper decline.
A steeper decline in sales due to a quicker uptake of generics
or failure of BMY’s pipeline to replace revenues could have a
detrimental impact on our forecasted valuation.
Competition
Increased competition in BMY’s marketed products and
pipeline could derail our forecast.
BMY is in constant competition with other large
pharmaceutical companies for sales of their marketed
products as well as development of pipeline drugs. BMY
faces competition in a number of its products. Plavix has new
competition from Eli Lilly’s Efficient, Abilify is competing with
AstraZeneca’s Seroquel and Pfizer’s Geoden, and Onglyza is in
direct competition with Merck’s Januiva. Similarly BMY’s
phase III diabetes treatment Dapagloflozin may have to
compete with SLGT‐2 inhibitors from JNJ and GSK. An
increase in competition above our estimates could put our
valuation of BMY at risk. However, on several of these fronts,
BMY is currently well positioned. Onglyza has a competitive
advantage in the DDP‐4 space being the only once daily
treatment, and Plavix is still experiencing strong sales thanks
to a much slower than expected adoption of LLY’s Efficient.
BMY – Revenue Forecast by Product
BMY is experiencing double‐digit growth in several key
franchises. While Plavix and Ability will begin facing stiff
generic competition BMY has several key franchises that have
blockbuster potential.
Plavix (Clopidogrel Bisulfate)
Plavix is BMY’s best selling drug with 2008 sales of $5.6B
making up over 20% of BMY’s total sales. Plavix is used to
help protect against future heart attack or stroke and is the
biggest seller in the space.
LLY recently launched Efficient, a direct competitor to Plavix.
Despite favorable clinical trials, Efficient has struggled to steal
market share from Plavix in the time since its 2008 launch.
Plavix has continued to grow sales through 2009 but will lose
patent protection in 2012, and it will face stiff competition
from multiple generics.
Sprycel (Dasantinib)
Sprycel was launched in 2006 as a second line treatment for
chronic myeloid leukemia (CML). Gleevec is the biggest
competitor in the space, but Sprycel fills a void in the
marketplace by being the only advanced SRC inhibitor with
demonstrated efficacy and safety in patients with solid
tumors that are resistant to Gleevec.
In May of 2009, the FDA approved Sprycel for treatment in all
three stages of CML for those with resistance or intolerance
for other therapies. Sprycel is also in trials for breast and
prostate cancer, and a recent study released by UCLA
scientists show Sprycel significantly inhibited the growth and
promoted the death of ovarian cancer cells, a disease that
currently has few effective therapies. Approval of Sprycel for
another cancer treatment would greatly increase its
forecasted sales potential.
Abilify (Aripiprazole)
Abilify was recently approved by the FDA for its fifth
indication. Abilify is currently approved for the treatment of
schizophrenia, bipolar I disorder, depression add‐on, agitation
associated with schizophrenia or bipolar depression, and
most recently for irritability in children with autism.
In April of 2009, BMY extended its exclusivity agreement with Otsuka to allow for an additional 29 months of exclusivity marketing Abilify. This will allow BMY to hold exclusivity through the Plavix patent expiration. In exchange, BMY will be recognizing Abilify sales on a tiered scale, and will share a percentage of revenue from its oncology line as well.
Virology Franchise: Baraclude Reyataz Sustiva
(Entecavir)(Atazanavir)(Efavirenz)
BMY’s virology franchise treats HIV/AIDS and Hepatitis B.
Sustiva a consistent grower loses patent protection at the
end of 2013, followed by Baraclude in 2015, and Reyataz in
2017. Sustiva is the one of the three that currently has a
generic filed to compete. Despite the patent expiration
issues, BMY should experience consistent growth in Sustiva
up till patent expiration. BMY should continue to experience
strong growth in Baraclude behind new study results that
show it has twice the efficacy rate and is just as safe as its
biggest competitor Adefovir. Reyataz should experience
accelerated growth behind its FDA approval as a once daily
treatment with a higher efficacy rate than its biggest
competitor ABT’s Kaletra ($1.5B sales).
The below forecast were completed prior to recent FDA
approvals for the franchise drugs.
Onglyza (Saxagliptin)
Onglyza is BMY’s newest approved drug. It is the second
approved DDP‐4 inhibitor approved by the FDA along with
MRK’s Januvia. DDP‐4 inhibitors are forecasted to $7B in
sales by 2015. New FDA approval requirements prevent any
new entrants from receiving approval prior to 2012 leaving
Onglyza and Januvia in a two horse race. Onglyza is the only
once a day DDP‐4 inhibitor and is offered in a smaller
dose/pill. In head to head trials, Onglyza showed the same
efficacy rate and safety as Januvia. The treatment of type‐2
diabetes is one of the most lucrative and fastest growing
disease areas currently in medicine. DDP‐4 inhibitors can be
combined with other diabetes treatments to help control
blood glucose levels. Onglyza was co‐developed with AZN
and both costs and revenues will be split equally between the
two firms.
