Stock Analysis on Net

Allergan Inc. (NYSE:AGN.)

This company has been moved to the archive! The financial data has not been updated since February 19, 2015.

Dividend Discount Model (DDM)

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Intrinsic Stock Value (Valuation Summary)

Allergan Inc., dividends per share (DPS) forecast

US$

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Year Value DPSt or Terminal value (TVt) Calculation Present value at 10.93%
0 DPS01 0.20
1 DPS1 -0.36 = 0.20 × (1 + -279.49%) -0.32
2 DPS2 0.38 = -0.36 × (1 + -206.91%) 0.31
3 DPS3 -0.13 = 0.38 × (1 + -134.33%) -0.10
4 DPS4 -0.05 = -0.13 × (1 + -61.75%) -0.03
5 DPS5 -0.06 = -0.05 × (1 + 10.83%) -0.03
5 Terminal value (TV5) -64.54 = -0.06 × (1 + 10.83%) ÷ (10.93%10.83%) -38.43
Intrinsic value of Allergan Inc. common stock (per share) $-38.60
Current share price $231.12

Based on: 10-K (reporting date: 2014-12-31).

1 DPS0 = Sum of the last year dividends per share of Allergan Inc. common stock. 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.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.43%
Expected rate of return on market portfolio2 E(RM) 13.61%
Systematic risk of Allergan Inc. common stock βAGN. 0.71
 
Required rate of return on Allergan Inc. common stock3 rAGN. 10.93%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rAGN. = RF + βAGN. [E(RM) – RF]
= 4.43% + 0.71 [13.61%4.43%]
= 10.93%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Allergan Inc., PRAT model

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Average Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Selected Financial Data (US$ in thousands)
Dividends 59,700 59,500 60,400 61,100 60,900
Net earnings attributable to Allergan, Inc. 1,524,200 985,100 1,098,800 934,500 600
Product net sales 7,126,100 6,197,500 5,708,800 5,347,100 4,819,600
Total assets 12,415,700 10,574,300 9,179,300 8,508,600 8,308,100
Total Allergan, Inc. stockholders’ equity 7,753,000 6,463,200 5,837,100 5,309,600 4,757,700
Financial Ratios
Retention rate1 0.96 0.94 0.95 0.93 -100.50
Profit margin2 21.39% 15.90% 19.25% 17.48% 0.01%
Asset turnover3 0.57 0.59 0.62 0.63 0.58
Financial leverage4 1.60 1.64 1.57 1.60 1.75
Averages
Retention rate -19.34
Profit margin 14.80%
Asset turnover 0.60
Financial leverage 1.63
 
Dividend growth rate (g)5 -279.49%

Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).

2014 Calculations

1 Retention rate = (Net earnings attributable to Allergan, Inc. – Dividends) ÷ Net earnings attributable to Allergan, Inc.
= (1,524,20059,700) ÷ 1,524,200
= 0.96

2 Profit margin = 100 × Net earnings attributable to Allergan, Inc. ÷ Product net sales
= 100 × 1,524,200 ÷ 7,126,100
= 21.39%

3 Asset turnover = Product net sales ÷ Total assets
= 7,126,100 ÷ 12,415,700
= 0.57

4 Financial leverage = Total assets ÷ Total Allergan, Inc. stockholders’ equity
= 12,415,700 ÷ 7,753,000
= 1.60

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -19.34 × 14.80% × 0.60 × 1.63
= -279.49%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($231.12 × 10.93%$0.20) ÷ ($231.12 + $0.20)
= 10.83%

where:
P0 = current price of share of Allergan Inc. common stock
D0 = the last year dividends per share of Allergan Inc. common stock
r = required rate of return on Allergan Inc. common stock


Dividend growth rate (g) forecast

Allergan Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -279.49%
2 g2 -206.91%
3 g3 -134.33%
4 g4 -61.75%
5 and thereafter g5 10.83%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= -279.49% + (10.83%-279.49%) × (2 – 1) ÷ (5 – 1)
= -206.91%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= -279.49% + (10.83%-279.49%) × (3 – 1) ÷ (5 – 1)
= -134.33%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= -279.49% + (10.83%-279.49%) × (4 – 1) ÷ (5 – 1)
= -61.75%