Intrinsic value of Bovie Medical - BVX

Previous Close

$2.99

  Intrinsic Value

$3.13

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  Rating & Target

hold

+5%

Previous close

$2.99

 
Intrinsic value

$3.13

 
Up/down potential

+5%

 
Rating

hold

We calculate the intrinsic value of BVX 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, %
  23.33
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
Revenue, $m
  37
  41
  45
  50
  55
  60
  65
  70
  76
  81
  87
  94
  100
  107
  114
  121
  129
  136
  145
  153
  162
  171
  181
  191
  202
  213
  225
  237
  249
  263
  277
Variable operating expenses, $m
 
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  56
  59
  62
  66
  70
  74
  78
  83
  87
  92
  97
  102
  108
  113
  119
Fixed operating expenses, $m
 
  26
  26
  27
  28
  28
  29
  30
  30
  31
  32
  33
  34
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
Total operating expenses, $m
  40
  44
  46
  49
  52
  54
  57
  60
  63
  66
  70
  73
  77
  80
  84
  88
  93
  97
  101
  106
  111
  116
  121
  127
  132
  138
  145
  151
  158
  164
  171
Operating income, $m
  -4
  -2
  0
  1
  3
  6
  8
  10
  12
  15
  18
  20
  23
  26
  29
  33
  36
  39
  43
  47
  51
  55
  60
  65
  69
  75
  80
  86
  92
  98
  105
EBITDA, $m
  -3
  -2
  0
  2
  4
  6
  8
  11
  13
  16
  19
  21
  24
  27
  31
  34
  37
  41
  45
  49
  53
  57
  62
  67
  72
  77
  82
  88
  94
  101
  108
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
Earnings before tax, $m
  -4
  -2
  -1
  1
  3
  5
  7
  10
  12
  15
  17
  20
  23
  26
  29
  32
  35
  39
  42
  46
  50
  54
  59
  63
  68
  73
  78
  84
  90
  96
  103
Tax expense, $m
  0
  0
  0
  0
  1
  1
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  9
  10
  11
  12
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
Net income, $m
  -4
  -2
  -1
  1
  2
  4
  5
  7
  9
  11
  12
  14
  16
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  66
  70
  75

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  14
  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
  35
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
  127
  134
  142
  149
  157
Adjusted assets (=assets-cash), $m
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
  127
  134
  142
  149
  157
Revenue / Adjusted assets
  1.762
  1.783
  1.731
  1.786
  1.774
  1.765
  1.757
  1.750
  1.767
  1.761
  1.740
  1.774
  1.754
  1.754
  1.754
  1.754
  1.767
  1.766
  1.768
  1.759
  1.761
  1.763
  1.757
  1.752
  1.757
  1.760
  1.772
  1.769
  1.754
  1.765
  1.764
Average production assets, $m
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
Working capital, $m
  22
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
Total debt, $m
  3
  4
  5
  6
  7
  9
  10
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
Total liabilities, $m
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
Total equity, $m
  26
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  65
  69
  73
  77
  81
  85
  90
Total liabilities and equity, $m
  35
  23
  26
  28
  31
  34
  37
  40
  42
  46
  49
  53
  56
  61
  65
  68
  73
  77
  82
  87
  92
  98
  103
  109
  114
  121
  128
  135
  142
  149
  157
Debt-to-equity ratio
  0.115
  0.300
  0.340
  0.380
  0.410
  0.440
  0.470
  0.490
  0.510
  0.520
  0.540
  0.550
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.680
  0.680
Adjusted equity ratio
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571
  0.571

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  -2
  -1
  1
  2
  4
  5
  7
  9
  11
  12
  14
  16
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  66
  70
  75
Depreciation, amort., depletion, $m
  1
  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
  3
  3
  3
  3
Funds from operations, $m
  -4
  -2
  0
  1
  3
  5
  6
  8
  10
  11
  13
  15
  18
  20
  22
  24
  27
  30
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  68
  73
  78
Change in working capital, $m
  -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
  3
  3
  3
Cash from operations, $m
  -3
  -3
  -1
  0
  2
  3
  5
  7
  8
  10
  12
  14
  16
  18
  21
  23
  25
  28
  31
  33
  36
  39
  43
  46
  50
  53
  57
  61
  66
  70
  75
Maintenance CAPEX, $m
  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
  -3
  -3
  -3
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Free cash flow, $m
  -3
  -3
  -2
  0
  1
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  44
  47
  51
  54
  58
  62
  67
  71
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Issuance/(repurchase) of shares, $m
  6
  4
  2
  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
Cash from financing (excl. dividends), $m  
  6
  5
  3
  2
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Total cash flow (excl. dividends), $m
  3
  1
  1
  1
  2
  4
  5
  7
  9
  11
  12
  14
  16
  19
  21
  23
  26
  28
  31
  33
  36
  39
  43
  46
  50
  53
  57
  61
  65
  70
  75
Retained Cash Flow (-), $m
  -3
  -4
  -2
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
Prev. year cash balance distribution, $m
 