Orencia (abatacept)
Orencia was approved in 2006 for the second‐line treatment
of adult RA (Rheumatoid Arthritis), and juvenile idiopathic
arthritis. The FDA recently approved Orencia as a first line
treatment for individuals with moderate to severe RA, as well
as for children over the age of 6 with idiopathic arthritis. In
clinical trials Orencia has shown higher efficacy rates with
improved safety over current RA treatments. Orencia stands
to see strong growth with the new broader use label
approved by the FDA. Approximately 2 million people in the
US are living with RA. Orencia is the first T‐cell co‐
stimulation modulator approved for the treatment of
rheumatoid arthritis (RA).
Pipeline Products
Dapagloflozin
Dapagloflozin is another diabetes treatment being co‐
developed by BMY and AZN. Dapagloflozin is a once daily
first in class SGLT‐2 inhibitor for the treatment of type‐2
diabetes. This drug helps control blood glucose levels by
targeting the SGLT‐2 receptor which is responsible for glucose
excretion in urine. Because of its impact on glucose excretion
Dapagloflozin has also shown weight loss advantages and
lowered blood pressure in clinical trials. The Diabetes Market
is one of the most lucrative with over 20 million Americans
currently diagnosed with diabetes and 54 million considered
prediabetic according to the CDC. Recent results from phase
III trials released in October show better than expected
results in controlling glucose levels and its ability to be
partnered with other diabetes treatments. The results were
released at the IDF (International Diabetes Federation)
meeting in Montreal. One IDF presenter noted, in his
practice, he would “use it in combination with every other
type of agent.”
Ipilimumab
Ipilimumab is fully human monoclonal antibody that BMY
gained full rights to through its recent acquisition of Medarex
earlier this year. It is in phase III trials for Malignant
Melanoma and in phase II trials for the treatment of prostate
cancer. A Pharmacor report titled Malignant Melanoma
estimates that the launch of BMY’s Ipilimumab will
significantly increase the size of the malignant melanoma
market. There is currently a huge unmet need for life
extending treatment in those with late skin cancer.
Pharmacor reports they anticipate Ipilimumab to grow at 17%
annually from a launch in 2012 to 2017, with it consuming a
third of the total malignant melanoma treatment market by
2017. These results are dependent on continued success in
phase III trials. Ipilimumab could experience even greater
growth through sales in treating prostate cancer. Prostate
cancer would be the single largest market for a monoclonal
antibody treatment with over 192,000 new cases diagnosed
each year in the US.
Apixaban
Apixaban is an oral anticoagulant currently in phase III trials
for the treatment of venous thromboembolism (VTE)
following knee and hip surgery, atrial fibrillation (AF), and
acute coronary syndrome (ACS). The drug is currently
enrolling its phase III clinical trials for treatment of AF and
ACS compared to the current treatment Warfarin. A once
daily pill has shown the highest efficacy rates but with slightly
higher risks of bleeding, a downside to the treatment.
Apixaban is the second Xa inhibitor currently in development
behind JNJ’s Xarelto. Apixaban is being co‐developed by BMY
and Pfizer.
Belatacept
Belatacept a first‐in‐class co‐stimulation blocker which
selectively inhibits T‐cell activation is in phase III trials to
prevent organ transplant rejection. The current treatment
use of Cyclosporine is known to cause significant problems
such as increased cardiovascular and metabolic risk.
Belatacept has shown higher efficacy rates and safety rates in
head to head comparisons with Cyclosporine in earlier trials.
Belatacept is currently under review by the FDA and could be
approved in late 2010.
BMY Technical Appendix, Page 1 of 8
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38394041424344454647484950515253545556
A B C D E F G H I J K L M N
Enter Firm Ticker BMY
Enter first financial statement year in cell B6 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average Manual
Total revenue 19,380 18,605 16,208 18,193 20,597 Revenue Growth -4.0% -12.9% 12.2% 13.2% 1.5%
Cost of goods sold 5,989 5,737 5,420 5,868 6,396 COGS % of Sales 30.9% 30.8% 33.4% 32.3% 31.1% 31.7%
Gross profit 13,391 12,868 10,788 12,325 14,201
SG&A expense 6,427 6,453 5,773 5,931 6,342 SG&A % of Sales 33.2% 34.7% 35.6% 32.6% 30.8% 33.4% 31.0%
Research & Development 2,500 2,678 2,951 3,227 3,585 R&D % of Sales 12.9% 14.4% 18.2% 17.7% 17.4% 16.1% 17.5%
Depreciation/Amortization 0 0 0 0 0 D&A % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Interest expense (income), operating 0 0 0 0 0 Inc. Exp. Oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Non-recurring expenses 267 (268) 161 429 391 Exp. Non-rec 1.4% -1.4% 1.0% 2.4% 1.9% 1.0%
Other operating expenses (158) (222) 292 (119) (180) Other exp. -0.8% -1.2% 1.8% -0.7% -0.9% -0.3%
Operating Income 4,418 4,304 2,085 3,186 5,471
