RBC comments WOW scripts update yesterday Targets..Target price/base case Our $27 price target is based on the average of our EV/EBITDA valuation and DCF analysis. Applying an 8.0x multiple to our 2017 Adj. EBITDA forecast of ~$541MM generates a value of $26.66. Our DCF value (11.0% WACC and a -2% terminal growth rate) equates to $27.93. The average of our EV/EBITDA and DCF values is $27.30, hence our $27 price target. There are no further acquisitions included in our base case. We assume that Photofrin is approved for bile duct cancer in 2018.
Upside scenario Our $47 upside scenario utilizes a 9.0x multiple on 2017E Adj. EBITDA of $591MM, equating to a value of $45.61. Our DCF value equates to $48.08. The average of our EV/EBITDA and DCF values is $46.85, rounded to our $47 upside value. This scenario utilizes a 2% terminal growth rate and higher multiple plus incrementally higher EBITDA to reflect stronger organic growth. We also assume that Photofrin is approved for bile duct cancer in 2018.