Intrinsic value of Analogic - ALOG

Previous Close

$77.60

  Intrinsic Value

$21.05

stock screener

  Rating & Target

str. sell

-73%

  Value-price divergence*

-46%

Previous close

$77.60

 
Intrinsic value

$21.05

 
Up/down potential

-73%

 
Rating

str. sell

 
Value-price divergence*

-46%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ALOG stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.74
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  509
  519
  531
  545
  560
  577
  596
  616
  638
  662
  687
  714
  743
  774
  807
  842
  879
  918
  959
  1,002
  1,049
  1,097
  1,148
  1,202
  1,259
  1,319
  1,382
  1,449
  1,519
  1,592
  1,670
Variable operating expenses, $m
 
  268
  274
  281
  289
  297
  307
  317
  328
  340
  353
  359
  373
  389
  405
  423
  441
  461
  482
  504
  527
  551
  577
  604
  633
  663
  695
  728
  763
  800
  839
Fixed operating expenses, $m
 
  233
  238
  244
  251
  257
  263
  270
  277
  283
  291
  298
  305
  313
  321
  329
  337
  345
  354
  363
  372
  381
  391
  401
  411
  421
  431
  442
  453
  465
  476
Total operating expenses, $m
  484
  501
  512
  525
  540
  554
  570
  587
  605
  623
  644
  657
  678
  702
  726
  752
  778
  806
  836
  867
  899
  932
  968
  1,005
  1,044
  1,084
  1,126
  1,170
  1,216
  1,265
  1,315
Operating income, $m
  25
  18
  18
  19
  21
  23
  26
  29
  33
  38
  44
  57
  64
  72
  81
  90
  100
  111
  123
  136
  150
  165
  181
  198
  216
  236
  256
  279
  302
  328
  355
EBITDA, $m
  48
  40
  40
  42
  44
  46
  50
  54
  58
  64
  70
  77
  85
  93
  103
  113
  124
  136
  149
  163
  179
  195
  212
  231
  251
  272
  294
  319
  344
  371
  400
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
Earnings before tax, $m
  20
  18
  18
  19
  20
  23
  25
  29
  33
  37
  43
  56
  63
  71
  79
  88
  98
  109
  120
  133
  146
  161
  176
  193
  211
  230
  251
  273
  296
  321
  347
Tax expense, $m
  8
  5
  5
  5
  6
  6
  7
  8
  9
  10
  12
  15
  17
  19
  21
  24
  26
  29
  32
  36
  39
  43
  48
  52
  57
  62
  68
  74
  80
  87
  94
Net income, $m
  12
  13
  13
  14
  15
  16
  18
  21
  24
  27
  31
  41
  46
  52
  58
  64
  71
  79
  88
  97
  107
  117
  129
  141
  154
  168
  183
  199
  216
  234
  253

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  119
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  633
  524
  536
  550
  566
  583
  602
  622
  644
  668
  694
  721
  751
  782
  815
  850
  887
  927
  969
  1,013
  1,059
  1,108
  1,160
  1,215
  1,272
  1,333
  1,396
  1,463
  1,534
  1,608
  1,687
Adjusted assets (=assets-cash), $m
  514
  524
  536
  550
  566
  583
  602
  622
  644
  668
  694
  721
  751
  782
  815
  850
  887
  927
  969
  1,013
  1,059
  1,108
  1,160
  1,215
  1,272
  1,333
  1,396
  1,463
  1,534
  1,608
  1,687
Revenue / Adjusted assets
  0.990
  0.990
  0.991
  0.991
  0.989
  0.990
  0.990
  0.990
  0.991
  0.991
  0.990
  0.990
  0.989
  0.990
  0.990
  0.991
  0.991
  0.990
  0.990
  0.989
  0.991
  0.990
  0.990
  0.989
  0.990
  0.989
  0.990
  0.990
  0.990
  0.990
  0.990
Average production assets, $m
  101
  103
  105
  108
  111
  114
  118
  122
  126
  131
  136
  141
  147
  153
  160
  167
  174
  182
  190
  198
  208
  217
  227
  238
  249
  261
  274
  287
  301
  315
  331
Working capital, $m
  311
  196
  200
  205
  211
  218
  225
  232
  241
  249
  259
  269
  280
  292
  304
  317
  331
  346
  361
  378
  395
  414
  433
  453
  475
  497
  521
  546
  573
  600
  629
Total debt, $m
  0
  2
  4
  7
  10
  13
  17
  21
  26
  30
  35
  41
  47
  53
  59
  66
  74
  82
  90
  98
  108
  117
  128
  138
  150
  162
  174
  188
  202
  216
  232
Total liabilities, $m
  102
  104
  106
  109
  112
  115
  119
  123
  128
  132
  137
  143
  149
  155
  161
  168
  176
  184
  192
  200
  210
  219
  230
  240
  252
  264
  276
  290
  304
  318
  334
Total equity, $m
  531
  421
  430
  441
  454
  467
  483
  499
  517
  536
  557
  579
  602
  627
  654
  682
  712
  743
  777
  812
  849
  889
  930
  974
  1,020
  1,069
  1,120
  1,174
  1,230
  1,290
  1,353
Total liabilities and equity, $m
  633
  525
  536
  550
  566
  582
  602
  622
  645
  668
  694
  722
  751
  782
  815
  850
  888
  927
  969
  1,012
  1,059
  1,108
  1,160
  1,214
  1,272
  1,333
  1,396
  1,464
  1,534
  1,608
  1,687
Debt-to-equity ratio
  0.000
  0.000
  0.010
  0.020
  0.020
  0.030
  0.040
  0.040
  0.050
  0.060
  0.060
  0.070
  0.080
  0.080
  0.090
  0.100
  0.100
  0.110
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.160
  0.170
  0.170
Adjusted equity ratio
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802
  0.802