Interest income (expense), non-operating 0 0 0 0 0 Int. inc. non-oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Gain (loss) on sale of assets 0 0 0 0 0 Gain (loss) asset sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other income, net 0 0 0 0 0 Other income, net 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Income before tax 4,418 4,304 2,085 3,186 5,471
Income tax 1,519 870 431 682 1,320 Tax rate 34.4% 20.2% 20.7% 21.4% 24.1% 24.2%
Income after tax 2,899 3,434 1,654 2,504 4,151
Minority interest (521) (592) (440) (763) (996) Minority interest -2.7% -3.2% -2.7% -4.2% -4.8% -3.5%
Equity in affiliates 0 0 0 0 0 Equity in affiliates 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
U.S. GAAP adjustment 0 0 0 0 0 U.S. GAAP adjust. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net income before extraordinary items 2,378 2,842 1,214 1,741 3,155
Extraordinary items, total 10 158 371 424 2,092 Extrordinary items
Net income 2,388 3,000 1,585 2,165 5,247
Total adjustments to net income 5 0 0 0 0 Adjustments to NI
Basic weighted average shares 1,942 1,952 1,960 1,970 1,977 Share growth 0.5% 0.4% 0.5% 0.4% 0.4%
Basic EPS excluding extraordinary items 1.22 1.46 0.62 0.88 1.60
Basic EPS including extraordinary items 1.23 1.54 0.81 1.10 2.65
Diluted weighted average shares 1,976 1,983 1,963 1,980 2,001 Diluted share growth 0.4% -1.0% 0.9% 1.1% 0.3%
Diluted EPS excluding extraordinary items 1.20 1.43 0.62 0.88 1.58
Diluted EPS including extraordinary items 1.21 1.51 0.81 1.09 2.62
Dividends per share -- common stock 1.12 1.12 1.12 1.15 1.24
Gross dividends -- common stock 2,176 2,187 2,204 2,275 2,460 Dividend growth 0.5% 0.8% 3.2% 8.1% 3.1%
Retained earnings 212 813 (619) (110) 2,787
values in millions
Too unpredictable to forecast, set to zero in the forecasts
Too unpredictable to forecast, set to zero in the forecasts
Forecasting PercentagesHistorical Income Statements
Forecasted income statement items are based on 5 years of historical average ratios unless a value is entered in the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the historical average is truly representative of what the firm can achieve in the future.
BMY Technical Appendix, Page 2 of 8
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O P Q R S T U V W X Y Z
Year-by-year dividend growth
Year-by-year revenue growth 5.00% 6.00% 5.00% -10.00% 5.00% 5.00% -5.00% 4.00% 4.00% 4.00%
year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
Total revenue 21,627 22,924 24,071 21,664 22,747 23,884 22,690 23,598 24,541 25,523
Cost of goods sold 6,855 7,266 7,630 6,867 7,210 7,571 7,192 7,480 7,779 8,090
Gross profit 14,772 15,658 16,441 14,797 15,537 16,314 15,498 16,118 16,762 17,433
SG&A expense 6,704 7,107 7,462 6,716 7,052 7,404 7,034 7,315 7,608 7,912
Research & Development 3,785 4,012 4,212 3,791 3,981 4,180 3,971 4,130 4,295 4,467
Depreciation/Amortization 0 0 0 0 0 0 0 0 0 0
Interest expense (income), operating 0 0 0 0 0 0 0 0 0 0
Non-recurring expenses 224 238 250 225 236 248 235 245 255 265
Other operating expenses (75) (80) (84) (75) (79) (83) (79) (82) (85) (89)
Operating Income 4,133 4,381 4,600 4,140 4,347 4,565 4,337 4,510 4,690 4,878
Interest income (expense), non-operating (372) (373) (360) (195) (193) (188) (81) (72) (61) (47)
Gain (loss) on sale of assets 0 0 0 0 0 0 0 0 0 0
Other income, net 0 0 0 0 0 0 0 0 0 0
Income before tax 3,761 4,008 4,241 3,945 4,154 4,377 4,255 4,438 4,630 4,831
Income tax 909 968 1,025 953 1,004 1,058 1,028 1,072 1,119 1,167
Income after tax 2,852 3,040 3,216 2,992 3,151 3,320 3,227 3,366 3,511 3,664
Minority interest (762) (808) (848) (763) (801) (841) (799) (831) (865) (899)
Equity in affiliates 0 0 0 0 0 0 0 0 0 0
U.S. GAAP adjustment 0 0 0 0 0 0 0 0 0 0
Net income before extraordinary items 3,614 3,848 4,064 3,755 3,952 4,161 4,027 4,197 4,376 4,563
Extraordinary items, total 0 0 0 0 0 0 0 0 0 0
Net income 3,614 3,848 4,064 3,755 3,952 4,161 4,027 4,197 4,376 4,563
Total adjustments to net income 0 0 0 0 0 0 0 0 0 0
Basic weighted average shares 1,986 1,995 2,004 2,013 2,022 2,031 2,040 2,049 2,058 2,067
Basic EPS excluding extraordinary items 1.82 1.93 2.03 1.87 1.95 2.05 1.97 2.05 2.13 2.21
Basic EPS including extraordinary items 1.82 1.93 2.03 1.87 1.95 2.05 1.97 2.05 2.13 2.21
Diluted weighted average shares 1,983 1,992 2,001 2,010 2,019 2,028 2,037 2,046 2,055 2,065
Diluted EPS excluding extraordinary items 1.82 1.93 2.03 1.87 1.96 2.05 1.98 2.05 2.13 2.21
Diluted EPS including extraordinary items 1.82 1.93 2.03 1.87 1.96 2.05 1.98 2.05 2.13 2.21
Dividends per share -- common stock 1.28 1.31 1.35 1.38 1.42 1.46 1.49 1.53 1.58 1.62
Gross dividends -- common stock 2,537 2,616 2,697 2,781 2,868 2,957 3,049 3,144 3,242 3,343Retained earnings 1,078 1,232 1,367 974 1,084 1,204 977 1,053 1,134 1,220
Forecasted Income Statements -- 10 Years
Revenues grow at the same rate each year unless a growth value is manually entered in the cell above the forecast year, in which case the year-by-year value overrides the historical or manual average. It makes sense to start tapering the growth forecasts 5 or 6 years into the forecast period.
