What is CPH.TO's Intrinsic value?

Cipher Pharmaceuticals Inc (CPH.TO) Intrinsic Value Analysis

Executive Summary

As of June 22, 2025, Cipher Pharmaceuticals Inc's estimated intrinsic value ranges from $2.83 to $15.51 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $5.38 -57.8%
Discounted Cash Flow (5Y) $15.31 +19.9%
Dividend Discount Model (Multi-Stage) $2.83 -77.8%
Dividend Discount Model (Stable) $15.51 +21.5%

Is Cipher Pharmaceuticals Inc (CPH.TO) undervalued or overvalued?

With the current market price at $12.76, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Cipher Pharmaceuticals Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.33 0.34
Cost of equity 4.8% 6.2%
Cost of debt 5.0% 5.0%
Tax rate 25.9% 26.5%
Debt/Equity ratio 0.17 0.17
After-tax WACC 4.7% 5.9%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 5.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $33 (FY12-2024) to $47 (FY12-2034)
  • Net profit margin expansion from 35% to 7%
  • Capital expenditures maintained at approximately 49% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $11 $304M 86.0%
10-Year Growth $4 $119M 53.7%
5-Year EBITDA $12 $313M 86.4%
10-Year EBITDA $9 $239M 77.0%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 5.5%
  • Long-term growth rate: 2.0%
  • Fair value: $2.83 (-77.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 6.2% (Low) to 4.8% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $5 to $18
  • Selected fair value: $15.51 (21.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $327M
Enterprise Value $352M
Trailing P/E 25.74
Forward P/E 103.27
Trailing EV/EBITDA 11.15
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.17

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $1.61
Discounted Cash Flow (5Y) 28% $3.83
Dividend Discount Model (Multi-Stage) 22% $0.57
Dividend Discount Model (Stable) 17% $2.33
Weighted Average 100% $9.26

Investment Conclusion

Based on our comprehensive valuation analysis, Cipher Pharmaceuticals Inc's weighted average intrinsic value is $9.26, which is approximately 27.4% below the current market price of $12.76.

Key investment considerations:

  • Strong projected earnings growth (35% to 7% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.17)

Given these factors, we believe Cipher Pharmaceuticals Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.