Intrinsic value of Luminex - LMNX

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$18.25

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$18.25

 
Intrinsic value

$2.54

 
Up/down potential

-86%

 
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 LMNX 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 0.8

 

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, %
  13.87
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  271
  325
  385
  451
  523
  601
  684
  773
  867
  967
  1,071
  1,181
  1,295
  1,415
  1,540
  1,669
  1,805
  1,945
  2,091
  2,242
  2,400
  2,564
  2,734
  2,911
  3,095
  3,287
  3,487
  3,695
  3,912
  4,138
  4,374
Variable operating expenses, $m
 
  280
  331
  386
  446
  511
  580
  655
  733
  816
  904
  987
  1,082
  1,182
  1,287
  1,395
  1,508
  1,625
  1,747
  1,874
  2,005
  2,142
  2,285
  2,433
  2,587
  2,747
  2,914
  3,088
  3,269
  3,458
  3,655
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
  251
  280
  331
  386
  446
  511
  580
  655
  733
  816
  904
  987
  1,082
  1,182
  1,287
  1,395
  1,508
  1,625
  1,747
  1,874
  2,005
  2,142
  2,285
  2,433
  2,587
  2,747
  2,914
  3,088
  3,269
  3,458
  3,655
Operating income, $m
  19
  45
  55
  66
  78
  90
  104
  119
  134
  150
  168
  194
  213
  233
  253
  274
  297
  320
  344
  369
  394
  421
  449
  478
  509
  540
  573
  607
  643
  680
  719
EBITDA, $m
  39
  69
  82
  96
  111
  127
  145
  164
  184
  205
  227
  250
  274
  300
  326
  354
  382
  412
  443
  475
  508
  543
  579
  617
  656
  696
  739
  783
  829
  877
  927
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
Earnings before tax, $m
  20
  45
  55
  65
  76
  89
  102
  116
  131
  147
  163
  189
  207
  226
  246
  267
  288
  310
  334
  358
  383
  408
  435
  464
  493
  523
  555
  588
  622
  658
  696
Tax expense, $m
  6
  12
  15
  18
  21
  24
  28
  31
  35
  40
  44
  51
  56
  61
  66
  72
  78
  84
  90
  97
  103
  110
  118
  125
  133
  141
  150
  159
  168
  178
  188
Net income, $m
  14
  33
  40
  47
  56
  65
  74
  85
  96
  107
  119
  138
  151
  165
  180
  195
  210
  227
  243
  261
  279
  298
  318
  338
  360
  382
  405
  429
  454
  480
  508

