Intrinsic value of GenMark Diagnostics - GNMK

Previous Close

$9.60

  Intrinsic Value

$0.21

stock screener

  Rating & Target

str. sell

-98%

  Value-price divergence*

-156%

Previous close

$9.60

 
Intrinsic value

$0.21

 
Up/down potential

-98%

 
Rating

str. sell

 
Value-price divergence*

-156%

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

We calculate the intrinsic value of GNMK 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 0.4

 

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, %
  25.64
  18.20
  16.88
  15.69
  14.62
  13.66
  12.79
  12.02
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
Revenue, $m
  49
  58
  68
  78
  90
  102
  115
  129
  143
  159
  175
  192
  209
  227
  246
  266
  287
  308
  330
  353
  377
  402
  428
  455
  483
  513
  543
  575
  608
  643
  679
Variable operating expenses, $m
 
  98
  115
  133
  152
  173
  195
  218
  243
  269
  296
  325
  354
  385
  418
  451
  486
  522
  560
  599
  639
  681
  725
  771
  819
  868
  920
  974
  1,030
  1,088
  1,150
Fixed operating expenses, $m
 
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  25
  26
  26
  27
  28
  29
  29
  30
  31
  31
Total operating expenses, $m
  98
  113
  131
  149
  169
  190
  212
  236
  261
  288
  315
  345
  374
  406
  439
  473
  508
  545
  583
  623
  664
  706
  751
  797
  846
  896
  949
  1,003
  1,060
  1,119
  1,181
Operating income, $m
  -49
  -56
  -63
  -71
  -79
  -88
  -97
  -107
  -118
  -129
  -141
  -153
  -165
  -179
  -192
  -206
  -221
  -237
  -253
  -269
  -286
  -304
  -323
  -342
  -363
  -384
  -405
  -428
  -452
  -477
  -502
EBITDA, $m
  -45
  -54
  -60
  -68
  -76
  -84
  -93
  -103
  -113
  -123
  -134
  -146
  -158
  -170
  -183
  -197
  -211
  -226
  -241
  -257
  -273
  -290
  -308
  -326
  -345
  -365
  -386
  -408
  -430
  -454
  -478
Interest expense (income), $m
  1
  1
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
Earnings before tax, $m
  -51
  -56
  -64
  -72
  -81
  -90
  -101
  -111
  -122
  -134
  -146
  -159
  -173
  -187
  -201
  -216
  -232
  -249
  -265
  -283
  -301
  -320
  -340
  -361
  -382
  -404
  -428
  -452
  -477
  -503
  -531
Tax expense, $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
Net income, $m
  -51
  -56
  -64
  -72
  -81
  -90
  -101
  -111
  -122
  -134
  -146
  -159
  -173
  -187
  -201
  -216
  -232
  -249
  -265
  -283
  -301
  -320
  -340
  -361
  -382
  -404
  -428
  -452
  -477
  -503
  -531

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  42
  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
  80
  56
  65
  75
  86
  98
  110
  124
  138
  152
  168
  184
  201
  218
  236
  255
  275
  295
  317
  339
  362
  386
  411
  436
  463
  491
  521
  551
  583
  616
  651
Adjusted assets (=assets-cash), $m
  38
  56
  65
  75
  86
  98
  110
  124
  138
  152
  168
  184
  201
  218
  236
  255
  275
  295
  317
  339
  362
  386
  411
  436
  463
  491
  521
  551
  583
  616
  651
Revenue / Adjusted assets
  1.289
  1.036
  1.046
  1.040
  1.047
  1.041
  1.045
  1.040
  1.036
  1.046
  1.042
  1.043
  1.040
  1.041
  1.042
  1.043
  1.044
  1.044
  1.041
  1.041
  1.041
  1.041
  1.041
  1.044
  1.043
  1.045
  1.042
  1.044
  1.043
  1.044
  1.043
Average production assets, $m
  18
  21
  24
  28
  32
  36
  41
  46
  51
  57
  62
  68
  75
  81
  88
  95
  102
  110
  118
  126
  135
  144
  153
  163
  173
  183
  194
  205
  217
  229
  242
Working capital, $m
  32
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
Total debt, $m
  20
  18
  25
  32
  40
  49
  58
  67
  77
  88
  99
  111
  123
  136
  149
  163
  177
  192
  207
  223
  240
  257
  275
  294
  313
  333
  354
  376
  399
  423
  448
Total liabilities, $m
  42
  40
  47
  54
  62
  71
  80
  89
  99
  110
  121
  133
  145
  158
  171
  185
  199
  214
  229
  245
  262
  279
  297
  316
  335
  355
  376
  398
  421
  445
  470
Total equity, $m
  38
  15
  18
  21
  24
  27
  31
  34
  38
  42
  46
  51
  56
  60
  65
  71
  76
  82
  88
  94
  100
  107
  114
  121
  128
  136
  144
  153
  161
  171
  180
Total liabilities and equity, $m
  80
  55
  65
  75
  86
  98
  111
  123
  137
  152
  167
  184
  201
  218
  236
  256
  275
  296
  317
  339
  362
  386
  411
  437
  463
  491
  520
  551
  582
  616
  650
Debt-to-equity ratio
  0.526
  1.180
  1.390
  1.550
  1.690
  1.800
  1.890
  1.970
  2.030
  2.090
  2.140
  2.180
  2.210
  2.250
  2.270
  2.300
  2.320
  2.340
  2.360
  2.380
  2.390
  2.400
  2.420
  2.430
  2.440
  2.450
  2.460
  2.470
  2.470
  2.480
  2.490
Adjusted equity ratio
  -0.105
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277
  0.277

