Intrinsic value of Bioanalytical Systems - BASI

Previous Close

$2.80

  Intrinsic Value

$3.64

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  Rating & Target

buy

+30%

Previous close

$2.80

 
Intrinsic value

$3.64

 
Up/down potential

+30%

 
Rating

buy

We calculate the intrinsic value of BASI 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 0.0

 

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, %
  -13.04
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  20
  24
  28
  33
  39
  44
  51
  57
  64
  71
  79
  87
  96
  104
  114
  123
  133
  144
  154
  165
  177
  189
  202
  215
  228
  243
  257
  273
  289
  305
  323
Variable operating expenses, $m
 
  23
  27
  32
  37
  42
  48
  54
  61
  68
  75
  83
  91
  99
  108
  117
  127
  136
  147
  157
  168
  180
  192
  204
  217
  230
  244
  259
  274
  290
  307
Fixed operating expenses, $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
Total operating expenses, $m
  23
  23
  27
  32
  37
  42
  48
  54
  61
  68
  75
  83
  91
  99
  108
  117
  127
  136
  147
  157
  168
  180
  192
  204
  217
  230
  244
  259
  274
  290
  307
Operating income, $m
  -3
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
EBITDA, $m
  -1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
Earnings before tax, $m
  -3
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Net income, $m
  -3
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  21
  25
  30
  35
  41
  47
  53
  60
  67
  75
  83
  92
  100
  110
  119
  129
  140
  151
  162
  174
  186
  199
  212
  226
  240
  255
  270
  286
  303
  321
  339
Adjusted assets (=assets-cash), $m
  21
  25
  30
  35
  41
  47
  53
  60
  67
  75
  83
  92
  100
  110
  119
  129
  140
  151
  162
  174
  186
  199
  212
  226
  240
  255
  270
  286
  303
  321
  339
Revenue / Adjusted assets
  0.952
  0.960
  0.933
  0.943
  0.951
  0.936
  0.962
  0.950
  0.955
  0.947
  0.952
  0.946
  0.960
  0.945
  0.958
  0.953
  0.950
  0.954
  0.951
  0.948
  0.952
  0.950
  0.953
  0.951
  0.950
  0.953
  0.952
  0.955
  0.954
  0.950
  0.953
Average production assets, $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
  0
Working capital, $m
  -8
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -48
Total debt, $m
  5
  8
  11
  14
  18
  22
  26
  31
  36
  41
  46
  52
  58
  64
  71
  77
  84
  92
  99
  107
  115
  124
  132
  142
  151
  161
  171
  182
  193
  205
  217
Total liabilities, $m
  14
  17
  20
  23
  27
  31
  35
  40
  45
  50
  55
  61
  67
  73
  80
  86
  93
  101
  108
  116
  124
  133
  141
  151
  160
  170
  180
  191
  202
  214
  226
Total equity, $m
  7
  8
  10
  12
  14
  16
  18
  20
  22
  25
  28
  30
  33
  37
  40
  43
  47
  50
  54
  58
  62
  66
  71
  75
  80
  85
  90
  95
  101
  107
  113
Total liabilities and equity, $m
  21
  25
  30
  35
  41
  47
  53
  60
  67
  75
  83
  91
  100
  110
  120
  129
  140
  151
  162
  174
  186
  199
  212
  226
  240
  255
  270
  286
  303
  321
  339
Debt-to-equity ratio
  0.714
  0.930
  1.100
  1.230
  1.340
  1.420
  1.490
  1.550
  1.600
  1.640
  1.680
  1.710
  1.730
  1.760
  1.780
  1.790
  1.810
  1.820
  1.840
  1.850
  1.860
  1.870
  1.880
  1.880
  1.890
  1.900
  1.900
  1.910
  1.910
  1.920
  1.920
Adjusted equity ratio
  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
  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

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Depreciation, amort., depletion, $m
  2
  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
Funds from operations, $m
  3
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Change in working capital, $m
  2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Cash from operations, $m
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Maintenance CAPEX, $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
  0
New CAPEX, $m
  -1
  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 investing activities, $m
  -1
  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
Free cash flow, $m
  0
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  0
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
Total cash flow (excl. dividends), $m
  0
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  20
  20
  21
Retained Cash Flow (-), $m
  4
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Prev. year cash balance distribution, $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 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
 