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  93
  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
  451
  430
  509
  596
  691
  794
  904
  1,021
  1,146
  1,277
  1,415
  1,560
  1,711
  1,869
  2,034
  2,205
  2,384
  2,569
  2,762
  2,962
  3,170
  3,387
  3,612
  3,846
  4,089
  4,342
  4,606
  4,881
  5,168
  5,467
  5,779
Adjusted assets (=assets-cash), $m
  358
  430
  509
  596
  691
  794
  904
  1,021
  1,146
  1,277
  1,415
  1,560
  1,711
  1,869
  2,034
  2,205
  2,384
  2,569
  2,762
  2,962
  3,170
  3,387
  3,612
  3,846
  4,089
  4,342
  4,606
  4,881
  5,168
  5,467
  5,779
Revenue / Adjusted assets
  0.757
  0.756
  0.756
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
  0.757
Average production assets, $m
  124
  148
  176
  206
  239
  274
  312
  353
  395
  441
  488
  538
  591
  645
  702
  761
  823
  887
  953
  1,023
  1,094
  1,169
  1,247
  1,327
  1,411
  1,499
  1,590
  1,685
  1,784
  1,887
  1,995
Working capital, $m
  134
  49
  58
  68
  79
  91
  103
  117
  131
  146
  162
  178
  196
  214
  232
  252
  272
  294
  316
  339
  362
  387
  413
  440
  467
  496
  527
  558
  591
  625
  661
Total debt, $m
  0
  9
  20
  31
  44
  57
  71
  87
  103
  120
  138
  157
  177
  198
  219
  242
  265
  290
  315
  341
  368
  397
  426
  457
  489
  522
  556
  592
  630
  669
  710
Total liabilities, $m
  47
  56
  67
  78
  91
  104
  118
  134
  150
  167
  185
  204
  224
  245
  266
  289
  312
  337
  362
  388
  415
  444
  473
  504
  536
  569
  603
  639
  677
  716
  757
Total equity, $m
  404
  373
  442
  518
  601
  690
  786
  888
  996
  1,110
  1,230
  1,355
  1,487
  1,624
  1,767
  1,916
  2,071
  2,233
  2,400
  2,574
  2,755
  2,943
  3,138
  3,342
  3,553
  3,773
  4,003
  4,242
  4,491
  4,751
  5,022
Total liabilities and equity, $m
  451
  429
  509
  596
  692
  794
  904
  1,022
  1,146
  1,277
  1,415
  1,559
  1,711
  1,869
  2,033
  2,205
  2,383
  2,570
  2,762
  2,962
  3,170
  3,387
  3,611
  3,846
  4,089
  4,342
  4,606
  4,881
  5,168
  5,467
  5,779
Debt-to-equity ratio
  0.000
  0.020
  0.040
  0.060
  0.070
  0.080
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
Adjusted equity ratio
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  33
  40
  47
  56
  65
  74
  85
  96
  107
  119
  138
  151
  165
  180
  195
  210
  227
  243
  261
  279
  298
  318
  338
  360
  382
  405
  429
  454
  480
  508
Depreciation, amort., depletion, $m
  20
  24
  27
  30
  33
  37
  41
  45
  50
  54
  59
  56
  62
  67
  73
  79
  86
  92
  99
  107
  114
  122
  130
  138
  147
  156
  166
  176
  186
  197
  208
Funds from operations, $m
  51
  57
  67
  77
  89
  102
  115
  130
  145
  162
  179
  194
  213
  232
  253
  274
  296
  319
  343
  368
  393
  420
  448
  477
  507
  538
  571
  605
  640
  677
  716
Change in working capital, $m
  1
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
Cash from operations, $m
  50
  71
  58
  67
  78
  90
  103
  117
  131
  147
  163
  178
  196
  214
  234
  254
  276
  298
  321
  345
  369
  395
  422
  450
  479
  509
  541
  573
  607
  643
  680
Maintenance CAPEX, $m
  0
  -13
  -15
  -18
  -21
  -25
  -29
  -33
  -37
  -41
  -46
  -51
  -56
  -62
  -67
  -73
  -79
  -86
  -92
  -99
  -107
  -114
  -122
  -130
  -138
  -147
  -156
  -166
  -176
  -186
  -197
New CAPEX, $m
  -13
  -25
  -27
  -30
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -108
Cash from investing activities, $m
  -63
  -38
  -42
  -48
  -54
  -60
  -67
  -73
  -80
  -86
  -94
  -101
  -108
  -117
  -124
  -132
  -141
  -150
  -159
  -168
  -179
  -189
  -200
  -211
  -222
  -234
  -247
  -261
  -275
  -289
  -305
Free cash flow, $m
  -13
  33
  15
  19
  24
  30
  36
  44
  51
  60
  69
  77
  87
  98
  110
  122
  135
  148
  162
  176
  191
  207
  223
  239
  257
  275
  293
  313
  333
  354
  376
Issuance/(repayment) of debt, $m
  -25
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
Issuance/(repurchase) of shares, $m
  3
  0
  44
  45
  46
  46
  45
  43
  40
  37
  33
  30
  24
  18
  12
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -22
  9
  54
  56
  58
  59
  59
  58
  56
  54
  51
  49
  44
  39
  34
  26
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
Total cash flow (excl. dividends), $m
  -35
  43
  25
  30
  36
  43
  51
  59
  68
  77
  87
  96
  107
  119
  131
  145
  158
  172
  187
  202
  218
  235
  252
  270
  289
  308
  328
  349
  370
  393
  417
Retained Cash Flow (-), $m
  -35
  -62
  -69
  -76
  -83
  -89
  -96
  -102
  -108
  -114
  -120
  -126
  -132
  -137
  -143
  -149
  -155
  -161
  -167
  -174
  -181
  -188
  -195
  -203
  -212
  -220
  -229
  -239
  -249
  -260
  -271
Prev. year cash balance distribution, $m
 
