Intrinsic value of Inogen - INGN

Previous Close

$100.87

  Intrinsic Value

$28.52

stock screener

  Rating & Target

str. sell

-72%

  Value-price divergence*

-8%

Previous close

$100.87

 
Intrinsic value

$28.52

 
Up/down potential

-72%

 
Rating

str. sell

 
Value-price divergence*

-8%

*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 2.1

 

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, %
  27.67
  16.40
  15.26
  14.23
  13.31
  12.48
  11.73
  11.06
  10.45
  9.91
  9.42
  8.97
  8.58
  8.22
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
Revenue, $m
  203
  236
  272
  311
  353
  397
  443
  492
  543
  597
  654
  712
  773
  837
  903
  972
  1,043
  1,117
  1,194
  1,274
  1,358
  1,445
  1,535
  1,629
  1,727
  1,829
  1,935
  2,046
  2,162
  2,283
  2,409
Variable operating expenses, $m
 
  193
  223
  254
  288
  324
  362
  402
  445
  489
  535
  583
  633
  685
  739
  795
  853
  914
  977
  1,043
  1,111
  1,182
  1,255
  1,332
  1,412
  1,496
  1,583
  1,674
  1,768
  1,867
  1,971
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
  207
  238
  269
  303
  340
  378
  419
  462
  506
  553
  601
  652
  704
  759
  815
  874
  935
  999
  1,065
  1,134
  1,206
  1,279
  1,357
  1,437
  1,522
  1,610
  1,701
  1,796
  1,896
  2,000
Operating income, $m
  23
  29
  35
  42
  49
  56
  64
  73
  82
  91
  101
  111
  122
  133
  145
  157
  169
  182
  196
  210
  224
  239
  255
  272
  289
  307
  326
  345
  366
  387
  409
EBITDA, $m
  37
  35
  42
  50
  58
  67
  76
  86
  97
  107
  119
  130
  143
  156
  169
  183
  197
  212
  228
  244
  261
  278
  297
  316
  336
  356
  378
  400
  424
  448
  474
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
Earnings before tax, $m
  23
  29
  35
  41
  48
  56
  63
  72
  80
  89
  99
  109
  119
  130
  141
  153
  165
  177
  190
  204
  218
  233
  248
  264
  281
  298
  317
  336
  355
  376
  398
Tax expense, $m
  2
  8
  9
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  67
  71
  76
  81
  85
  91
  96
  102
  107
Net income, $m
  21
  21
  25
  30
  35
  41
  46
  52
  59
  65
  72
  79
  87
  95
  103
  111
  120
  130
  139
  149
  159
  170
  181
  193
  205
  218
  231
  245
  259
  275
  290

