Intrinsic value of Applied DNA Sciences - APDN

Previous Close

$2.32

  Intrinsic Value

$2.65

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  Rating & Target

hold

+14%

Previous close

$2.32

 
Intrinsic value

$2.65

 
Up/down potential

+14%

 
Rating

hold

We calculate the intrinsic value of APDN 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 0.1

 

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, %
  -55.56
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  4
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  260
  305
  355
  409
  467
  529
  595
  664
  737
  814
  894
  978
  1,066
  1,157
  1,252
  1,350
  1,453
Variable operating expenses, $m
 
  3
  5
  7
  11
  15
  21
  28
  37
  47
  60
  74
  90
  109
  130
  153
  178
  204
  233
  264
  297
  332
  369
  407
  447
  489
  533
  578
  626
  675
  726
Fixed operating expenses, $m
 
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
  28
  29
  29
Total operating expenses, $m
  16
  17
  20
  22
  26
  31
  37
  45
  54
  64
  78
  92
  109
  128
  150
  173
  199
  225
  255
  286
  320
  356
  393
  432
  472
  515
  560
  605
  654
  704
  755
Operating income, $m
  -12
  -11
  -10
  -8
  -5
  -1
  5
  11
  20
  30
  42
  56
  72
  90
  110
  132
  157
  183
  212
  242
  274
  308
  344
  382
  422
  463
  506
  551
  598
  647
  697
EBITDA, $m
  -11
  -10
  -9
  -6
  -2
  3
  10
  18
  29
  42
  57
  74
  94
  117
  142
  170
  201
  234
  270
  308
  349
  391
  437
  484
  534
  585
  640
  696
  754
  815
  879
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  3
  4
  5
  6
  8
  9
  11
  13
  16
  18
  21
  24
  28
  31
  35
  39
  43
  47
  51
  56
  61
  66
  71
Earnings before tax, $m
  -12
  -11
  -10
  -8
  -5
  -2
  3
  9
  17
  26
  37
  50
  64
  80
  99
  119
  141
  165
  190
  218
  247
  277
  310
  344
  379
  416
  455
  495
  537
  581
  626
Tax expense, $m
  0
  0
  0
  0
  0
  0
  1
  3
  5
  7
  10
  13
  17
  22
  27
  32
  38
  44
  51
  59
  67
  75
  84
  93
  102
  112
  123
  134
  145
  157
  169
Net income, $m
  -12
  -11
  -10
  -8
  -5
  -2
  2
  7
  12
  19
  27
  36
  47
  59
  72
  87
  103
  120
  139
  159
  180
  203
  226
  251
  277
  304
  332
  362
  392
  424
  457