  93
  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
 
  73
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  3
  11
  20
  28
  37
  47
  57
  67
  77
  88
  99
  110
  121
  133
  145
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
 
  70
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  4
  5
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  100.0
  94.1
  89.1
  85.1
  81.7
  79.0
  76.7
  74.9
  73.5
  72.3
  71.4
  70.7
  70.2
  70.0
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9
  69.9

Luminex Corporation develops, manufactures, and sells proprietary biological testing technologies and products for the diagnostics, pharmaceutical, and life sciences industries worldwide. It develops proprietary instruments and assays utilizing its xMAP open-architecture multi-analyte platform, MultiCode real-time polymerase chain reaction (PCR), and multiplex PCR-based technologies. The company’s products include Luminex LX 100/200 that integrates fluidics, optics, and digital signal processing; FLEXMAP 3D system for use as a general laboratory instrument; MAGPIX system, a multiplexing analyzer for qualitative and quantitative analysis of proteins and nucleic acids; and ARIES system, a sample to answer real-time PCR platform. It also offers MicroPlex, MagPlex, xTAG, SeroMAP, and calibration and control microspheres; ARIES cassettes that are self-contained assay consumables; xPONENT, a software suite to simplify laboratory workflow and enhance productivity; respiratory viral family of products to identify the causative agent for respiratory infections; and gastrointestinal pathogen panel assays to identify the pathogens causing infectious gastroenteritis. In addition, the company offers MultiCode assays and products comprising HSV 1&2 assays, analyte specific reagents, and other products to detect infectious agents in clinical samples; ARIES HSV 1&2 assays; cystic fibrosis family of products comprising IVD kits for cystic fibrosis genotyping; pharmacogenetics family of products consisting of assays to determine the drug metabolism status; and specialty product family and instrumentation products, as well as operates as an original equipment manufacturer of custom reagents and instrumentation. It serves pharmaceutical companies, clinical laboratories, and research and medical institutions. Luminex Corporation was founded in 1995 and is headquartered in Austin, Texas.

FINANCIAL RATIOS  of  Luminex (LMNX)

Valuation Ratios
P/E Ratio 55.8
Price to Sales 2.9
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 15.6
Price to Free Cash Flow 21.1
Growth Rates
Sales Growth Rate 13.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35%
Cap. Spend. - 3 Yr. Gr. Rate -7.3%
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 3.3%
Ret/ On Assets - 3 Yr. Avg. 8.2%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.2%
Return On Equity 3.6%
Return On Equity - 3 Yr. Avg. 9.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 66.4%
Gross Margin - 3 Yr. Avg. 69.3%
EBITDA Margin 14.8%
EBITDA Margin - 3 Yr. Avg. 17.7%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 11.1%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 5.2%
Net Profit Margin - 3 Yr. Avg. 12.6%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. -7.1%
Payout Ratio 0%

LMNX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LMNX stock intrinsic value calculation we used $271 million for the last fiscal year's total revenue generated by Luminex. The default revenue input number comes from 2016 income statement of Luminex. 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 LMNX stock valuation model: a) initial revenue growth rate of 20% 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 LMNX is calculated based on our internal credit rating of Luminex, 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 Luminex.
    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 LMNX stock the variable cost ratio is equal to 86.7%.

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 LMNX 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 Luminex.

Corporate tax rate of 27% is the nominal tax rate for Luminex. 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 LMNX 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 LMNX are equal to 45.6%.

Life of production assets of 9.6 years is the average useful life of capital assets used in Luminex 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 LMNX is equal to 15.1%. 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 - $404 million for Luminex - 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 41.285 million for Luminex 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 Luminex at the current share price and the inputted number of shares is $0.8 billion.


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COMPANY NEWS

▶ 3 Top Medical Instrument Companies to Buy in 2017   [Apr-04-17 04:22PM  Motley Fool]
▶ Luminex reports 4Q loss   [Feb-06-17 05:24PM  Associated Press]
▶ Luminex wins R&D 100 Award for ARIES Systems   [Dec-05-16 08:00AM  PR Newswire]
▶ Biotech firm joins fight against Zika   [Aug-10-16 07:00AM  at bizjournals.com]
Stock chart of LMNX Financial statements of LMNX
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