BMY Technical Appendix, Page 3 of 8
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AA AB AC AD AE AF AG AH AI AJ AK AL AM AN
Enter Firm Ticker BMY
year 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average Manual
Assets
Cash & equivalents 3,680 3,050 2,018 1,801 7,976 Cash % of Sales 19.0% 16.4% 12.5% 9.9% 38.7% 19.3%
Short term investments 3,794 2,749 1,995 424 289 ST Invest. % of Sales 19.6% 14.8% 12.3% 2.3% 1.4% 10.1%
Receivables, total 4,373 3,378 3,247 3,994 3,710 Receivables % Sales 22.6% 18.2% 20.0% 22.0% 18.0% 20.1%
Inventory, total 1,830 2,060 2,079 2,162 1,765 Inventory % of Sales 9.4% 11.1% 12.8% 11.9% 8.6% 10.8%
Prepaid expenses 319 270 314 310 320 Pre. Exp. % of Sales 1.6% 1.5% 1.9% 1.7% 1.6% 1.7%
Other current assets, total 805 776 649 1,411 703 Other CA % of Sales 4.2% 4.2% 4.0% 7.8% 3.4% 4.7%
Total Current Assets 14,801 12,283 10,302 10,102 14,763
Property, plant and equipment (net) 5,765 5,693 5,673 5,650 5,405 Net PPE % of Sales 29.7% 30.6% 35.0% 31.1% 26.2% 30.5% 27.0%
Goodwill 4,905 4,823 4,829 4,998 4,827 Goodwill % of Sales 25.3% 25.9% 29.8% 27.5% 23.4% 26.4%
Intangibles 2,260 1,921 1,852 1,330 1,151 Intangibles % of Sales 11.7% 10.3% 11.4% 7.3% 5.6% 9.3%
Long term investments 0 0 0 0 0 LT Invest. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Notes receivable -- long term 0 0 0 0 0 Notes Rec. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other long term assets, total 2,704 3,418 2,919 3,846 3,406 Other LT ass. % Sales 14.0% 18.4% 18.0% 21.1% 16.5% 17.6%
Other assets, total 0 0 0 0 0 Other assets % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total assets 30,435 28,138 25,575 25,926 29,552
Liabilities and Shareholders' Equity
Accounts payable 2,127 1,579 1,239 1,442 1,535 Acc. Payable % Sales 11.0% 8.5% 7.6% 7.9% 7.5% 8.5%
Payable/accrued 0 0 0 0 0 Pay/accured % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Accrued expenses 4,233 3,870 3,663 3,919 3,780 Acc. Exp. % of Sales 21.8% 20.8% 22.6% 21.5% 18.4% 21.0%
Notes payable/short term debt 1,883 231 187 1,891 154 Notes payable % Sales 9.7% 1.2% 1.2% 10.4% 0.7% 4.7%
Current portion of LT debt/Capital leases 0 0 0 0 0 Curr. debt % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other current liabilities 1,600 1,210 1,407 1,146 1,241 Other curr liab % Sales 8.3% 6.5% 8.7% 6.3% 6.0% 7.2%
Total Current Liabilities 9,843 6,890 6,496 8,398 6,710
Long term debt, total 8,463 8,364 7,248 4,381 6,585 LT debt % of Sales
Deferred income tax 0 0 0 0 0 Def. inc. tax % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Minority interest 0 0 0 0 0 Min. Int. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other liabilities, total 1,927 1,676 1,840 2,585 4,016 Other liab. % of Sales 9.9% 9.0% 11.4% 14.2% 19.5% 12.8%
Total Liabilities 20,233 16,930 15,584 15,364 17,311
Preferred stock (redeemable) 0 0 0 0 0
Preferred stock (unredeemable) 0 0 0 0 0
Common stock 220 220 220 220 220Additonal paid-in capital 2,491 2,528 2,498 2,722 2,828Retained earnings (accumluated deficit) 19,651 20,464 19,845 19,762 22,549Treasury stock -- common (11,311) (11,168) (10,927) (10,584) (10,566)ESOP Debt Guarantee 0 0 0 0 0Other equity, total (849) (836) (1,645) (1,558) (2,790)
Total Shareholders' Equity 10,202 11,208 9,991 10,562 12,241Total Liabilities and Shareholders' Equity 30,435 28,138 25,575 25,926 29,552Diluted weighted average shares 1,976 1,983 1,963 1,980 2,001 Diluted share growth 0.4% -1.0% 0.9% 1.1% 0.3%Total preferred shares outstanding 0 0 0 0 0 Preferred share growth
Set to last historical year's level throughout the forecasts.Set to last historical year's level throughout the forecasts.
