Intrinsic value of Inogen - INGN

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$81.18

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$81.18

 
Intrinsic value

$47.77

 
Up/down potential

-41%

 
Rating

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 1.7

 

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
  27.50
  25.25
  23.23
  21.40
  19.76
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
  6.06
Revenue, $m
  203
  259
  324
  399
  485
  581
  687
  804
  930
  1,067
  1,213
  1,369
  1,534
  1,708
  1,891
  2,083
  2,284
  2,493
  2,712
  2,939
  3,175
  3,420
  3,676
  3,941
  4,217
  4,503
  4,801
  5,111
  5,433
  5,769
  6,118
Variable operating expenses, $m
 
  212
  265
  327
  397
  475
  562
  657
  761
  873
  992
  1,120
  1,255
  1,397
  1,547
  1,704
  1,868
  2,040
  2,218
  2,404
  2,597
  2,798
  3,007
  3,224
  3,449
  3,684
  3,927
  4,181
  4,444
  4,719
  5,005
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
  226
  280
  342
  412
  491
  578
  674
  778
  890
  1,010
  1,138
  1,274
  1,416
  1,567
  1,724
  1,889
  2,061
  2,240
  2,426
  2,620
  2,822
  3,031
  3,249
  3,474
  3,710
  3,954
  4,208
  4,472
  4,748
  5,034
Operating income, $m
  23
  33
  44
  58
  73
  90
  109
  130
  152
  177
  203
  231
  260
  292
  324
  359
  395
  432
  472
  512
  555
  599
  645
  693
  742
  794
  847
  903
  961
  1,021
  1,084
EBITDA, $m
  37
  40
  53
  68
  86
  106
  127
  151
  177
  205
  236
  268
  302
  338
  375
  415
  457
  500
  545
  592
  641
  691
  744
  799
  856
  915
  977
  1,041
  1,108
  1,177
  1,249
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  31
Earnings before tax, $m
  23
  33
  44
  57
  72
  88
  107
  127
  149
  173
  198
  225
  254
  284
  316
  350
  385
  421
  459
  499
  540
  583
  627
  673
  721
  771
  823
  878
  934
  992
  1,053
Tax expense, $m
  2
  9
  12
  15
  19
  24
  29
  34
  40
  47
  53
  61
  69
  77
  85
  94
  104
  114
  124
  135
  146
  157
  169
  182
  195
  208
  222
  237
  252
  268
  284
Net income, $m
  21
  24
  32
  42
  52
  64
  78
  93
  109
  126
  145
  164
  185
  208
  231
  255
  281
  307
  335
  364
  394
  425
  458
  492
  527
  563
  601
  641
  682
  724
  769