  3
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
Discount rate, %
 
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
 
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.3
  94.8
  92.6
  90.7
  89.0
  87.5
  86.2
  85.1
  84.1
  83.2
  82.5
  81.8
  81.3
  80.8
  80.4
  80.0
  79.8
  79.5
  79.3
  79.2
  79.1
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0
  79.0

Bioanalytical systems, Inc. is an international contract research company providing drug discovery and development services and analytical instruments. The Company operates in two segments: contract research services and research products. The contract research services segment provides research and development support on a contract basis to pharmaceutical companies. The research products segment provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers, and medical research institutions. The Company supports the preclinical and clinical development needs of researchers and clinicians for small molecule and large biomolecule drug candidates. The contract research services segment provides screening and pharmacological testing, preclinical safety testing, formulation development, regulatory compliance and quality control testing.

FINANCIAL RATIOS  of  Bioanalytical Systems (BASI)

Valuation Ratios
P/E Ratio -7.6
Price to Sales 1.1
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 22.7
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -13%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 71.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -13.3%
Ret/ On Assets - 3 Yr. Avg. -4.4%
Return On Total Capital -21.4%
Ret/ On T. Cap. - 3 Yr. Avg. -7.1%
Return On Equity -33.3%
Return On Equity - 3 Yr. Avg. -11.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 20%
Gross Margin - 3 Yr. Avg. 27.5%
EBITDA Margin -5%
EBITDA Margin - 3 Yr. Avg. 2.6%
Operating Margin -15%
Oper. Margin - 3 Yr. Avg. -2.2%
Pre-Tax Margin -15%
Pre-Tax Margin - 3 Yr. Avg. -4.9%
Net Profit Margin -15%
Net Profit Margin - 3 Yr. Avg. -4.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

BASI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BASI stock intrinsic value calculation we used $20 million for the last fiscal year's total revenue generated by Bioanalytical Systems. The default revenue input number comes from 2016 income statement of Bioanalytical Systems. 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 BASI stock valuation model: a) initial revenue growth rate of 20% 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 9%, whose default value for BASI is calculated based on our internal credit rating of Bioanalytical Systems, 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 Bioanalytical Systems.
    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 BASI stock the variable cost ratio is equal to 95%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BASI 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 Bioanalytical Systems.

Corporate tax rate of 27% is the nominal tax rate for Bioanalytical Systems. 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 BASI 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 BASI are equal to 0%.

Life of production assets of 0.3 years is the average useful life of capital assets used in Bioanalytical Systems 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 BASI is equal to -15%. 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 - $7 million for Bioanalytical Systems - 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 8.237 million for Bioanalytical Systems 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 Bioanalytical Systems at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ BASi Announces Enhanced Bioequivalence Capabilities   [Dec-12-17 08:33AM  ACCESSWIRE]
▶ BASi Reports Second Quarter Results   [May-15-17 08:30AM  Business Wire]
▶ BASi Announces Appointment of Scientific Advisor   [May-01-17 11:42AM  Business Wire]
▶ BASi Reports First Quarter Results   [08:30AM  Business Wire]
▶ BASi Names Alan Loch Director of Business Development   [Dec-20-16 02:44PM  Business Wire]
▶ BASi Reports Third Quarter Results   [08:30AM  Business Wire]
▶ BASi Reports Second Quarter Results   [09:56AM  Business Wire]
▶ BASi Launches New Website and E-Catalogue   [Apr-14-16 02:10PM  Business Wire]
▶ BASi Reports First Quarter Results   [09:00AM  Business Wire]
▶ BASi Awards RaturnĀ® Systems for Optogenetic Research   [Feb-04-16 11:50AM  Business Wire]
▶ BASi Names Wendy Perrow to Board of Directors   [Dec-14  10:30AM  Business Wire]
▶ 10-Q for Bioanalytical Systems, Inc.   [Aug-16  08:12PM  at Company Spotlight]
▶ 10-Q for Bioanalytical Systems, Inc.   [May-17  08:11PM  at Company Spotlight]
▶ BASi Reports Second Quarter Results   [May-14  09:00AM  Business Wire]
Financial statements of BASI
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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