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4
  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
  16
  19
  30
  44
  64
  91
  125
  168
  220
  283
  358
  445
  544
  655
  779
  916
  1,066
  1,228
  1,402
  1,588
  1,785
  1,994
  2,214
  2,444
  2,686
  2,938
  3,201
  3,474
  3,759
  4,055
  4,363
Adjusted assets (=assets-cash), $m
  12
  19
  30
  44
  64
  91
  125
  168
  220
  283
  358
  445
  544
  655
  779
  916
  1,066
  1,228
  1,402
  1,588
  1,785
  1,994
  2,214
  2,444
  2,686
  2,938
  3,201
  3,474
  3,759
  4,055
  4,363
Revenue / Adjusted assets
  0.333
  0.316
  0.333
  0.341
  0.328
  0.330
  0.336
  0.333
  0.332
  0.332
  0.332
  0.333
  0.333
  0.333
  0.334
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
Average production assets, $m
  3
  4
  6
  9
  13
  19
  26
  35
  46
  59
  75
  93
  113
  136
  162
  191
  222
  256
  292
  330
  372
  415
  461
  509
  559
  611
  666
  723
  782
  844
  908
Working capital, $m
  7
  3
  5
  7
  11
  15
  21
  28
  37
  47
  60
  74
  90
  109
  130
  153
  178
  204
  233
  264
  297
  332
  369
  407
  447
  489
  533
  578
  626
  675
  726
Total debt, $m
  0
  4
  9
  16
  26
  39
  56
  78
  104
  136
  173
  216
  266
  322
  384
  452
  527
  608
  695
  788
  887
  991
  1,101
  1,216
  1,337
  1,463
  1,594
  1,731
  1,874
  2,022
  2,176
Total liabilities, $m
  5
  10
  15
  22
  32
  45
  62
  84
  110
  142
  179
  222
  272
  328
  390
  458
  533
  614
  701
  794
  893
  997
  1,107
  1,222
  1,343
  1,469
  1,600
  1,737
  1,880
  2,028
  2,182
Total equity, $m
  10
  10
  15
  22
  32
  45
  62
  84
  110
  142
  179
  222
  272
  328
  390
  458
  533
  614
  701
  794
  893
  997
  1,107
  1,222
  1,343
  1,469
  1,600
  1,737
  1,880
  2,028
  2,182
Total liabilities and equity, $m
  15
  20
  30
  44
  64
  90
  124
  168
  220
  284
  358
  444
  544
  656
  780
  916
  1,066
  1,228
  1,402
  1,588
  1,786
  1,994
  2,214
  2,444
  2,686
  2,938
  3,200
  3,474
  3,760
  4,056
  4,364
Debt-to-equity ratio
  0.000
  0.380
  0.600
  0.730
  0.810
  0.870
  0.900
  0.930
  0.950
  0.960
  0.970
  0.970
  0.980
  0.980
  0.980
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
Adjusted equity ratio
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -12
  -11
  -10
  -8
  -5
  -2
  2
  7
  12
  19
  27
  36
  47
  59
  72
  87
  103
  120
  139
  159
  180
  203
  226
  251
  277
  304
  332
  362
  392
  424
  457
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  3
  4
  5
  7
  9
  12
  15
  19
  23
  27
  32
  38
  44
  51
  58
  66
  74
  83
  92
  102
  112
  122
  133
  145
  156
  169
  182
Funds from operations, $m
  -11
  -10
  -9
  -6
  -3
  2
  8
  14
  21
  31
  42
  55
  69
  86
  105
  125
  147
  171
  197
  225
  254
  286
  318
  353
  389
  426
  465
  506
  549
  593
  639
Change in working capital, $m
  -1
  1
  2
  2
  3
  4
  6
  7
  9
  11
  12
  14
  16
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  38
  40
  42
  44
  46
  47
  49
  51
Cash from operations, $m
  -10
  -12
  -10
  -9
  -6
  -2
  2
  7
  13
  20
  29
  40
  53
  67
  84
  102
  122
  144
  168
  194
  222
  251
  282
  314
  348
  384
  422
  461
  501
  544
  588
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -3
  -4
  -5
  -7
  -9
  -12
  -15
  -19
  -23
  -27
  -32
  -38
  -44
  -51
  -58
  -66
  -74
  -83
  -92
  -102
  -112
  -122
  -133
  -145
  -156
  -169
New CAPEX, $m
  -1
  -2
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -13
  -16
  -18
  -21
  -23
  -26
  -29
  -31
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -64
Cash from investing activities, $m
  -1
  -3
  -3
  -4
  -6
  -9
  -11
  -14
  -18
  -22
  -28
  -33
  -40
  -46
  -53
  -61
  -69
  -78
  -87
  -97
  -107
  -117
  -129
  -140
  -152
  -164
  -177
  -190
  -204
  -218
  -233
Free cash flow, $m
  -11
  -14
  -13
  -13
  -12
  -10
  -9
  -7
  -5
  -2
  2
  7
  14
  22
  31
  41
  53
  66
  81
  97
  114
  133
  153
  174
  196
  220
  245
  270
  297
  326
  355
Issuance/(repayment) of debt, $m
  0
  4
  5
  7
  10
  13
  17
  21
  26
  32
  37
  43
  49
  56
  62
  69
  75
  81
  87
  93
  99
  104
  110
  115
  121
  126
  131
  137
  142
  148
  154
Issuance/(repurchase) of shares, $m
  8
  15
  15
  15
  15
  15
  15
  15
  14
  13
  10
  7
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  8
  19
  20
  22
  25
  28
  32
  36
  40
  45
  47
  50
  52
  56
  62
  69
  75
  81
  87
  93
  99
  104
  110
  115
  121
  126
  131
  137
  142
  148
  154
Total cash flow (excl. dividends), $m
  -3
  5
  7
  10
  13
  18
  23
  29
  35
  42
  50
  58
  66
  77
  93
  110
  128
  147
  168
  190
  213
  237
  263
  289
  317
  346
  376
  407
  440
  474
  509
Retained Cash Flow (-), $m
  3
  -15
  -15
  -15
  -15
  -15
  -17
  -21
  -26
  -32
  -37
  -43
  -49
  -56
  -62
  -69
  -75
  -81
  -87
  -93
  -99
  -104
  -110
  -115
  -121
  -126
  -131
  -137
  -142
  -148
  -154
Prev. year cash balance distribution, $m
 
