Intrinsic value of Mesa Laboratories - MLAB

Previous Close

$130.04

  Intrinsic Value

$49.93

stock screener

  Rating & Target

str. sell

-62%

Previous close

$130.04

 
Intrinsic value

$49.93

 
Up/down potential

-62%

 
Rating

str. sell

We calculate the intrinsic value of MLAB 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 2017), $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 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  10.59
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
Revenue, $m
  94
  103
  112
  122
  132
  143
  153
  165
  177
  189
  202
  215
  229
  243
  258
  273
  290
  307
  324
  343
  362
  382
  403
  425
  448
  472
  497
  523
  551
  579
  610
Variable operating expenses, $m
 
  81
  88
  95
  102
  110
  118
  126
  135
  143
  153
  155
  165
  175
  186
  197
  209
  221
  234
  247
  261
  275
  291
  306
  323
  340
  358
  377
  397
  418
  440
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
  77
  81
  88
  95
  102
  110
  118
  126
  135
  143
  153
  155
  165
  175
  186
  197
  209
  221
  234
  247
  261
  275
  291
  306
  323
  340
  358
  377
  397
  418
  440
Operating income, $m
  16
  21
  24
  27
  30
  33
  36
  39
  42
  45
  49
  60
  64
  68
  72
  76
  81
  85
  90
  95
  101
  106
  112
  118
  125
  131
  138
  146
  153
  161
  170
EBITDA, $m
  25
  33
  36
  39
  43
  46
  50
  53
  57
  61
  65
  70
  74
  79
  83
  88
  94
  99
  105
  111
  117
  124
  130
  137
  145
  153
  161
  169
  178
  188
  197
Interest expense (income), $m
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
Earnings before tax, $m
  14
  20
  22
  24
  27
  30
  32
  35
  38
  41
  44
  55
  59
  62
  66
  70
  74
  78
  83
  87
  92
  97
  102
  108
  114
  120
  126
  133
  140
  147
  155
Tax expense, $m
  3
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
Net income, $m
  11
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  40
  43
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
  107
  113

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
  172
  182
  198
  215
  233
  252
  271
  291
  312
  334
  356
  380
  404
  429
  456
  483
  512
  542
  573
  605
  639
  675
  712
  750
  791
  833
  878
  924
  973
  1,024
  1,077
Adjusted assets (=assets-cash), $m
  166
  182
  198
  215
  233
  252
  271
  291
  312
  334
  356
  380
  404
  429
  456
  483
  512
  542
  573
  605
  639
  675
  712
  750
  791
  833
  878
  924
  973
  1,024
  1,077
Revenue / Adjusted assets
  0.566
  0.566
  0.566
  0.567
  0.567
  0.567
  0.565
  0.567
  0.567
  0.566
  0.567
  0.566
  0.567
  0.566
  0.566
  0.565
  0.566
  0.566
  0.565
  0.567
  0.567
  0.566
  0.566
  0.567
  0.566
  0.567
  0.566
  0.566
  0.566
  0.565
  0.566
Average production assets, $m
  61
  67
  73
  79
  86
  93
  100
  107
  115
  123
  131
  139
  148
  158
  167
  177
  188
  199
  210
  222
  235
  248
  261
  276
  291
  306
  322
  339
  357
  376
  396
Working capital, $m
  19
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  91
Total debt, $m
  55
  61
  68
  76
  84
  92
  100
  109
  118
  128
  138
  148
  159
  170
  181
  194
  206
  219
  233
  247
  262
  278
  294
  311
  329
  348
  367
  388
  409
  431
  455
Total liabilities, $m
  74
  80
  87
  95
  103
  111
  119
  128
  137
  147
  157
  167
  178
  189
  200
  213
  225
  238
  252
  266
  281
  297
  313
  330
  348
  367
  386
  407
  428
  450
  474
Total equity, $m
  98
  102
  111
  121
  131
  141
  152
  163
  175
  187
  199
  213
  226
  240
  255
  271
  287
  303
  321
  339
  358
  378
  398
  420
  443
  467
  491
  517
  545
  573
  603
Total liabilities and equity, $m
  172
  182
  198
  216
  234
  252
  271
  291
  312
  334
  356
  380
  404
  429
  455
  484
  512
  541
  573
  605
  639
  675
  711
  750
  791
  834
  877
  924
  973
  1,023
  1,077
Debt-to-equity ratio
  0.561
  0.600
  0.610
  0.630
  0.640
  0.650
  0.660
  0.670
  0.680
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.720
  0.720
  0.730
  0.730
  0.730
  0.740
  0.740
  0.740
  0.740
  0.740
  0.750
  0.750
  0.750
  0.750
  0.750
Adjusted equity ratio
  0.554
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  40
  43
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
  107
  113
Depreciation, amort., depletion, $m
  9
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
Funds from operations, $m
  5
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  103
  109
  115
  121
  127
  133
  140
Change in working capital, $m
  -3
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
Cash from operations, $m
  8
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  48
  51
  54
  57
  61
  65
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  123
  129
  136
Maintenance CAPEX, $m
  0
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
New CAPEX, $m
  -12
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -18
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -27
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -42
  -44
  -46
Free cash flow, $m
  -10
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  86
  90
Issuance/(repayment) of debt, $m
  10
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  13
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
Total cash flow (excl. dividends), $m
  2
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  40
  43
  46
  48
  51
  54
  57
  61
  64
  68
  71
  75
  79
  84
  88
  93
  98
  103
  108
  114
Retained Cash Flow (-), $m
  -13
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
Prev. year cash balance distribution, $m
 
