Intrinsic value of Cancer Genetics - CGIX

Previous Close

$3.30

  Intrinsic Value

$0.20

stock screener

  Rating & Target

str. sell

-94%

  Value-price divergence*

-164%

Previous close

$3.30

 
Intrinsic value

$0.20

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence*

-164%

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

We calculate the intrinsic value of CGIX 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, %
  50.00
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
Revenue, $m
  27
  32
  36
  42
  47
  53
  60
  66
  73
  81
  88
  96
  105
  114
  123
  132
  142
  152
  163
  173
  185
  197
  209
  222
  235
  249
  264
  279
  295
  312
  329
Variable operating expenses, $m
 
  17
  20
  23
  25
  28
  32
  35
  39
  43
  46
  49
  54
  58
  63
  68
  73
  78
  83
  89
  95
  101
  107
  114
  120
  128
  135
  143
  151
  159
  168
Fixed operating expenses, $m
 
  31
  32
  32
  33
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  45
  46
  47
  48
  49
  50
  52
  53
  54
  56
  57
  58
  60
  61
  63
Total operating expenses, $m
  44
  48
  52
  55
  58
  62
  67
  71
  76
  80
  84
  88
  94
  99
  105
  111
  118
  124
  130
  137
  144
  151
  159
  167
  174
  184
  192
  201
  211
  220
  231
Operating income, $m
  -17
  -17
  -15
  -13
  -11
  -9
  -7
  -4
  -2
  1
  4
  8
  11
  14
  17
  21
  25
  29
  33
  37
  41
  46
  51
  56
  61
  66
  72
  78
  84
  91
  98
EBITDA, $m
  -15
  -14
  -13
  -11
  -9
  -6
  -4
  -1
  1
  4
  7
  10
  14
  17
  21
  25
  29
  33
  37
  42
  46
  51
  56
  62
  67
  73
  79
  86
  92
  99
  107
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  -16
  -17
  -15
  -13
  -12
  -10
  -7
  -5
  -3
  0
  3
  7
  9
  13
  16
  19
  23
  26
  30
  34
  38
  43
  47
  52
  57
  62
  68
  74
  80
  86
  92
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
Net income, $m
  -16
  -17
  -15
  -13
  -12
  -10
  -7
  -5
  -3
  0
  2
  5
  7
  9
  12
  14
  17
  19
  22
  25
  28
  31
  35
  38
  42
  45
  49
  54
  58
  63
  67

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  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
  42
  37
  43
  49
  56
  63
  71
  79
  87
  96
  105
  114
  124
  135
  145
  156
  168
  180
  193
  206
  219
  233
  248
  263
  279
  295
  313
  331
  350
  369
  390
Adjusted assets (=assets-cash), $m
  32
  37
  43
  49
  56
  63
  71
  79
  87
  96
  105
  114
  124
  135
  145
  156
  168
  180
  193
  206
  219
  233
  248
  263
  279
  295
  313
  331
  350
  369
  390
Revenue / Adjusted assets
  0.844
  0.865
  0.837
  0.857
  0.839
  0.841
  0.845
  0.835
  0.839
  0.844
  0.838
  0.842
  0.847
  0.844
  0.848
  0.846
  0.845
  0.844
  0.845
  0.840
  0.845
  0.845
  0.843
  0.844
  0.842
  0.844
  0.843
  0.843
  0.843
  0.846
  0.844
Average production assets, $m
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  25
  27
  29
  32
  34
  37
  39
  42
  45
  48
  51
  55
  58
  62
  65
  69
  73
  78
  82
  87
  91
Working capital, $m
  12
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
Total debt, $m
  5
  5
  8
  11
  13
  17
  20
  23
  27
  31
  35
  39
  43
  48
  52
  57
  62
  68
  73
  79
  85
  91
  97
  104
  111
  118
  126
  134
  142
  150
  159
Total liabilities, $m
  17
  16
  19
  22
  24
  28
  31
  34
  38
  42
  46
  50
  54
  59
  63
  68
  73
  79
  84
  90
  96
  102
  108
  115
  122
  129
  137
  145
  153
  161
  170
Total equity, $m
  26
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  70
  76
  82
  88
  95
  101
  108
  116
  123
  131
  140
  148
  157
  166
  176
  186
  197
  208
  219
Total liabilities and equity, $m
  43
  37
  43
  50
  56
  64
  71
  78
  87
  96
  105
  114
  124
  135
  145
  156
  168
  180
  192
  206
  219
  233
  248
  263
  279
  295
  313
  331
  350
  369
  389
Debt-to-equity ratio
  0.192
  0.250
  0.320
  0.380
  0.430
  0.470
  0.500
  0.530
  0.550
  0.570
  0.590
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
  0.710
  0.710
  0.720
  0.720
  0.720
  0.730
Adjusted equity ratio
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -16
  -17
  -15
  -13
  -12
  -10
  -7
  -5
  -3
  0
  2
  5
  7
  9
  12
  14
  17
  19
  22
  25
  28
  31
  35
  38
  42
  45
  49
  54
  58
  63
  67
Depreciation, amort., depletion, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
Funds from operations, $m
  -24
  -15
  -13
  -11
  -9
  -7
  -5
  -2
  1
  3
  5
  7
  10
  12
  15
  18
  21
  23
  27
  30
  33
  37
  40
  44
  48
  52
  57
  61
  66
  71
  77
Change in working capital, $m
  -6
  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
  2
  3
Cash from operations, $m
  -18
  -15
  -14
  -12
  -10
  -8
  -6
  -3
  -1
  2
  4
  6
  9
  11
  14
  16
  19
  22
  25
  28
  31
  35
  39
  42
  46
  50
  55
  59
  64
  69
  74
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
New CAPEX, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
Cash from investing activities, $m
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -14
Free cash flow, $m
  -19
  -17
  -16
  -14
  -13
  -11
  -9
  -7
  -4
  -2
  0
  2
  4
  6
  8
  10
  13
  15
  18
  21
  23
  26
  30
  33
  36
  40
  44
  48
  52
  56
  61
Issuance/(repayment) of debt, $m
  -1
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Issuance/(repurchase) of shares, $m
  10
  20
  18
  17
  15
  14
  12
  10
  7
  5
  3
  1
  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  
  9
  22
  21
  20
  18
  17
  15
  13
  11
  9
  7
  5
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Total cash flow (excl. dividends), $m
  -10
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  6
  8
  10
  13
  15
  18
  20
  23
  26
  29
  33
  36
  40
  43
  47
  51
  55
  60
  65
  70
Retained Cash Flow (-), $m
  7
  -20
  -18
  -17
  -15
  -14
  -12
  -10
  -7
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Prev. year cash balance distribution, $m
 
