Intrinsic value of Myriad Genetics - MYGN

Previous Close

$32.58

  Intrinsic Value

$35.14

stock screener

  Rating & Target

hold

+8%

Previous close

$32.58

 
Intrinsic value

$35.14

 
Up/down potential

+8%

 
Rating

hold

We calculate the intrinsic value of MYGN 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 2.3

 

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, %
  2.25
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
Revenue, $m
  771
  833
  898
  966
  1,036
  1,109
  1,185
  1,263
  1,345
  1,430
  1,519
  1,612
  1,708
  1,808
  1,913
  2,022
  2,136
  2,255
  2,379
  2,509
  2,645
  2,788
  2,937
  3,092
  3,255
  3,426
  3,605
  3,793
  3,989
  4,195
  4,411
Variable operating expenses, $m
 
  646
  694
  743
  795
  849
  905
  963
  1,023
  1,086
  1,151
  1,188
  1,259
  1,333
  1,410
  1,490
  1,574
  1,662
  1,754
  1,850
  1,950
  2,055
  2,164
  2,279
  2,399
  2,525
  2,657
  2,795
  2,940
  3,092
  3,251
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
  722
  646
  694
  743
  795
  849
  905
  963
  1,023
  1,086
  1,151
  1,188
  1,259
  1,333
  1,410
  1,490
  1,574
  1,662
  1,754
  1,850
  1,950
  2,055
  2,164
  2,279
  2,399
  2,525
  2,657
  2,795
  2,940
  3,092
  3,251
Operating income, $m
  49
  188
  205
  222
  241
  260
  280
  301
  322
  345
  368
  424
  449
  476
  503
  532
  562
  593
  626
  660
  696
  733
  772
  813
  856
  901
  948
  997
  1,049
  1,103
  1,160
EBITDA, $m
  97
  251
  271
  291
  312
  334
  357
  381
  405
  431
  458
  486
  515
  545
  577
  609
  644
  680
  717
  756
  797
  840
  885
  932
  981
  1,033
  1,087
  1,143
  1,202
  1,264
  1,330
Interest expense (income), $m
  0
  3
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  20
  22
  24
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
Earnings before tax, $m
  43
  184
  200
  216
  233
  251
  270
  289
  309
  329
  351
  405
  429
  453
  479
  505
  533
  562
  592
  624
  657
  692
  728
  766
  806
  847
  891
  937
  984
  1,035
  1,087
Tax expense, $m
  21
  50
  54
  58
  63
  68
  73
  78
  83
  89
  95
  109
  116
  122
  129
  136
  144
  152
  160
  168
  177
  187
  197
  207
  218
  229
  241
  253
  266
  279
  294
Net income, $m
  22
  134
  146
  158
  170
  183
  197
  211
  225
  241
  256
  296
  313
  331
  349
  369
  389
  410
  432
  455
  480
  505
  531
  559
  588
  619
  650
  684
  719
  755
  794

