Intrinsic value of Harvard Bioscience - HBIO

Previous Close

$2.80

  Intrinsic Value

$0.26

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

+227%

Previous close

$2.80

 
Intrinsic value

$0.26

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

+227%

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

We calculate the intrinsic value of HBIO 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, %
  -3.67
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  105
  107
  110
  112
  116
  119
  123
  127
  132
  136
  142
  147
  153
  160
  166
  174
  181
  189
  198
  207
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
Variable operating expenses, $m
 
  110
  113
  115
  119
  122
  126
  130
  134
  139
  145
  146
  152
  159
  165
  172
  180
  188
  196
  205
  215
  225
  235
  246
  258
  270
  283
  297
  311
  326
  342
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
  107
  110
  113
  115
  119
  122
  126
  130
  134
  139
  145
  146
  152
  159
  165
  172
  180
  188
  196
  205
  215
  225
  235
  246
  258
  270
  283
  297
  311
  326
  342
Operating income, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
EBITDA, $m
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
Tax expense, $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
Net income, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  108
  104
  106
  109
  112
  116
  119
  123
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  252
  264
  277
  290
  304
  319
  335
Adjusted assets (=assets-cash), $m
  102
  104
  106
  109
  112
  116
  119
  123
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  252
  264
  277
  290
  304
  319
  335
Revenue / Adjusted assets
  1.029
  1.029
  1.038
  1.028
  1.036
  1.026
  1.034
  1.033
  1.031
  1.023
  1.029
  1.028
  1.027
  1.032
  1.025
  1.030
  1.028
  1.027
  1.031
  1.030
  1.029
  1.027
  1.030
  1.029
  1.032
  1.030
  1.029
  1.031
  1.030
  1.028
  1.027
Average production assets, $m
  26
  26
  27
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
Working capital, $m
  30
  27
  27
  28
  29
  30
  30
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  64
  67
  71
  74
  78
  81
  85
Total debt, $m
  14
  13
  13
  14
  15
  17
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  75
  79
  84
  89
Total liabilities, $m
  36
  35
  35
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  111
Total equity, $m
  72
  69
  71
  73
  75
  77
  80
  82
  85
  88
  92
  95
  99
  103
  108
  113
  117
  123
  128
  134
  140
  147
  154
  161
  168
  176
  185
  194
  203
  213
  223
Total liabilities and equity, $m
  108
  104
  106
  109
  112
  116
  120
  123
  128
  132
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  231
  241
  252
  264
  277
  291
  304
  319
  334
Debt-to-equity ratio
  0.194
  0.180
  0.190
  0.200
  0.210
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.390
  0.390
  0.400
  0.400
Adjusted equity ratio
  0.647
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
Depreciation, amort., depletion, $m
  5
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
Funds from operations, $m
  5
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
Change in working capital, $m
  0
  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
  3
  3
  4
  4
  4
Cash from operations, $m
  5
  2
  1
  1
  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
Maintenance CAPEX, $m
  0
  -2
  -2
  -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
  -6
  -6
  -6
New CAPEX, $m
  -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
  -3
  -3
  -4
  -4
  -4
Cash from investing activities, $m
  0
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -8
  -10
  -10
  -10
Free cash flow, $m
  5
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
Issuance/(repayment) of debt, $m
  -5
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Issuance/(repurchase) of shares, $m
  0
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
Cash from financing (excl. dividends), $m  
  -5
  6
  6
  7
  7
  7
  7
  8
  8
  9
  10
  6
  6
  7
  7
  7
  8
  9
  9
  10
  10
  11
  11
  13
  13
  14
  14
  15
  17
  17
  18
Total cash flow (excl. dividends), $m
  -1
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Retained Cash Flow (-), $m
  6
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
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
 
  4
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
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
 
  4
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  94.4
  89.1
  83.9
  79.0
  74.2
  69.7
  65.5
  61.5
  57.7
  54.1
  52.3
  50.5
  48.8
  47.0
  45.3
  43.6
  41.9
  40.2
  38.6
  37.0
  35.5
  34.0
  32.6
  31.2
  29.8
  28.5
  27.3
  26.1
  24.9
  23.8