  5
  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
 
  18
  14
  16
  17
  19
  20
  22
  24
  26
  27
  27
  29
  32
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  64
  68
  72
  76
  80
  84
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  17
  12
  13
  13
  13
  13
  12
  12
  11
  10
  9
  8
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
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
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Mesa Laboratories, Inc. is focused primarily on quality control products and services. The Company operates through four segments: Instruments, Continuous Monitoring, Biological Indicators and Cold Chain. The Instruments Division designs, manufactures and markets quality control instruments and disposable products. Its Biological Indicators Division provides testing services, along with the manufacturing and marketing of biological indicators and distribution of chemical indicators used to assess the effectiveness of sterilization processes. Its Continuous Monitoring Division designs, develops and markets systems, which are used to monitor various environmental parameters. Its Cold Chain Division provides parameter (primarily temperature) monitoring of products in a cold chain. The Company's brands include DataTrace, DialyGuard, DryCal, Torqo, SureTorque, BGI, Mesa, PCD, Apex, CheckPoint, Mesa and TempTrust.

FINANCIAL RATIOS  of  Mesa Laboratories (MLAB)

Valuation Ratios
P/E Ratio 44.1
Price to Sales 5.2
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 60.6
Price to Free Cash Flow -121.3
Growth Rates
Sales Growth Rate 10.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 64.4%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 55.1%
Total Debt to Equity 56.1%
Interest Coverage 15
Management Effectiveness
Return On Assets 7.1%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 7.8%
Ret/ On T. Cap. - 3 Yr. Avg. 9.5%
Return On Equity 12%
Return On Equity - 3 Yr. Avg. 13.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 56.4%
Gross Margin - 3 Yr. Avg. 59%
EBITDA Margin 25.5%
EBITDA Margin - 3 Yr. Avg. 28.3%
Operating Margin 18.1%
Oper. Margin - 3 Yr. Avg. 20.2%
Pre-Tax Margin 14.9%
Pre-Tax Margin - 3 Yr. Avg. 18.3%
Net Profit Margin 11.7%
Net Profit Margin - 3 Yr. Avg. 12.9%
Effective Tax Rate 21.4%
Eff/ Tax Rate - 3 Yr. Avg. 28.7%
Payout Ratio 18.2%

MLAB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MLAB stock intrinsic value calculation we used $94 million for the last fiscal year's total revenue generated by Mesa Laboratories. The default revenue input number comes from 2017 income statement of Mesa Laboratories. 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 MLAB stock valuation model: a) initial revenue growth rate of 9.5% 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 6.5%, whose default value for MLAB is calculated based on our internal credit rating of Mesa Laboratories, 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 Mesa Laboratories.
    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 MLAB stock the variable cost ratio is equal to 79.8%.

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 MLAB 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 Mesa Laboratories.

Corporate tax rate of 27% is the nominal tax rate for Mesa Laboratories. 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 MLAB 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 MLAB are equal to 64.9%.

Life of production assets of 14.4 years is the average useful life of capital assets used in Mesa Laboratories 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 MLAB is equal to 14.9%. 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 - $98 million for Mesa Laboratories - 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 3.765 million for Mesa Laboratories 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 Mesa Laboratories at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ New Strong Sell Stocks for November 21st   [Nov-21-17 09:31AM  Zacks]
▶ Mesa Labs posts 2Q profit   [Nov-06-17 08:21AM  Associated Press]
▶ Mesa Labs Reports Second Quarter Results   [08:00AM  GlobeNewswire]
▶ Mesa Labs Acquires Sterilization Process Control Business   [Oct-05-17 04:00PM  GlobeNewswire]
▶ Mesa Labs Declares Quarterly Dividend   [Oct-03-17 08:00AM  GlobeNewswire]
▶ Mesa Labs Reports Transition of its Chief Executive Officer   [Sep-01-17 08:00AM  GlobeNewswire]
▶ Mesa Labs posts 1Q profit   [Jul-31-17 11:02PM  Associated Press]
▶ Mesa Labs Declares Quarterly Dividend   [Jul-05-17 01:00PM  GlobeNewswire]
▶ Mesa Labs posts 4Q profit   [Jun-07-17 07:24AM  Associated Press]
▶ A Deep Analysis of 6 Five-Star Companies   [Jun-02-17 06:11PM  GuruFocus.com]
▶ Mesa Labs Declares Quarterly Dividend   [Apr-05-17 06:33PM  GlobeNewswire]
▶ Mesa Labs posts 3Q profit   [Feb-02-17 08:52AM  Associated Press]
▶ Mesa Labs Declares Quarterly Dividend   [Jan-03-17 12:00PM  GlobeNewswire]
Financial statements of MLAB
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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