  8
  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
 
  -7
  -13
  -12
  -10
  -8
  -5
  -3
  -1
  2
  2
  1
  2
  4
  7
  9
  11
  14
  16
  19
  22
  25
  28
  31
  34
  38
  42
  45
  49
  54
  58
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
 
  -7
  -12
  -10
  -8
  -6
  -4
  -2
  0
  1
  1
  0
  1
  2
  2
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  67.3
  48.4
  37.0
  29.7
  24.9
  21.7
  19.6
  18.3
  17.5
  17.0
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9
  16.9

Cancer Genetics, Inc. develops, commercializes, and provides molecular and biomarker-based tests and services in the United States, India, and China. Its tests enable physicians to personalize the clinical management of each individual patient by providing genomic information to diagnose, monitor, and inform cancer treatment; and enable biopharmaceutical companies involved in oncology trials to select candidate populations and reduce adverse drug reactions by providing information regarding genomic factors influencing subject responses to therapeutics. The company’s clinical services provide information on diagnosis, prognosis, and predicting treatment outcomes of cancers to guide patient management. Its biopharma services offer companies with customized solutions for patient stratification and treatment selection through a suite of molecular- and biomarker-based testing services, customized assay development, and trial design consultation. The company’s discovery services provide the tools and testing methods for companies and researchers to identify new molecular-based biomarkers for disease. It serves hospitals, cancer centers, clinics, researchers, and academic institutions, as well as biopharma and biotech companies performing clinical trials. The company has a strategic alliance and partnership agreement with ApoCell to work on clinical trial projects that support the liquid biopsy and CTC profiling needs in various trials for targeted therapeutics and immuno-oncology. Cancer Genetics, Inc. was founded in 1999 and is headquartered in Rutherford, New Jersey.

FINANCIAL RATIOS  of  Cancer Genetics (CGIX)

Valuation Ratios
P/E Ratio -3.9
Price to Sales 2.3
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow -3.5
Price to Free Cash Flow -3.3
Growth Rates
Sales Growth Rate 50%
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 5
Current Ratio 0
LT Debt to Equity 11.5%
Total Debt to Equity 19.2%
Interest Coverage 0
Management Effectiveness
Return On Assets -35.2%
Ret/ On Assets - 3 Yr. Avg. -36.7%
Return On Total Capital -45.7%
Ret/ On T. Cap. - 3 Yr. Avg. -43.9%
Return On Equity -54.2%
Return On Equity - 3 Yr. Avg. -51.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 37%
Gross Margin - 3 Yr. Avg. 26.4%
EBITDA Margin -51.9%
EBITDA Margin - 3 Yr. Avg. -112.5%
Operating Margin -63%
Oper. Margin - 3 Yr. Avg. -123.2%
Pre-Tax Margin -59.3%
Pre-Tax Margin - 3 Yr. Avg. -122%
Net Profit Margin -59.3%
Net Profit Margin - 3 Yr. Avg. -113.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 5.1%
Payout Ratio 0%

CGIX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CGIX stock intrinsic value calculation we used $27 million for the last fiscal year's total revenue generated by Cancer Genetics. The default revenue input number comes from 2016 income statement of Cancer Genetics. 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 CGIX stock valuation model: a) initial revenue growth rate of 16.7% 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 CGIX is calculated based on our internal credit rating of Cancer Genetics, 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 Cancer Genetics.
    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 CGIX stock the variable cost ratio is equal to 55.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $30 million in the base year in the intrinsic value calculation for CGIX 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 Cancer Genetics.

Corporate tax rate of 27% is the nominal tax rate for Cancer Genetics. 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 CGIX 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 CGIX are equal to 27.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Cancer Genetics 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 CGIX is equal to 14.8%. 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 Cancer Genetics - 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 17.709 million for Cancer Genetics 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 Cancer Genetics at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Cancer Genetics reports 2Q loss   [Aug-14-17 10:06PM  Associated Press]
▶ TMOs Oncomine Target Test Launch Will Boost This Business   [Jul-13-17 07:38AM  Market Realist]
▶ Cancer Genetics reports 1Q loss   [May-11-17 06:28PM  Associated Press]
Stock chart of CGIX Financial statements of CGIX
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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