Intrinsic value of Inogen - INGN

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$88.95

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$88.95

 
Intrinsic value

$38.67

 
Up/down potential

-57%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of INGN 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 1.9

 

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, %
  27.67
  23.30
  21.47
  19.82
  18.34
  17.01
  15.81
  14.73
  13.75
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
Revenue, $m
  203
  250
  304
  364
  431
  504
  584
  670
  762
  861
  965
  1,074
  1,190
  1,311
  1,437
  1,569
  1,707
  1,850
  1,999
  2,154
  2,315
  2,482
  2,656
  2,837
  3,024
  3,220
  3,423
  3,635
  3,855
  4,085
  4,324
Variable operating expenses, $m
 
  205
  249
  298
  353
  413
  478
  548
  624
  704
  789
  879
  973
  1,072
  1,176
  1,284
  1,396
  1,513
  1,635
  1,762
  1,894
  2,030
  2,173
  2,320
  2,474
  2,634
  2,800
  2,973
  3,154
  3,341
  3,537
Fixed operating expenses, $m
 
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
  28
  29
  29
Total operating expenses, $m
  180
  219
  264
  313
  368
  429
  494
  565
  641
  721
  807
  897
  992
  1,091
  1,196
  1,304
  1,417
  1,534
  1,657
  1,784
  1,917
  2,054
  2,197
  2,345
  2,499
  2,660
  2,827
  3,000
  3,182
  3,370
  3,566
Operating income, $m
  23
  31
  41
  51
  63
  76
  90
  105
  122
  139
  158
  177
  198
  219
  242
  265
  290
  315
  342
  370
  398
  428
  459
  492
  525
  560
  596
  634
  674
  715
  758
EBITDA, $m
  37
  38
  49
  61
  75
  90
  106
  123
  142
  162
  184
  206
  230
  255
  281
  308
  336
  365
  396
  428
  461
  495
  531
  568
  607
  647
  689
  732
  778
  825
  874
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
Earnings before tax, $m
  23
  31
  40
  51
  62
  75
  88
  103
  119
  136
  154
  173
  193
  214
  236
  259
  282
  307
  333
  360
  388
  417
  447
  478
  511
  544
  580
  616
  655
  695
  736
Tax expense, $m
  2
  8
  11
  14
  17
  20
  24
  28
  32
  37
  42
  47
  52
  58
  64
  70
  76
  83
  90
  97
  105
  112
  121
  129
  138
  147
  157
  166
  177
  188
  199
Net income, $m
  21
  23
  29
  37
  45
  55
  65
  75
  87
  99
  112
  126
  141
  156
  172
  189
  206
  224
  243
  263
  283
  304
  326
  349
  373
  397
  423
  450
  478
  507
  537