LT debt is manually adjusted for AFN in the pro formas
Forecasting Percentages
values in millions
Historical Balance Sheets
The model uses the more conservative diluted common shares number for total shares outstanding.
Forecasted balance sheet items are based on 5 years of historical average ratios unless a value is entered in the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the historical average is truly representative of what the firm can achieve in the future.
The model uses the more conservative diluted common shares number for total shares outstanding.
BMY Technical Appendix, Page 4 of 8
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AO AP AQ AR AS AT AU AV AW AX AY AZ
PPE/Sales
year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
Assets
Cash & equivalents 4,172 4,422 4,644 4,179 4,388 4,608 4,377 4,552 4,734 4,924
Short term investments 2,180 2,311 2,426 2,183 2,293 2,407 2,287 2,378 2,474 2,572
Receivables, total 4,357 4,618 4,849 4,364 4,582 4,811 4,571 4,753 4,944 5,141
Inventory, total 2,327 2,466 2,590 2,331 2,447 2,570 2,441 2,539 2,640 2,746
Prepaid expenses 359 380 399 359 377 396 376 391 407 423
Other current assets, total 1,016 1,077 1,131 1,018 1,069 1,122 1,066 1,109 1,153 1,199
Total Current Assets 14,410 15,275 16,039 14,435 15,156 15,914 15,119 15,723 16,352 17,006
Property, plant and equipment (net) 5,839 6,190 6,499 5,849 6,142 6,449 6,126 6,371 6,626 6,891
Goodwill 5,707 6,049 6,351 5,716 6,002 6,302 5,987 6,227 6,476 6,735
Intangibles 2,003 2,123 2,230 2,007 2,107 2,212 2,102 2,186 2,273 2,364
Long term investments 0 0 0 0 0 0 0 0 0 0
Notes receivable -- long term 0 0 0 0 0 0 0 0 0 0
Other long term assets, total 3,807 4,035 4,237 3,813 4,004 4,204 3,994 4,154 4,320 4,493
Other assets, total 0 0 0 0 0 0 0 0 0 0
Total assets 31,766 33,672 35,356 31,820 33,411 35,082 33,328 34,661 36,047 37,489
Liabilities and Shareholders' Equity
Accounts payable 1,838 1,948 2,045 1,841 1,933 2,029 1,928 2,005 2,085 2,169
Payable/accrued 0 0 0 0 0 0 0 0 0 0
Accrued expenses 4,548 4,820 5,061 4,555 4,783 5,022 4,771 4,962 5,160 5,367
Notes payable/short term debt 1,006 1,066 1,119 1,008 1,058 1,111 1,055 1,097 1,141 1,187
Current portion of LT debt/Capital leases 0 0 0 0 0 0 0 0 0 0
Other current liabilities 1,547 1,640 1,722 1,550 1,627 1,708 1,623 1,688 1,755 1,826
Total Current Liabilities 8,938 9,474 9,948 8,953 9,401 9,871 9,377 9,752 10,142 10,548
Long term debt, total 6,741 6,712 6,408 3,201 3,122 2,973 887 676 418 109
Deferred income tax 0 0 0 0 0 0 0 0 0 0
Minority interest 0 0 0 0 0 0 0 0 0 0
Other liabilities, total 2,769 2,935 3,082 2,773 2,912 3,058 2,905 3,021 3,142 3,268
Total Liabilities 18,447 19,121 19,438 14,928 15,435 15,901 13,170 13,450 13,702 13,924
Preferred stock (redeemable) 0 0 0 0 0 0 0 0 0 0
Preferred stock (unredeemable) 0 0 0 0 0 0 0 0 0 0
Common stock 220 220 220 220 220 220 220 220 220 220Additonal paid-in capital 2,828 2,828 2,828 2,828 2,828 2,828 2,828 2,828 2,828 2,828Retained earnings (accumluated deficit) 23,627 24,859 26,226 27,200 28,284 29,489 30,466 31,519 32,653 33,873Treasury stock -- common (10,566) (10,566) (10,566) (10,566) (10,566) (10,566) (10,566) (10,566) (10,566) (10,566)ESOP Debt Guarantee 0 0 0 0 0 0 0 0 0 0Other equity, total (2,790) (2,790) (2,790) (2,790) (2,790) (2,790) (2,790) (2,790) (2,790) (2,790)