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
  116
  134
  153
  174
  195
  218
  242
  268
  294
  322
  351
  381
  412
  445
  479
  514
  550
  588
  628
  669
  712
  756
  802
  851
  901
  953
  1,008
  1,065
  1,125
  1,187
Adjusted assets (=assets-cash), $m
  100
  116
  134
  153
  174
  195
  218
  242
  268
  294
  322
  351
  381
  412
  445
  479
  514
  550
  588
  628
  669
  712
  756
  802
  851
  901
  953
  1,008
  1,065
  1,125
  1,187
Revenue / Adjusted assets
  2.030
  2.034
  2.030
  2.033
  2.029
  2.036
  2.032
  2.033
  2.026
  2.031
  2.031
  2.028
  2.029
  2.032
  2.029
  2.029
  2.029
  2.031
  2.031
  2.029
  2.030
  2.029
  2.030
  2.031
  2.029
  2.030
  2.030
  2.030
  2.030
  2.029
  2.029
Average production assets, $m
  28
  32
  37
  42
  48
  54
  60
  66
  73
  81
  88
  96
  104
  113
  122
  131
  141
  151
  161
  172
  183
  195
  207
  220
  233
  247
  261
  276
  292
  308
  325
Working capital, $m
  139
  29
  33
  38
  43
  49
  54
  61
  67
  73
  80
  88
  95
  103
  111
  120
  128
  137
  147
  157
  167
  178
  189
  200
  212
  225
  238
  252
  266
  281
  296
Total debt, $m
  0
  5
  11
  17
  24
  31
  38
  46
  54
  62
  71
  80
  90
  100
  110
  121
  132
  144
  156
  169
  182
  196
  210
  225
  240
  256
  273
  291
  309
  328
  348
Total liabilities, $m
  32
  37
  43
  49
  56
  63
  70
  78
  86
  94
  103
  112
  122
  132
  142
  153
  164
  176
  188
  201
  214
  228
  242
  257
  272
  288
  305
  323
  341
  360
  380
Total equity, $m
  182
  79
  91
  104
  118
  133
  148
  165
  182
  200
  219
  239
  259
  280
  302
  325
  349
  374
  400
  427
  455
  484
  514
  546
  578
  613
  648
  685
  724
  765
  807
Total liabilities and equity, $m
  214
  116
  134
  153
  174
  196
  218
  243
  268
  294
  322
  351
  381
  412
  444
  478
  513
  550
  588
  628
  669
  712
  756
  803
  850
  901
  953
  1,008
  1,065
  1,125
  1,187
Debt-to-equity ratio
  0.000
  0.070
  0.120
  0.160
  0.200
  0.230
  0.250
  0.280
  0.290
  0.310
  0.320
  0.340
  0.350
  0.360
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
  0.430
  0.430
  0.430
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
  21
  25
  30
  35
  41
  46
  52
  59
  65
  72
  79
  87
  95
  103
  111
  120
  130
  139
  149
  159
  170
  181
  193
  205
  218
  231
  245
  259
  275
  290
Depreciation, amort., depletion, $m
  14
  6
  7
  8
  10
  11
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
  49
  52
  55
  58
  62
  65
Funds from operations, $m
  -3
  27
  33
  38
  45
  51
  58
  66
  73
  81
  90
  99
  108
  117
  127
  138
  148
  160
  171
  183
  196
  209
  223
  237
  252
  267
  283
  300
  318
  336
  355
Change in working capital, $m
  -34
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
Cash from operations, $m
  31
  23
  28
  34
  40
  46
  52
  60
  67
  75
  83
  91
  100
  110
  119
  129
  140
  151
  162
  174
  186
  198
  212
  225
  240
  255
  270
  287
  304
  321
  340
Maintenance CAPEX, $m
  0
  -6
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -47
  -49
  -52
  -55
  -58
  -62
New CAPEX, $m
  -2
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
Cash from investing activities, $m
  -12
  -10
  -11
  -12
  -14
  -16
  -17
  -19
  -20
  -22
  -24
  -26
  -27
  -30
  -32
  -33
  -36
  -38
  -40
  -43
  -45
  -49
  -51
  -54
  -57
  -61
  -63
  -67
  -71
  -74
  -79
Free cash flow, $m
  19
  13
  17
  21
  26
  30
  35
  41
  47
  53
  59
  66
  73
  80
  88
  96
  104
  112
  121
  130
  140
  150
  160
  171
  183
  194
  207
  219
  233
  247
  261
Issuance/(repayment) of debt, $m
  0
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
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
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
Total cash flow (excl. dividends), $m
  27
  19
  23
  27
  32
  37
  43
  49
  55
  61
  68
  75
  82
  90
  98
  106
  115
  124
  133
  143
  153
  164
  175
  186
  198
  210
  223
  237
  251
  266
  281
Retained Cash Flow (-), $m
  -48
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -42
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
 
  121
  11
  14
  18
  23
  27
  32
  38
  43
  49
  55
  62
  69
  76
  83
  91
  99
  108
  116
  125
  135
  144
  155
  165
  176
  188
  200
  212
  225
  239
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
 
  116
  10
  12
  15
  17
  20
  22
  23
  25
  26
  26
  26
  26
  26
  24
  23
  22
  20
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
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Inogen, Inc. is a medical technology company. The Company develops, manufactures and markets portable oxygen concentrators used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions. The Company's Inogen One systems concentrate the air around the patient to offer a single source of supplemental oxygen anytime, anywhere with a portable device. Its three portable product offerings, the Inogen One G4, Inogen One G3 and Inogen One G2, at approximately 2.8, 4.8 and 7.0 pounds with a single battery, respectively. Its Inogen One G4, Inogen One G3 and Inogen One G2 are sub-3, sub-5 and sub-10 pound portable oxygen concentrators, respectively. All of its Inogen One systems are equipped with Intelligent Delivery Technology. The Inogen At Home stationary oxygen concentrator allows it to access the non-ambulatory oxygen patient market and serves as a backup to its Inogen One system for ambulatory patients on its rental service.

FINANCIAL RATIOS  of  Inogen (INGN)

Valuation Ratios
P/E Ratio 97.9
Price to Sales 10.1
Price to Book 11.3
Price to Tangible Book
Price to Cash Flow 66.3
Price to Free Cash Flow 70.9
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 16.4% 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 20.558 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 $2.1 billion.

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COMPANY NEWS

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▶ Inogen beats 2Q profit forecasts   [Aug-03-17 11:53PM  Associated Press]
▶ Heart Valve Maker Trying To Pump Stock Past Buy Zone   [Jun-20-17 04:19PM  Investor's Business Daily]
▶ ETFs with exposure to Inogen, Inc. : June 19, 2017   [Jun-19-17 03:32PM  Capital Cube]
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Financial statements 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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