  4
  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
 
  -6
  -8
  -6
  -2
  3
  6
  7
  9
  11
  12
  14
  17
  22
  31
  41
  53
  66
  81
  97
  114
  133
  153
  174
  196
  220
  245
  270
  297
  326
  355
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
 
  -6
  -7
  -5
  -2
  2
  4
  5
  5
  6
  7
  7
  7
  8
  10
  12
  13
  14
  15
  15
  15
  14
  13
  11
  10
  9
  7
  6
  5
  4
  3
Current shareholders' claim on cash, %
  100
  72.1
  57.8
  49.7
  44.8
  41.8
  39.8
  38.3
  37.4
  36.7
  36.3
  36.1
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0
  36.0

Applied DNA Sciences, Inc. is engaged in creating security solutions addressing the challenges of modern commerce. The Company is also engaged in the large-scale production of specific deoxyribonucleic acid (DNA) sequences using the polymerase chain reaction (PCR). Its principal technology platform includes SigNature DNA, SigNature T DNA, fiberTyping, DNAnet, digitalDNA, SigNify and Beacon. Its SigNify IF portable DNA reader provides definitive real-time authentication of SigNature DNA in the field-DNA becomes a solution for supply chain integrity. SigNature DNA is the Company's platform ingredient, at the core of all its security solutions. It provides forensic power and protection for a range of applications. SigNature T DNA is a tagging and authentication system specifically designed for textiles and apparel. DNAnet is a DNA marker that can be used to definitively link evidence and offenders to specific crime scenes and help return stolen or lost property to its rightful owner.

FINANCIAL RATIOS  of  Applied DNA Sciences (APDN)

Valuation Ratios
P/E Ratio -4.7
Price to Sales 14
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow -5.6
Price to Free Cash Flow -5.1
Growth Rates
Sales Growth Rate -55.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
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 -75%
Ret/ On Assets - 3 Yr. Avg. -137.2%
Return On Total Capital -104.3%
Ret/ On T. Cap. - 3 Yr. Avg. -236.4%
Return On Equity -104.3%
Return On Equity - 3 Yr. Avg. -318.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 75%
Gross Margin - 3 Yr. Avg. 25%
EBITDA Margin -275%
EBITDA Margin - 3 Yr. Avg. -280.6%
Operating Margin -300%
Oper. Margin - 3 Yr. Avg. -263%
Pre-Tax Margin -300%
Pre-Tax Margin - 3 Yr. Avg. -288.9%
Net Profit Margin -300%
Net Profit Margin - 3 Yr. Avg. -288.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

APDN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APDN stock intrinsic value calculation we used $4 million for the last fiscal year's total revenue generated by Applied DNA Sciences. The default revenue input number comes from 2016 income statement of Applied DNA Sciences. 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 APDN stock valuation model: a) initial revenue growth rate of 60% 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 APDN is calculated based on our internal credit rating of Applied DNA Sciences, 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 Applied DNA Sciences.
    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 APDN stock the variable cost ratio is equal to 50%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14 million in the base year in the intrinsic value calculation for APDN 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 Applied DNA Sciences.

Corporate tax rate of 27% is the nominal tax rate for Applied DNA Sciences. 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 APDN 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 APDN are equal to 62.5%.

Life of production assets of 2.5 years is the average useful life of capital assets used in Applied DNA Sciences 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 APDN is equal to 50%. 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 - $10 million for Applied DNA Sciences - 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 27.376 million for Applied DNA Sciences 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 Applied DNA Sciences at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Applied DNA Sciences Files Form S-3 Registration Statement   [Sep-18-17 05:30AM  Business Wire]
▶ Applied DNA Sciences reports 3Q loss   [Aug-10-17 10:01PM  Associated Press]
▶ Update on APDN 2017 Fiscal Second Quarter Financials   [Jun-07-17 02:30PM  Zacks Small Cap Research]
▶ Applied DNA Sciences reports 2Q loss   [May-11-17 04:16PM  Associated Press]
▶ BMW Dealers in Sweden Expand DNA Asset Marking Program   [Feb-16-17 05:30AM  Marketwired]
▶ Applied DNA Sciences reports 1Q loss   [Feb-09-17 05:31PM  AP]
▶ [$$] Applied DNA Pumped Up by Retail Partner   [Dec-08-16 11:16AM  at Barrons.com]
▶ APDN: Update on Fiscal Fourth Quarter Financials   [Dec-07-16 10:35AM  Zacks Small Cap Research]
▶ Applied DNA Sciences reports 4Q loss   [Dec-06-16 04:14PM  AP]
Financial statements of APDN
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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