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
  128
  160
  197
  239
  286
  338
  396
  458
  525
  598
  674
  756
  841
  932
  1,026
  1,125
  1,228
  1,336
  1,448
  1,564
  1,685
  1,811
  1,941
  2,077
  2,218
  2,365
  2,518
  2,676
  2,842
  3,014
Adjusted assets (=assets-cash), $m
  100
  128
  160
  197
  239
  286
  338
  396
  458
  525
  598
  674
  756
  841
  932
  1,026
  1,125
  1,228
  1,336
  1,448
  1,564
  1,685
  1,811
  1,941
  2,077
  2,218
  2,365
  2,518
  2,676
  2,842
  3,014
Revenue / Adjusted assets
  2.030
  2.023
  2.025
  2.025
  2.029
  2.031
  2.033
  2.030
  2.031
  2.032
  2.028
  2.031
  2.029
  2.031
  2.029
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
  2.030
Average production assets, $m
  28
  35
  44
  54
  65
  78
  93
  108
  126
  144
  164
  185
  207
  231
  255
  281
  308
  337
  366
  397
  429
  462
  496
  532
  569
  608
  648
  690
  733
  779
  826
Working capital, $m
  139
  32
  40
  49
  60
  71
  85
  99
  114
  131
  149
  168
  189
  210
  233
  256
  281
  307
  334
  361
  391
  421
  452
  485
  519
  554
  591
  629
  668
  710
  753
Total debt, $m
  0
  9
  19
  31
  44
  60
  76
  95
  115
  136
  159
  184
  210
  237
  266
  296
  328
  361
  395
  431
  468
  507
  547
  589
  633
  678
  725
  774
  824
  877
  932
Total liabilities, $m
  32
  41
  51
  63
  76
  92
  108
  127
  147
  168
  191
  216
  242
  269
  298
  328
  360
  393
  427
  463
  500
  539
  579
  621
  665
  710
  757
  806
  856
  909
  964
Total equity, $m
  182
  87
  109
  134
  162
  195
  230
  269
  312
  357
  406
  459
  514
  572
  634
  698
  765
  835
  908
  984
  1,064
  1,146
  1,231
  1,320
  1,412
  1,508
  1,608
  1,712
  1,820
  1,932
  2,050
Total liabilities and equity, $m
  214
  128
  160
  197
  238
  287
  338
  396
  459
  525
  597
  675
  756
  841
  932
  1,026
  1,125
  1,228
  1,335
  1,447
  1,564
  1,685
  1,810
  1,941
  2,077
  2,218
  2,365
  2,518
  2,676
  2,841
  3,014
Debt-to-equity ratio
  0.000
  0.100
  0.180
  0.230
  0.270
  0.310
  0.330
  0.350
  0.370
  0.380
  0.390
  0.400
  0.410
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  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
  24
  32
  42
  52
  64
  78
  93
  109
  126
  145
  164
  185
  208
  231
  255
  281
  307
  335
  364
  394
  425
  458
  492
  527
  563
  601
  641
  682
  724
  769
Depreciation, amort., depletion, $m
  14
  7
  9
  11
  13
  16
  19
  22
  25
  29
  33
  37
  41
  46
  51
  56
  62
  67
  73
  79
  86
  92
  99
  106
  114
  122
  130
  138
  147
  156
  165
Funds from operations, $m
  -3
  31
  41
  52
  65
  80
  96
  114
  134
  155
  177
  201
  227
  254
  282
  311
  342
  375
  408
  443
  480
  518
  557
  598
  641
  685
  731
  779
  828
  880
  934
Change in working capital, $m
  -34
  7
  8
  9
  11
  12
  13
  14
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
Cash from operations, $m
  31
  22
  33
  43
  55
  68
  83
  100
  118
  138
  159
  182
  206
  232
  259
  288
  318
  349
  381
  415
  451
  487
  526
  565
  607
  650
  694
  740
  789
  839
  891
Maintenance CAPEX, $m
  0
  -6
  -7
  -9
  -11
  -13
  -16
  -19
  -22
  -25
  -29
  -33
  -37
  -41
  -46
  -51
  -56
  -62
  -67
  -73
  -79
  -86
  -92
  -99
  -106
  -114
  -122
  -130
  -138
  -147
  -156
New CAPEX, $m
  -2
  -7
  -9
  -10
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
Cash from investing activities, $m
  -12
  -13
  -16
  -19
  -23
  -26
  -30
  -35
  -39
  -43
  -49
  -54
  -59
  -65
  -71
  -77
  -83
  -90
  -96
  -104
  -111
  -119
  -126
  -135
  -143
  -153
  -162
  -172
  -182
  -192
  -203
Free cash flow, $m
  19
  9
  17
  24
  33
  42
  53
  66
  79
  94
  111
  128
  147
  167
  188
  211
  234
  259
  285
  312
  339
  369
  399
  430
  463
  497
  532
  569
  607
  647
  688
Issuance/(repayment) of debt, $m
  0
  9
  10
  12
  13
  15
  17
  18
  20
  22
  23
  25
  26
  27
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
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
  9
  10
  12
  13
  15
  17
  18
  20
  22
  23
  25
  26
  27
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
Total cash flow (excl. dividends), $m
  27
  17
  27
  36
  46
  57
  70
  84
  99
  116
  134
  153
  173
  195
  217
  241
  266
  292
  319
  347
  377
  407
  439
  472
  506
  542
  579
  618
  658
  700
  743
Retained Cash Flow (-), $m
  -48
  -19
  -22
  -25
  -29
  -32
  -36
  -39
  -42
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -104
  -108
  -112
  -117
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
 
  113
  5
  11
  17
  25
  35
  45
  57
  70
  85
  101
  118
  136
  156
  177
  199
  222
  246
  271
  298
  325
  354
  383
  414
  446
  479
  514
  550
  587
  626
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
 
  108
  5
  9
  14
  20
  25
  30
  36
  40
  44
  48
  50
  52
  52
  52
  51
  48
  45
  42
  38
  34
  29
  25
  21
  17
  14
  11
  9
  6
  5
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 78.8
Price to Sales 8.2
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow 53.4
Price to Free Cash Flow 57.1
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 27.5% 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 20.758 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 $1.7 billion.


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COMPANY NEWS

▶ Bull of the Day: Inogen (INGN)   [07:00AM  Zacks]
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