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  151
  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
  1,224
  1,159
  1,249
  1,343
  1,441
  1,542
  1,648
  1,757
  1,871
  1,989
  2,113
  2,241
  2,375
  2,515
  2,660
  2,812
  2,971
  3,136
  3,309
  3,490
  3,679
  3,877
  4,084
  4,301
  4,528
  4,765
  5,014
  5,275
  5,548
  5,835
  6,135
Adjusted assets (=assets-cash), $m
  1,073
  1,159
  1,249
  1,343
  1,441
  1,542
  1,648
  1,757
  1,871
  1,989
  2,113
  2,241
  2,375
  2,515
  2,660
  2,812
  2,971
  3,136
  3,309
  3,490
  3,679
  3,877
  4,084
  4,301
  4,528
  4,765
  5,014
  5,275
  5,548
  5,835
  6,135
Revenue / Adjusted assets
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
Average production assets, $m
  415
  448
  483
  520
  557
  597
  637
  680
  724
  770
  817
  867
  919
  973
  1,029
  1,088
  1,149
  1,213
  1,280
  1,350
  1,423
  1,500
  1,580
  1,664
  1,751
  1,843
  1,940
  2,040
  2,146
  2,257
  2,373
Working capital, $m
  99
  -56
  -60
  -65
  -69
  -74
  -79
  -85
  -90
  -96
  -102
  -108
  -114
  -121
  -128
  -135
  -143
  -151
  -159
  -168
  -177
  -187
  -197
  -207
  -218
  -230
  -242
  -254
  -267
  -281
  -296
Total debt, $m
  99
  135
  173
  212
  252
  295
  338
  384
  431
  481
  532
  585
  641
  699
  760
  823
  889
  958
  1,030
  1,105
  1,184
  1,266
  1,352
  1,442
  1,537
  1,635
  1,739
  1,847
  1,961
  2,080
  2,205
Total liabilities, $m
  446
  482
  520
  559
  599
  642
  685
  731
  778
  828
  879
  932
  988
  1,046
  1,107
  1,170
  1,236
  1,305
  1,377
  1,452
  1,531
  1,613
  1,699
  1,789
  1,884
  1,982
  2,086
  2,194
  2,308
  2,427
  2,552
Total equity, $m
  778
  677
  730
  785
  841
  901
  962
  1,026
  1,093
  1,162
  1,234
  1,309
  1,387
  1,469
  1,554
  1,642
  1,735
  1,832
  1,933
  2,038
  2,149
  2,264
  2,385
  2,512
  2,644
  2,783
  2,928
  3,081
  3,240
  3,407
  3,583
Total liabilities and equity, $m
  1,224
  1,159
  1,250
  1,344
  1,440
  1,543
  1,647
  1,757
  1,871
  1,990
  2,113
  2,241
  2,375
  2,515
  2,661
  2,812
  2,971
  3,137
  3,310
  3,490
  3,680
  3,877
  4,084
  4,301
  4,528
  4,765
  5,014
  5,275
  5,548
  5,834
  6,135
Debt-to-equity ratio
  0.127
  0.200
  0.240
  0.270
  0.300
  0.330
  0.350
  0.370
  0.390
  0.410
  0.430
  0.450
  0.460
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.600
  0.610
  0.610
  0.620
Adjusted equity ratio
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  22
  134
  146
  158
  170
  183
  197
  211
  225
  241
  256
  296
  313
  331
  349
  369
  389
  410
  432
  455
  480
  505
  531
  559
  588
  619
  650
  684
  719
  755
  794
Depreciation, amort., depletion, $m
  48
  64
  66
  69
  71
  74
  77
  80
  83
  87
  90
  62
  66
  69
  74
  78
  82
  87
  91
  96
  102
  107
  113
  119
  125
  132
  139
  146
  153
  161
  170
Funds from operations, $m
  69
  198
  212
  227
  242
  258
  274
  291
  309
  327
  346
  358
  379
  400
  423
  446
  471
  497
  524
  552
  581
  612
  644
  678
  713
  750
  789
  829
  872
  916
  963
Change in working capital, $m
  -37
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
Cash from operations, $m
  106
  202
  216
  231
  247
  262
  279
  296
  314
  333
  352
  364
  385
  407
  430
  454
  479
  505
  532
  561
  590
  622
  654
  688
  724
  762
  801
  842
  885
  930
  978
Maintenance CAPEX, $m
  0
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -66
  -69
  -74
  -78
  -82
  -87
  -91
  -96
  -102
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -153
  -161
New CAPEX, $m
  -6
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
Cash from investing activities, $m
  -146
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -120
  -125
  -133
  -139
  -146
  -154
  -161
  -169
  -179
  -187
  -197
  -207
  -217
  -228
  -240
  -252
  -264
  -277
Free cash flow, $m
  -40
  139
  149
  160
  172
  183
  196
  208
  222
  235
  250
  256
  271
  287
  304
  322
  340
  359
  379
  399
  421
  443
  467
  492
  518
  545
  573
  603
  634
  666
  700
Issuance/(repayment) of debt, $m
  98
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  108
  114
  119
  125
Issuance/(repurchase) of shares, $m
  -26
  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  
  72
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  108
  114
  119
  125
Total cash flow (excl. dividends), $m
  34
  175
  187
  199
  212
  226
  239
  254
  269
  285
  301
  309
  327
  345
  365
  385
  406
  428
  451
  474
  500
  526
  553
  582
  612
  643
  676
  711
  747
  785
  825
Retained Cash Flow (-), $m
  -30
  -50
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -97
  -101
  -106
  -110
  -116
  -121
  -127
  -132
  -139
  -145
  -152
  -160
  -167
  -175
Prev. year cash balance distribution, $m
 
  151
  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
 
  276
  134
  145
  155
  166
  178
  190
  202
  215
  229
  234
  249
  264
  280
  296
  313
  331
  349
  369
  389
  410
  432
  455
  479
  505
  531
  559
  588
  618
  650
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
 
  265
  123
  126
  128
  129
  129
  128
  127
  124
  120
  111
  106
  100
  94
  87
  80
  72
  64
  57
  49
  42
  36
  30
  24
  20
  15
  12
  9
  7
  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

Myriad Genetics, Inc. is a molecular diagnostic company. The Company is engaged in the discovery, development and marketing of transformative molecular diagnostic tests. The Company operates through two segments: diagnostics and other. The diagnostics segment provides testing and collaborative development of testing that is designed to assess an individual's risk for developing disease later in life, identify a patient's likelihood of responding to drug therapy and guide a patient's dosing to enable optimal treatment, or assess a patient's risk of disease progression and disease recurrence. The other segment provides testing products and services to the pharmaceutical, biotechnology and medical research industries, research and development, and clinical services for patients, and also includes corporate services, such as finance, human resources, legal and information technology. Its molecular diagnostic tests include myRisk Hereditary Cancer, BRACAnalysis CDx and COLARIS.

FINANCIAL RATIOS  of  Myriad Genetics (MYGN)

Valuation Ratios
P/E Ratio 101.3
Price to Sales 2.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 21
Price to Free Cash Flow 22.3
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate -15.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 12.7%
Total Debt to Equity 12.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 10.7%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. 10.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 77.8%
Gross Margin - 3 Yr. Avg. 78.9%
EBITDA Margin 11.8%
EBITDA Margin - 3 Yr. Avg. 20%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 15.7%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 10.2%
Effective Tax Rate 48.8%
Eff/ Tax Rate - 3 Yr. Avg. 38.5%
Payout Ratio 0%

MYGN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MYGN stock intrinsic value calculation we used $771 million for the last fiscal year's total revenue generated by Myriad Genetics. The default revenue input number comes from 2017 income statement of Myriad Genetics. 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 MYGN stock valuation model: a) initial revenue growth rate of 8.1% 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 MYGN is calculated based on our internal credit rating of Myriad Genetics, 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 Myriad Genetics.
    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 MYGN stock the variable cost ratio is equal to 77.8%.

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 MYGN 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 Myriad Genetics.

Corporate tax rate of 27% is the nominal tax rate for Myriad Genetics. 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 MYGN 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 MYGN are equal to 53.8%.

Life of production assets of 14 years is the average useful life of capital assets used in Myriad Genetics 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 MYGN is equal to -6.7%. 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 - $778 million for Myriad Genetics - 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 69.134 million for Myriad Genetics 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 Myriad Genetics at the current share price and the inputted number of shares is $2.3 billion.

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Financial statements of MYGN
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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