Total Shareholders' Equity 13,319 14,551 15,918 16,892 17,976 19,181 20,158 21,211 22,345 23,565Total Liabilities and Shareholders' Equity 31,766 33,672 35,356 31,820 33,411 35,082 33,328 34,661 36,047 37,489Total common shares (diluted) 2,007 2,014 2,020 2,026 2,033 2,039 2,046 2,052 2,058 2,065Total preferred shares outstanding 0 0 0 0 0 0 0 0 0 0AFN (interactive with 3 items below) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adjustment to LT Debt (iterate or use Goal Seek) 155.7 (28.5) (304.0) (3,206.7) (79.6) (149.3) (2,085.1) (211.1) (258.2) (309.6)Issue Common Stock to Fund AFNSet Balance Sheet Cash Lower to Fund AFN
Forecasted Balance Sheets -- 10 Years
Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries to zero and use Goal
BMY Technical Appendix, Page 5 of 8
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BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BO BPEnter Firm Ticker BMY
2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
Liquidity
Current 1.50 1.78 1.59 1.20 2.20 1.61 1.61 1.61 1.61 1.61 1.61 1.61 1.61 1.61 1.61
Quick 1.32 1.48 1.27 0.95 1.94 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35
Net Working Capital to Total Assets 0.16 0.19 0.15 0.07 0.27 0.17 0.17 0.17 0.17 0.17 0.17 0.17 0.17 0.17 0.17
Asset Management
Days Sales Outstanding 82.36 66.27 73.12 80.13 65.75 73.53 73.53 73.53 73.53 73.53 73.53 73.53 73.53 73.53 73.53
Inventory Turnover 10.59 9.03 7.80 8.41 11.67 9.29 9.29 9.29 9.29 9.29 9.29 9.29 9.29 9.29 9.29
Fixed Assets Turnover 3.36 3.27 2.86 3.22 3.81 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70 3.70
Total Assets Turnover 0.64 0.66 0.63 0.70 0.70 0.68 0.68 0.68 0.68 0.68 0.68 0.68 0.68 0.68 0.68
Debt Management
Long-Term Debt to Equity 83.0% 74.6% 72.5% 41.5% 53.8% 50.6% 46.1% 40.3% 19.0% 17.4% 15.5% 4.4% 3.2% 1.9% 0.5%
Total Debt to Total Assets 34.0% 30.5% 29.1% 24.2% 22.8% 24.4% 23.1% 21.3% 13.2% 12.5% 11.6% 5.8% 5.1% 4.3% 3.5%
Times Interest Earned N/A N/A N/A N/A N/A 11.1 11.7 12.8 21.2 22.5 24.3 53.3 62.4 77.1 103.9
Profitability
Gross Profit Margin 69.1% 69.2% 66.6% 67.7% 68.9% 68.3% 68.3% 68.3% 68.3% 68.3% 68.3% 68.3% 68.3% 68.3% 68.3%
Operating Profit Margin 22.8% 23.1% 12.9% 17.5% 26.6% 19.1% 19.1% 19.1% 19.1% 19.1% 19.1% 19.1% 19.1% 19.1% 19.1%
Net After-Tax Profit Margin 15.0% 18.5% 10.2% 13.8% 20.2% 13.2% 13.3% 13.4% 13.8% 13.9% 13.9% 14.2% 14.3% 14.3% 14.4%
Total Assets Turnover 0.64 0.66 0.63 0.70 0.70 0.68 0.68 0.68 0.68 0.68 0.68 0.68 0.68 0.68 0.68
Return on Assets 7.8% 10.7% 6.2% 8.4% 17.8% 11.4% 11.4% 11.5% 11.8% 11.8% 11.9% 12.1% 12.1% 12.1% 12.2%
Equity Multiplier 2.98 2.51 2.56 2.45 2.41 2.39 2.31 2.22 1.88 1.86 1.83 1.65 1.63 1.61 1.59
Return on Equity 23.4% 26.8% 15.9% 20.5% 42.9% 27.1% 26.4% 25.5% 22.2% 22.0% 21.7% 20.0% 19.8% 19.6% 19.4%
EPS (using diluted shares, excluding extraordinary items) 1.20 1.43 0.62 0.88 1.58 1.82 1.93 2.03 1.87 1.96 2.05 1.98 2.05 2.13 2.21
DPS (dividends per share) 1.10 1.10 1.12 1.15 1.23 1.28 1.31 1.35 1.38 1.42 1.46 1.50 1.54 1.58 1.62
2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
NOPAT (net operating profit after tax) 2,899 3,434 1,654 2,504 4,151 3,135 3,323 3,489 3,140 3,297 3,462 3,289 3,420 3,557 3,700
ROIC (return on invested capital) 31.2% 39.3% 20.4% 30.4% 30.7% 30.4% 30.4% 30.4% 30.4% 30.4% 30.4% 30.4% 30.4% 30.4% 30.4%
EVA (economic value added) 2,091 2,675 948 1,787 2,973 2,238 2,373 2,491 2,242 2,354 2,472 2,348 2,442 2,540 2,641
FCF (free cash flow) N/A 3,990 2,271 2,373 (1,144) 6,366 2,704 2,943 4,288 2,781 2,920 3,858 2,988 3,107 3,232
Weighted Average Cost of Capital 8.7% 8.7% 8.7% 8.7% 8.7% 8.7% 8.7% 8.7% 8.7% 8.7% 8.7%
Net Operating Working Capital (NOWC) 3,523 3,039 2,442 2,596 8,136 4,470 4,738 4,975 4,478 4,702 4,937 4,690 4,878 5,073 5,276