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -51
  -56
  -64
  -72
  -81
  -90
  -101
  -111
  -122
  -134
  -146
  -159
  -173
  -187
  -201
  -216
  -232
  -249
  -265
  -283
  -301
  -320
  -340
  -361
  -382
  -404
  -428
  -452
  -477
  -503
  -531
Depreciation, amort., depletion, $m
  4
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
Funds from operations, $m
  -35
  -54
  -62
  -69
  -78
  -87
  -96
  -107
  -117
  -128
  -140
  -153
  -165
  -179
  -193
  -207
  -222
  -238
  -254
  -270
  -288
  -306
  -325
  -345
  -365
  -386
  -408
  -431
  -455
  -480
  -507
Change in working capital, $m
  1
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  -36
  -54
  -61
  -69
  -77
  -86
  -96
  -106
  -117
  -128
  -140
  -152
  -165
  -178
  -192
  -206
  -221
  -237
  -253
  -270
  -287
  -305
  -324
  -343
  -364
  -385
  -407
  -430
  -454
  -479
  -505
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
New CAPEX, $m
  -9
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -24
  -5
  -5
  -6
  -7
  -7
  -9
  -9
  -10
  -10
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -33
  -34
  -36
Free cash flow, $m
  -60
  -59
  -67
  -75
  -84
  -94
  -104
  -115
  -126
  -138
  -151
  -164
  -178
  -192
  -207
  -222
  -238
  -255
  -272
  -290
  -308
  -327
  -347
  -368
  -390
  -413
  -436
  -461
  -486
  -513
  -541
Issuance/(repayment) of debt, $m
  10
  6
  7
  7
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
Issuance/(repurchase) of shares, $m
  32
  59
  67
  75
  84
  94
  104
  115
  126
  138
  151
  164
  177
  192
  206
  222
  238
  254
  271
  289
  308
  327
  347
  368
  390
  412
  436
  460
  486
  513
  540
Cash from financing (excl. dividends), $m  
  40
  65
  74
  82
  92
  103
  113
  125
  136
  149
  162
  176
  189
  205
  219
  236
  252
  269
  286
  305
  325
  344
  365
  387
  409
  432
  457
  482
  509
  537
  565
Total cash flow (excl. dividends), $m
  -19
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  25
Retained Cash Flow (-), $m
  11
  -59
  -67
  -75
  -84
  -94
  -104
  -115
  -126
  -138
  -151
  -164
  -177
  -192
  -206
  -222
  -238
  -254
  -271
  -289
  -308
  -327
  -347
  -368
  -390
  -412
  -436
  -460
  -486
  -513
  -540
Prev. year cash balance distribution, $m
 
  25
  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
 
  -28
  -60
  -68
  -76
  -85
  -95
  -105
  -116
  -128
  -140
  -152
  -166
  -179
  -193
  -208
  -224
  -240
  -256
  -274
  -292
  -310
  -330
  -350
  -371
  -392
  -415
  -439
  -463
  -489
  -516
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
 
  -27
  -55
  -59
  -63
  -66
  -69
  -71
  -73
  -73
  -73
  -72
  -71
  -68
  -65
  -61
  -57
  -52
  -47
  -42
  -37
  -32
  -27
  -23
  -19
  -15
  -12
  -9
  -7
  -5
  -4
Current shareholders' claim on cash, %
  100
  68.9
  48.1
  33.9
  24.2
  17.3
  12.5
  9.1
  6.7
  4.9
  3.6
  2.7
  2.0
  1.5
  1.1
  0.8
  0.6
  0.5
  0.3
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