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  13
  13
  14
  15
  16
  18
  21
  24
  27
  31
  41
  46
  52
  58
  64
  71
  79
  88
  97
  107
  117
  129
  141
  154
  168
  183
  199
  216
  234
  253
Depreciation, amort., depletion, $m
  23
  22
  22
  22
  23
  23
  24
  24
  25
  26
  26
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
Funds from operations, $m
  19
  35
  35
  36
  38
  40
  42
  45
  49
  53
  58
  61
  66
  73
  80
  87
  96
  104
  114
  124
  136
  148
  160
  174
  189
  204
  221
  239
  258
  278
  299
Change in working capital, $m
  -14
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
Cash from operations, $m
  33
  31
  31
  31
  32
  33
  35
  38
  41
  44
  48
  50
  56
  61
  67
  74
  82
  90
  99
  108
  118
  129
  141
  154
  167
  182
  197
  214
  231
  250
  270
Maintenance CAPEX, $m
  0
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
New CAPEX, $m
  -13
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
Cash from investing activities, $m
  -21
  -16
  -16
  -18
  -18
  -18
  -20
  -20
  -21
  -23
  -23
  -24
  -26
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -43
  -44
  -47
  -48
  -51
  -54
  -57
  -59
Free cash flow, $m
  12
  15
  14
  14
  14
  15
  16
  17
  19
  22
  25
  26
  30
  35
  40
  45
  51
  58
  65
  73
  82
  91
  101
  111
  123
  135
  148
  163
  178
  194
  211
Issuance/(repayment) of debt, $m
  0
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  -12
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -12
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Total cash flow (excl. dividends), $m
  0
  17
  17
  17
  17
  18
  19
  21
  24
  26
  30
  32
  36
  41
  46
  52
  59
  66
  73
  82
  91
  101
  111
  122
  134
  147
  161
  176
  192
  209
  226
Retained Cash Flow (-), $m
  0
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
Prev. year cash balance distribution, $m
 
  119
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  128
  7
  5
  5
  4
  4
  5
  6
  7
  9
  10
  12
  16
  20
  24
  29
  34
  40
  46
  53
  61
  69
  78
  88
  99
  110
  122
  135
  149
  164
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  122
  6
  5
  4
  3
  3
  3
  4
  4
  5
  5
  5
  6
  7
  7
  7
  7
  7
  7
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
Current shareholders' claim on cash, %
  100
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Analogic Corporation designs, manufactures and commercializes guidance, diagnostic imaging and threat detection technologies. The Company operates through three segments: Medical Imaging, Ultrasound, and Security and Detection. The Company's Medical Imaging segment provides medical imaging systems and subsystems for computed tomography (CT), magnetic resonance imaging (MRI) and high-resolution digital mammography. The Company's Ultrasound business segment provides ultrasound procedure guidance systems for the urology and surgery markets. The Company's Security and Detection segment designs and manufactures automated threat detection systems for aviation baggage inspection applications utilizing medical CT technology and systems used for deoxyribonucleic acid (DNA) analysis for law enforcement and government agencies.

FINANCIAL RATIOS  of  Analogic (ALOG)

Valuation Ratios
P/E Ratio 80.2
Price to Sales 1.9
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 29.2
Price to Free Cash Flow 48.1
Growth Rates
Sales Growth Rate -5.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 2.3%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 44.8%
Gross Margin - 3 Yr. Avg. 43.2%
EBITDA Margin 8.4%
EBITDA Margin - 3 Yr. Avg. 10%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 5.7%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 14.1%
Payout Ratio 41.7%

ALOG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALOG stock intrinsic value calculation we used $509 million for the last fiscal year's total revenue generated by Analogic. The default revenue input number comes from 2016 income statement of Analogic. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ALOG stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ALOG is calculated based on our internal credit rating of Analogic, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Analogic.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ALOG stock the variable cost ratio is equal to 51.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $227 million in the base year in the intrinsic value calculation for ALOG stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Analogic.

Corporate tax rate of 27% is the nominal tax rate for Analogic. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ALOG stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ALOG are equal to 19.8%.

Life of production assets of 7.2 years is the average useful life of capital assets used in Analogic operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ALOG is equal to 37.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $531 million for Analogic - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 12.55 million for Analogic is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Analogic at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ Analogic reports 4Q loss   [Sep-19-17 10:03PM  Associated Press]
▶ Analogic Appoints New Chief Financial Officer   [Jul-13-17 04:05PM  GlobeNewswire]
▶ ETFs with exposure to Analogic Corp. : July 3, 2017   [Jul-03-17 02:48PM  Capital Cube]
▶ [$$] American Airlines to Test 3-D Bag Screening Equipment   [Jun-27-17 06:18PM  The Wall Street Journal]
▶ ETFs with exposure to Analogic Corp. : June 19, 2017   [Jun-19-17 02:53PM  Capital Cube]
▶ ETFs with exposure to Analogic Corp. : June 9, 2017   [Jun-09-17 01:15PM  Capital Cube]
▶ Analogic reports 3Q loss   [Jun-06-17 04:29PM  Associated Press]
▶ ETFs with exposure to Analogic Corp. : April 19, 2017   [Apr-19-17 02:08PM  Capital Cube]
▶ Analogic posts 2Q profit   [04:22PM  Associated Press]
▶ Analogic Corporation to Webcast Annual Stockholders Meeting   [Jan-12-17 03:15PM  GlobeNewswire]
▶ Analogic to Present at Upcoming Investor Conferences   [Dec-28-16 01:00PM  GlobeNewswire]
▶ Analogic Announces Leadership Transition   [Oct-24-16 09:00AM  GlobeNewswire]
Financial statements of ALOG
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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