Operating Long Term Assets 5,765 5,693 5,673 5,650 5,405 5,839 6,190 6,499 5,849 6,142 6,449 6,126 6,371 6,626 6,891Total Operating Capital 9,288 8,732 8,115 8,246 13,541 10,310 10,928 11,474 10,327 10,843 11,386 10,816 11,249 11,699 12,167
2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018ELong-term Horizon Value Growth Rate (user-supplied) 3.50%PV of Forecasted FCF, discounted at 8.70% $51,629 $49,753 $51,375 $52,900 $53,212 $55,059 $56,927 $58,019 $60,077 $62,194 $64,370Value of Non-Operating Assets $8,265 $6,352 $6,733 $7,070 $6,363 $6,681 $7,015 $6,664 $6,931 $7,208 $7,496Total Intrinsic Value of the Firm $59,894 $56,104 $58,108 $59,969 $59,575 $61,740 $63,942 $64,683 $67,007 $69,402 $71,867Intrinsic Market Value of the Equity $53,155 $48,358 $50,329 $52,442 $55,366 $57,560 $59,858 $62,741 $65,234 $67,842 $70,571Per Share Intrinsic Value of the Firm $26.56 $24.38 $25.26 $26.21 $27.55 $28.51 $29.52 $30.80 $31.88 $33.01 $34.18MVA (market value added) $40,914 $35,039 $35,779 $36,524 $38,474 $39,584 $40,678 $42,583 $44,023 $45,497 $47,006
Item Value Percent Cost Weighted Cost Risk Free Rate 4.25%ST Debt (from most recent balance sheet) 154 0.30% 3.50% 0.01% Beta 0.80LT Debt (from most recent balance sheet) 6,585 12.96% 5.00% 0.49% Market Risk Prem. 6.50%MV Equity (look up stock's mkt. cap and enter in cell BB53) 44,060 86.73% 9.45% 8.20% Cost of Equity 9.45%Weighted Average Cost of Capital 8.70%
values in millions
Historical Ratios and Valuation Model
Valuation (in millions where appropriate) -- through year 2018E
Capital Asset Pricing Model
Forecasted Ratios and Valuation Model -- 10 Years
Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions) Forecasted Valuation Metrics -- 10 Years
Weighted Average Cost of Capital Calculations
BMY Technical Appendix, Page 6 of 8
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BQ BR BS BT BU BV BW BX BY BZ CA CB CC CD CE CF CG CH
Inputs 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
Per share value (hist. & DCF est.) $18.37 $17.37 $21.26 $26.47 $22.24 $24.38 $25.26 $26.21 $27.55 $28.51 $29.52 $30.80 $31.88 $33.01 $34.18
Market capitalization $35,675 $33,906 $41,670 $52,146 $43,968 $48,422 $50,396 $52,511 $55,439 $57,636 $59,938 $62,824 $65,320 $67,932 $70,664
EBITDA $3,907 $3,870 $2,016 $2,847 $6,567 $4,895 $5,189 $5,448 $4,904 $5,149 $5,406 $5,136 $5,341 $5,555 $5,777
Enterprise Value $42,341 $39,451 $47,087 $56,617 $42,731 $51,996 $53,752 $55,395 $55,469 $57,428 $59,413 $60,389 $62,541 $64,757 $67,036
Multiples
Price/Sales 1.84 1.82 2.57 2.87 2.13 2.24 2.20 2.18 2.56 2.53 2.51 2.77 2.77 2.77 2.77
Price/EBITDA 9.13 8.76 20.67 18.32 6.70 9.89 9.71 9.64 11.31 11.19 11.09 12.23 12.23 12.23 12.23
Price/Free Cash Flow N/A 8.45 18.27 21.86 -38.30 7.61 18.64 17.85 12.93 20.73 20.53 16.28 21.86 21.86 21.87
Enterprise Value/EBITDA 10.84 10.19 23.36 19.89 6.51 10.62 10.36 10.17 11.31 11.15 10.99 11.76 11.71 11.66 11.60
Price/Earnings 15.26 12.12 34.38 30.10 14.11 13.38 13.08 12.90 14.74 14.56 14.39 15.58 15.54 15.50 15.47
Free Cash Flow Yield 11.6% 5.4% 4.5% -2.6% 13.2% 5.4% 5.6% 7.7% 4.8% 4.9% 6.1% 4.6% 4.6% 4.6%
Dividend Yield 5.99% 6.35% 5.28% 4.34% 5.53% 5.25% 5.20% 5.14% 5.02% 4.98% 4.94% 4.86% 4.82% 4.78% 4.74%
Historical Override
Valuation Estimates Based On: Average w/Manual 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
Price/Sales 2.25 $24.50 $25.86 $27.03 $24.22 $25.32 $26.46 $25.03 $25.91 $26.83 $27.78
Price/EBITDA 12.71 $31.34 $33.08 $34.57 $30.98 $32.38 $33.85 $32.01 $33.15 $34.32 $35.53
Price/Free Cash Flow 2.57 $8.25 $3.49 $3.78 $5.48 $3.54 $3.70 $4.87 $3.75 $3.89 $4.02
Enterprise Value/EBITDA 14.16 $34.90 $36.83 $38.49 $34.49 $36.05 $37.69 $35.64 $36.90 $38.21 $39.56