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  114
  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
  214
  123
  150
  179
  212
  248
  288
  330
  376
  424
  475
  529
  586
  646
  708
  773
  841
  911
  985
  1,061
  1,140
  1,223
  1,308
  1,397
  1,490
  1,586
  1,686
  1,791
  1,899
  2,012
  2,130
Adjusted assets (=assets-cash), $m
  100
  123
  150
  179
  212
  248
  288
  330
  376
  424
  475
  529
  586
  646
  708
  773
  841
  911
  985
  1,061
  1,140
  1,223
  1,308
  1,397
  1,490
  1,586
  1,686
  1,791
  1,899
  2,012
  2,130
Revenue / Adjusted assets
  2.030
  2.033
  2.027
  2.034
  2.033
  2.032
  2.028
  2.030
  2.027
  2.031
  2.032
  2.030
  2.031
  2.029
  2.030
  2.030
  2.030
  2.031
  2.029
  2.030
  2.031
  2.029
  2.031
  2.031
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
Average production assets, $m
  28
  34
  41
  49
  58
  68
  79
  90
  103
  116
  130
  145
  161
  177
  194
  212
  230
  250
  270
  291
  313
  335
  359
  383
  408
  435
  462
  491
  520
  551
  584
Working capital, $m
  139
  31
  37
  45
  53
  62
  72
  82
  94
  106
  119
  132
  146
  161
  177
  193
  210
  228
  246
  265
  285
  305
  327
  349
  372
  396
  421
  447
  474
  502
  532
Total debt, $m
  0
  7
  16
  25
  36
  48
  60
  74
  88
  104
  120
  137
  156
  175
  195
  215
  237
  260
  283
  308
  333
  359
  387
  415
  445
  476
  508
  541
  576
  612
  650
Total liabilities, $m
  32
  39
  48
  57
  68
  80
  92
  106
  120
  136
  152
  169
  188
  207
  227
  247
  269
  292
  315
  340
  365
  391
  419
  447
  477
  508
  540
  573
  608
  644
  682
Total equity, $m
  182
  84
  102
  122
  144
  169
  196
  224
  255
  288
  323
  360
  399
  439
  481
  526
  572
  620
  670
  722
  775
  831
  890
  950
  1,013
  1,079
  1,147
  1,218
  1,291
  1,368
  1,449
Total liabilities and equity, $m
  214
  123
  150
  179
  212
  249
  288
  330
  375
  424
  475
  529
  587
  646
  708
  773
  841
  912
  985
  1,062
  1,140
  1,222
  1,309
  1,397
  1,490
  1,587
  1,687
  1,791
  1,899
  2,012
  2,131
Debt-to-equity ratio
  0.000
  0.090
  0.160
  0.210
  0.250
  0.280
  0.310
  0.330
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.430
  0.430
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
Adjusted equity ratio
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  23
  29
  37
  45
  55
  65
  75
  87
  99
  112
  126
  141
  156
  172
  189
  206
  224
  243
  263
  283
  304
  326
  349
  373
  397
  423
  450
  478
  507
  537
Depreciation, amort., depletion, $m
  14
  7
  8
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  35
  39
  42
  46
  50
  54
  58
  63
  67
  72
  77
  82
  87
  92
  98
  104
  110
  117
Funds from operations, $m
  -3
  30
  38
  47
  57
  68
  80
  93
  108
  123
  138
  155
  173
  191
  211
  231
  252
  274
  297
  321
  345
  371
  398
  426
  454
  484
  516
  548
  582
  617
  654
Change in working capital, $m
  -34
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
Cash from operations, $m
  31
  21
  31
  39
  49
  59
  71
  83
  96
  110
  126
  142
  159
  177
  195
  215
  235
  257
  279
  302
  326
  351
  376
  403
  431
  460
  491
  522
  555
  589
  625
Maintenance CAPEX, $m
  0
  -6
  -7
  -8
  -10
  -12
  -14
  -16
  -18
  -21
  -23
  -26
  -29
  -32
  -35
  -39
  -42
  -46
  -50
  -54
  -58
  -63
  -67
  -72
  -77
  -82
  -87
  -92
  -98
  -104
  -110
New CAPEX, $m
  -2
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
Cash from investing activities, $m
  -12
  -12
  -14
  -16
  -19
  -22
  -25
  -28
  -30
  -34
  -37
  -41
  -45
  -48
  -52
  -57
  -61
  -65
  -70
  -75
  -80
  -86
  -90
  -96
  -102
  -108
  -114
  -121
  -128
  -135
  -142
Free cash flow, $m
  19
  9
  17
  23
  30
  38
  46
  55
  66
  77
  88
  101
  114
  128
  143
  158
  174
  191
  209
  227
  246
  265
  286
  307
  329
  352
  376
  401
  427
  454
  482
Issuance/(repayment) of debt, $m
  0
  7
  8
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
Issuance/(repurchase) of shares, $m
  7
  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 financing (excl. dividends), $m  
  8
  7
  8
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
Total cash flow (excl. dividends), $m
  27
  17
  26
  33
  40
  49
  59
  69
  80
  92
  105
  118
  132
  147
  163
  179
  196
  214
  232
  251
  271
  292
  313
  336
  359
  383
  408
  435
  462
  490
  520
Retained Cash Flow (-), $m
  -48
  -16
  -18
  -20
  -22
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -65
  -68
  -71
  -74
  -77
  -80
Prev. year cash balance distribution, $m
 