GenMark Diagnostics, Inc., a molecular diagnostics company, develops, manufactures, commercializes, sells, and supports instruments and molecular tests based on its proprietary eSensor detection technology. Its products include XT-8 system that enables reference laboratories and hospitals to perform a range of molecular diagnostic and research tests with a workstation and disposable test cartridge. The company offers eight diagnostic tests for use with its XT-8 system that includes Respiratory Viral Panel, Cystic Fibrosis Genotyping Test, Warfarin Sensitivity Test, Thrombophilia Risk Test, hepatitis C virus, genotyping tests, and custom manufactured reagents, as well as provides versions for other research-based and pharmacogenomics products. It also provides ePlex system, which integrates automated nucleic acid extraction and amplification with its eSensor detection technology to enable operators using the ePlex system to place the patient sample into the test cartridge and obtain results without any additional steps. The company sells its products through direct sales and technically specialized service organization in the United States and Europe. GenMark Diagnostics, Inc. is headquartered in Carlsbad, California.

FINANCIAL RATIOS  of  GenMark Diagnostics (GNMK)

Valuation Ratios
P/E Ratio -8.8
Price to Sales 9.1
Price to Book 11.8
Price to Tangible Book
Price to Cash Flow -12.4
Price to Free Cash Flow -9.9
Growth Rates
Sales Growth Rate 25.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 125%
Cap. Spend. - 3 Yr. Gr. Rate 12.5%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 31.6%
Total Debt to Equity 52.6%
Interest Coverage -50
Management Effectiveness
Return On Assets -66.2%
Ret/ On Assets - 3 Yr. Avg. -50.7%
Return On Total Capital -87.2%
Ret/ On T. Cap. - 3 Yr. Avg. -63%
Return On Equity -117.2%
Return On Equity - 3 Yr. Avg. -74.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 61.2%
Gross Margin - 3 Yr. Avg. 59.2%
EBITDA Margin -93.9%
EBITDA Margin - 3 Yr. Avg. -102.5%
Operating Margin -100%
Oper. Margin - 3 Yr. Avg. -111.2%
Pre-Tax Margin -104.1%
Pre-Tax Margin - 3 Yr. Avg. -112.5%
Net Profit Margin -104.1%
Net Profit Margin - 3 Yr. Avg. -111.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0.9%
Payout Ratio 0%

GNMK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GNMK stock intrinsic value calculation we used $49 million for the last fiscal year's total revenue generated by GenMark Diagnostics. The default revenue input number comes from 2016 income statement of GenMark Diagnostics. 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 GNMK stock valuation model: a) initial revenue growth rate of 18.2% 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 GNMK is calculated based on our internal credit rating of GenMark Diagnostics, 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 GenMark Diagnostics.
    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 GNMK stock the variable cost ratio is equal to 169.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15 million in the base year in the intrinsic value calculation for GNMK 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 6.7% for GenMark Diagnostics.

Corporate tax rate of 27% is the nominal tax rate for GenMark Diagnostics. 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 GNMK 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 GNMK are equal to 35.7%.

Life of production assets of 10 years is the average useful life of capital assets used in GenMark Diagnostics 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 GNMK is equal to -4.1%. 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 - $38 million for GenMark Diagnostics - 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 45.324 million for GenMark Diagnostics 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 GenMark Diagnostics at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
LH Laboratory of 153.91 132.21  hold
LMNX Luminex 18.95 1.99  str.sell
HOLX Hologic 37.42 16.08  str.sell
QGEN Qiagen 31.25 16.41  str.sell
ABT Abbott Laborat 48.74 423.88  str.buy
PKI PerkinElmer 63.47 46.33  sell

COMPANY NEWS

▶ GenMark Diagnostics reports 2Q loss   [Aug-01-17 10:54PM  Associated Press]
▶ GenMark Reports Second Quarter 2017 Results   [08:05AM  Business Wire]
▶ GenMark Diagnostics reports 1Q loss   [May-02-17 06:16PM  Associated Press]
▶ GenMark Diagnostics reports 4Q loss   [05:19PM  Associated Press]
▶ 7 Stocks Making Big Moves With Unusual Volume   [Jan-11-17 09:20AM  TheStreet.com]
▶ GenMark Reports First Quarter 2016 Results   [04:05PM  Business Wire]
Stock chart of GNMK Financial statements of GNMK
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.