Price/Earnings 21.19 $38.57 $40.88 $42.99 $39.54 $41.43 $43.43 $41.84 $43.41 $45.06 $46.78
Low Price $8.25 $3.49 $3.78 $5.48 $3.54 $3.70 $4.87 $3.75 $3.89 $4.02
High Price $38.57 $40.88 $42.99 $39.54 $41.43 $43.43 $41.84 $43.41 $45.06 $46.78
DCF Price $24.38 $25.26 $26.21 $27.55 $28.51 $29.52 $30.80 $31.88 $33.01 $34.18
Historical Ratios and Valuation Forecasted Ratios and Valuation
Forecasted Stock Prices Based on Historical Multiples -- 10 Years
In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks ‐‐ P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the various multiples, we may want to adjust our forecast assumptions. 1. You will need to look up the company's year‐end stock prices and enter them in the first 5 (historical) years of the "per share value" category.2. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG47‐BP47.3. Market capitalization will be calculated as basic weighted shares x historical year‐end prices and then forecasted basic weighted shares x DCF forecasted prices.4. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values.
$0 $5
$10 $15 $20 $25 $30 $35 $40 $45 $50
Forecasted
Value
Per Sha
re
Forecasted Per Share Stock Values
Low Price DCF Price High Price
$0
$5
$10
$15
$20
$25
$30
$35
$40
0
5
10
15
20
25
Historical or D
CF Price
P/S an
d En
t. Value
/EBITD
A
Price/Sales and Enterprise Value/EBITDA vs. Price
Price/Sales Enterprise Value/EBITDA Historical or DCF Price
BMY Technical Appendix, Page 7 of 8
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38394041424344454647484950515253545556
CI CJ CK CL CM CN CO CP CQ CR CS CT CU CV CW CX CY CZ DA DB
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
0
5
10
15
20
25
30
35
Dividen
d Yield
Price/Earnings Ratio
Price/Earnings Ratio and Dividend Yield
Price/Earnings Ratio Dividend Yield
0%
10%
20%
30%
40%
50%
60%
70%
80%
Gross M
argin
Gross, Operating and Net Profit Margins
Gross Margin Operating Margin Net Margin
0%5%10%15%20%25%30%35%40%45%
ROA, R
OE an
d RO
IC
Return on Assets, Equity and Invested Capital
Return on Assets Return on Equity Return on Invested Capital
$0 $500
$1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500
NOPAT an
d Free
Cash Flow
NOPAT and Free Cash Flow (millions)
NOPAT Free Cash Flow
$30,000 $32,000 $34,000 $36,000 $38,000 $40,000 $42,000 $44,000 $46,000 $48,000
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Market V
alue
Add
ed
Econ
omic Value
Add
ed
Economic Value Added & Market Value Added (millions)
Economic Value Added Market Value Added
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
EPS and DPS
Earnings and Dividends Per Share
Earnings Per Share Dividends Per Share
BMY Technical Appendix, Page 8 of 8
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38394041424344454647484950515253545556
DC DD DE DF DG DH DI DJ DK DL DM DN DO DP DQ DR DS DT DU DV
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Net Insider Purchases (Sales) , $, in thousands
Insider Transactions
5
10
15
20
25
30
Peer Comparison: Price/Earnings Ratio
BMY AZN TEVA
10,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,000
Short Interst (tho
usan
ds)
Short Interest (thousands of shares)
Short Interest (thousands of shares)
0
5,000
10,000
15,000
20,000
25,000
Avg. Daily Volum
e
Average Daily Trading Volume (thousands)
Average Daily Volume (thousands of shares)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Days to Cov
er Ratio
Days to Cover Ratio (Short Interest / Volume)
Days to Cover
0
5
10
15
20
25
30
Peer Comparison: Price/Cash Flow Ratio
BMY AZN TEVA
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