  114
  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
 
  115
  8
  12
  18
  25
  32
  40
  49
  59
  70
  81
  94
  107
  120
  135
  150
  166
  182
  199
  217
  236
  255
  275
  296
  318
  340
  364
  388
  413
  440
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
 
  110
  7
  11
  15
  19
  23
  27
  31
  34
  37
  39
  40
  41
  40
  40
  38
  36
  34
  31
  28
  24
  21
  18
  15
  12
  10
  8
  6
  5
  3
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Inogen, Inc., a medical technology company, primarily develops, manufactures, and markets portable oxygen concentrators for patients, physicians and other clinicians, and third-party payors in the United States and internationally. The company’s oxygen concentrators are used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions. It offers Inogen One systems, which are portable devices that concentrate the air around the patients to provide a single source of supplemental oxygen; and Inogen At Home stationary oxygen concentrators, as well as related accessories. The company also rents its products directly to patients. Inogen, Inc. was founded in 2001 and is headquartered in Goleta, California.

FINANCIAL RATIOS  of  Inogen (INGN)

Valuation Ratios
P/E Ratio 86.4
Price to Sales 8.9
Price to Book 10
Price to Tangible Book
Price to Cash Flow 58.5
Price to Free Cash Flow 62.5
Growth Rates
Sales Growth Rate 27.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.2%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 13.3%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 13.3%
Return On Equity - 3 Yr. Avg. 10.3%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 47.8%
Gross Margin - 3 Yr. Avg. 48.4%
EBITDA Margin 18.2%
EBITDA Margin - 3 Yr. Avg. 18.6%
Operating Margin 11.3%
Oper. Margin - 3 Yr. Avg. 10.2%
Pre-Tax Margin 11.3%
Pre-Tax Margin - 3 Yr. Avg. 9.9%
Net Profit Margin 10.3%
Net Profit Margin - 3 Yr. Avg. 8%
Effective Tax Rate 8.7%
Eff/ Tax Rate - 3 Yr. Avg. 19.6%
Payout Ratio 0%

INGN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INGN stock intrinsic value calculation we used $203 million for the last fiscal year's total revenue generated by Inogen. The default revenue input number comes from 2016 income statement of Inogen. 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 INGN stock valuation model: a) initial revenue growth rate of 23.3% 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 INGN is calculated based on our internal credit rating of Inogen, 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 Inogen.
    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 INGN stock the variable cost ratio is equal to 81.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14 million in the base year in the intrinsic value calculation for INGN 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 Inogen.

Corporate tax rate of 27% is the nominal tax rate for Inogen. 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 INGN 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 INGN are equal to 13.5%.

Life of production assets of 2 years is the average useful life of capital assets used in Inogen 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 INGN is equal to 12.3%. 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 - $182 million for Inogen - 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 20.911 million for Inogen 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 Inogen at the current share price and the inputted number of shares is $1.9 billion.


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COMPANY NEWS

▶ Can This 2015 Medical IPO Inject New Life Into Its Stock?   [May-24-17 12:03PM  Investor's Business Daily]
▶ Inogen beats Street 1Q forecasts   [May-09-17 06:40PM  Associated Press]
▶ Stocks To Buy And Watch: Top IPOs, Big And Small Caps, Growth Stocks   [Apr-28-17 02:10PM  Investor's Business Daily]
▶ Medical Device Maker Bolts Higher On Earnings In Massive Volume   [Apr-26-17 11:10AM  Investor's Business Daily]
▶ Bull of the Day: Inogen (INGN)   [07:00AM  Zacks]
Stock chart of INGN Financial statements of INGN Annual reports of INGN
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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