  14
  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
 
  12
  -1
  0
  1
  2
  4
  5
  7
  9
  10
  12
  14
  16
  18
  21
  23
  25
  28
  31
  33
  36
  39
  43
  46
  50
  53
  57
  61
  66
  70
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
 
  11
  -1
  0
  1
  2
  3
  4
  4
  5
  5
  6
  6
  6
  6
  6
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
Current shareholders' claim on cash, %
  100
  92.0
  88.3
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4
  87.4

Bovie Medical Corporation (Bovie) is an energy-based medical device company. The Company is engaged in the design, development and manufacturing of electrosurgical equipment by producing equipment for medical device manufacturers through original equipment manufacturing (OEM) agreements, as well as start-up companies. It operates through three segments: Core, OEM and J-Plasma. It is engaged in developing and marketing a range of electrosurgical products and technologies, as well as related medical products used in doctor's offices, surgery centers and hospitals around the world. It also develops J-Plasma, a helium-based plasma surgical product. The J-Plasma system consists of an electrosurgical generator unit, a handpiece and a supply of helium gas. Its products are marketed through brands, including Bovie, Aaron, DERM, IDS and ICON, and on a private label basis to distributors around the world. It offers its products in electrosurgery, cauteries and other products categories.

FINANCIAL RATIOS  of  Bovie Medical (BVX)

Valuation Ratios
P/E Ratio -23.1
Price to Sales 2.5
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow -30.8
Price to Free Cash Flow -30.8
Growth Rates
Sales Growth Rate 23.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 11.5%
Total Debt to Equity 11.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -12.1%
Ret/ On Assets - 3 Yr. Avg. -29.5%
Return On Total Capital -14.5%
Ret/ On T. Cap. - 3 Yr. Avg. -50.1%
Return On Equity -16.3%
Return On Equity - 3 Yr. Avg. -60.9%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 48.6%
Gross Margin - 3 Yr. Avg. 41.4%
EBITDA Margin -8.1%
EBITDA Margin - 3 Yr. Avg. -21.4%
Operating Margin -8.1%
Oper. Margin - 3 Yr. Avg. -17.6%
Pre-Tax Margin -10.8%
Pre-Tax Margin - 3 Yr. Avg. -24.6%
Net Profit Margin -10.8%
Net Profit Margin - 3 Yr. Avg. -29.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -10.3%
Payout Ratio 0%

BVX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BVX stock intrinsic value calculation we used $37 million for the last fiscal year's total revenue generated by Bovie Medical. The default revenue input number comes from 2016 income statement of Bovie Medical. 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 BVX stock valuation model: a) initial revenue growth rate of 11.1% 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 BVX is calculated based on our internal credit rating of Bovie Medical, 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 Bovie Medical.
    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 BVX stock the variable cost ratio is equal to 43.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $25 million in the base year in the intrinsic value calculation for BVX 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 Bovie Medical.

Corporate tax rate of 27% is the nominal tax rate for Bovie Medical. 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 BVX 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 BVX are equal to 5.4%.

Life of production assets of 2 years is the average useful life of capital assets used in Bovie Medical 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 BVX is equal to 21.6%. 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 - $26 million for Bovie Medical - 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 30.86 million for Bovie Medical 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 Bovie Medical at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Bovie reports 3Q loss   [Nov-02-17 06:55PM  Associated Press]
▶ Bovie reports 2Q loss   [Aug-02-17 10:55PM  Associated Press]
▶ ETFs with exposure to Bovie Medical Corp. : June 29, 2017   [Jun-29-17 02:54PM  Capital Cube]
▶ ETFs with exposure to Bovie Medical Corp. : June 16, 2017   [Jun-16-17 03:30PM  Capital Cube]
▶ Bovie reports 1Q loss   [May-15-17 04:12PM  Associated Press]
▶ Bovie Medical Confirms Its 2017 Outlook   [Feb-01-17 08:00AM  Business Wire]
▶ Bovie Medical Provides J-Plasma┬« Update   [Jan-31-17 04:05PM  PR Newswire]
Financial statements of BVX
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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