Harvard Bioscience, Inc. develops, manufactures, and markets scientific instruments, systems, and lab consumables used in life science research. The company offers cell and animal physiology products, such as syringe pump and peristaltic pump products, as well as a range of instruments and accessories, including surgical products, infusion systems, microdialysis instruments, behavior research systems, isolated organ and tissue bath systems, and in vivo and in vitro electrophysiology recording, stimulation and analysis systems for tissue, organ, and animal based lab research under the Harvard Apparatus, CMA Microdialysis, Panlab, Coulbourn, Hugo-Sachs, InBreath Bioreactor, MCS, TBSI, and HEKA brands. It also provides products for molecular biology labs comprising pipettes and pipette tips, gloves, gel electrophoresis equipment and reagents, autoradiography films, thermal cycler accessories and reagents, sample preparation columns, tissue culture products, and general lab equipment and consumables under the Denville Scientific, AHN, and other brands. In addition, the company offers spectrophotometers under the Libra, WPA, and BioDrop brands; microplate readers; amino acid analyzers; gel electrophoresis equipment under the Hoefer and Scie-Plas brands; and electroporation and electrofusion products, including systems and generators, electrodes, and accessories for research applications, such as in vivo, and in vitro gene delivery, cell fusion, and nuclear transfer cloning under the Harvard Apparatus BTX brand. Harvard Bioscience, Inc. markets its products to research scientists at universities, hospitals, government laboratories, and pharmaceutical and biotechnology companies. The company sells its products in approximately 100 countries through Websites, catalogs, and distributors. Harvard Bioscience, Inc. was founded in 1901 and is headquartered in Holliston, Massachusetts.

FINANCIAL RATIOS  of  Harvard Bioscience (HBIO)

Valuation Ratios
P/E Ratio -24.1
Price to Sales 0.9
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 19.3
Price to Free Cash Flow 24.1
Growth Rates
Sales Growth Rate -3.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 16.7%
Total Debt to Equity 19.4%
Interest Coverage -2
Management Effectiveness
Return On Assets -2.3%
Ret/ On Assets - 3 Yr. Avg. -3.9%
Return On Total Capital -4.4%
Ret/ On T. Cap. - 3 Yr. Avg. -6.8%
Return On Equity -5.3%
Return On Equity - 3 Yr. Avg. -8.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 45.7%
Gross Margin - 3 Yr. Avg. 45.2%
EBITDA Margin 2.9%
EBITDA Margin - 3 Yr. Avg. 4.3%
Operating Margin -1.9%
Oper. Margin - 3 Yr. Avg. 0.6%
Pre-Tax Margin -2.9%
Pre-Tax Margin - 3 Yr. Avg. -1%
Net Profit Margin -3.8%
Net Profit Margin - 3 Yr. Avg. -6.5%
Effective Tax Rate -33.3%
Eff/ Tax Rate - 3 Yr. Avg. -119.4%
Payout Ratio 0%

HBIO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HBIO stock intrinsic value calculation we used $105 million for the last fiscal year's total revenue generated by Harvard Bioscience. The default revenue input number comes from 2016 income statement of Harvard Bioscience. 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 HBIO stock valuation model: a) initial revenue growth rate of 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 HBIO is calculated based on our internal credit rating of Harvard Bioscience, 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 Harvard Bioscience.
    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 HBIO stock the variable cost ratio is equal to 102.9%.

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 HBIO 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 6.1% for Harvard Bioscience.

Corporate tax rate of 27% is the nominal tax rate for Harvard Bioscience. 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 HBIO 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 HBIO are equal to 24.3%.

Life of production assets of 12.9 years is the average useful life of capital assets used in Harvard Bioscience 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 HBIO is equal to 24.8%. 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 - $72 million for Harvard Bioscience - 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 33.189 million for Harvard Bioscience 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 Harvard Bioscience at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Harvard Bioscience reports 2Q loss   [Jul-27-17 11:36PM  Associated Press]
▶ Harvard Bioscience reports 1Q loss   [Apr-27-17 05:32PM  Associated Press]
▶ Harvard Bioscience reports 4Q loss   [Mar-09-17 05:14PM  Associated Press]
▶ Harvard Bioscience an 'Asymmetrical Long Shot'   [Dec-19-16 11:00AM  TheStreet.com]
▶ Harvard Bioscience reports 4Q loss   [Apr-29-16 05:07PM  AP]
Stock chart of HBIO Financial statements of HBIO
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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