Intrinsic value of Myriad Genetics - MYGN

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$33.70

  Intrinsic Value

$33.23

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  Rating & Target

hold

-1%

Previous close

$33.70

 
Intrinsic value

$33.23

 
Up/down potential

-1%

 
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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
Revenue, $m
  771
  823
  876
  932
  990
  1,051
  1,114
  1,180
  1,248
  1,320
  1,395
  1,473
  1,554
  1,639
  1,728
  1,822
  1,919
  2,021
  2,128
  2,240
  2,357
  2,479
  2,608
  2,743
  2,884
  3,032
  3,188
  3,350
  3,521
  3,700
  3,888
Variable operating expenses, $m
 
  638
  678
  719
  762
  806
  853
  901
  952
  1,004
  1,060
  1,085
  1,145
  1,208
  1,274
  1,343
  1,414
  1,490
  1,568
  1,651
  1,737
  1,827
  1,922
  2,021
  2,126
  2,235
  2,349
  2,469
  2,595
  2,727
  2,866
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
  638
  678
  719
  762
  806
  853
  901
  952
  1,004
  1,060
  1,085
  1,145
  1,208
  1,274
  1,343
  1,414
  1,490
  1,568
  1,651
  1,737
  1,827
  1,922
  2,021
  2,126
  2,235
  2,349
  2,469
  2,595
  2,727
  2,866
Operating income, $m
  49
  185
  199
  214
  229
  245
  261
  279
  297
  316
  335
  387
  409
  431
  455
  479
  505
  532
  560
  589
  620
  652
  686
  721
  758
  797
  838
  881
  926
  973
  1,023
EBITDA, $m
  97
  248
  264
  281
  299
  317
  336
  356
  376
  398
  420
  444
  468
  494
  521
  549
  578
  609
  641
  675
  710
  747
  786
  827
  869
  914
  961
  1,010
  1,061
  1,115
  1,172
Interest expense (income), $m
  0
  3
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  56
  59
  63
Earnings before tax, $m
  43
  181
  194
  208
  222
  237
  252
  268
  285
  302
  321
  371
  391
  412
  433
  456
  480
  505
  531
  558
  587
  616
  648
  681
  715
  751
  789
  829
  870
  914
  960
Tax expense, $m
  21
  49
  52
  56
  60
  64
  68
  72
  77
  82
  87
  100
  106
  111
  117
  123
  130
  136
  143
  151
  158
  166
  175
  184
  193
  203
  213
  224
  235
  247
  259
Net income, $m
  22
  132
  142
  152
  162
  173
  184
  196
  208
  221
  234
  271
  285
  301
  316
  333
  350
  368
  387
  407
  428
  450
  473
  497
  522
  548
  576
  605
  635
  667
  701

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
  1,144
  1,219
  1,297
  1,378
  1,462
  1,550
  1,641
  1,736
  1,836
  1,940
  2,048
  2,162
  2,280
  2,404
  2,533
  2,669
  2,811
  2,959
  3,115
  3,278
  3,448
  3,627
  3,815
  4,011
  4,217
  4,433
  4,660
  4,897
  5,147
  5,408
Adjusted assets (=assets-cash), $m
  1,073
  1,144
  1,219
  1,297
  1,378
  1,462
  1,550
  1,641
  1,736
  1,836
  1,940
  2,048
  2,162
  2,280
  2,404
  2,533
  2,669
  2,811
  2,959
  3,115
  3,278
  3,448
  3,627
  3,815
  4,011
  4,217
  4,433
  4,660
  4,897
  5,147
  5,408
Revenue / Adjusted assets
  0.719
  0.719
  0.719
  0.719
  0.718
  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
  443
  471
  502
  533
  565
  599
  635
  672
  710
  750
  792
  836
  882
  930
  980
  1,032
  1,087
  1,145
  1,205
  1,268
  1,334
  1,403
  1,476
  1,552
  1,631
  1,715
  1,803
  1,894
  1,991
  2,092
Working capital, $m
  99
  -55
  -59
  -62
  -66
  -70
  -75
  -79
  -84
  -88
  -93
  -99
  -104
  -110
  -116
  -122
  -129
  -135
  -143
  -150
  -158
  -166
  -175
  -184
  -193
  -203
  -214
  -224
  -236
  -248
  -261
Total debt, $m
  99
  129
  160
  192
  226
  261
  298
  336
  375
  417
  460
  505
  552
  602
  653
  707
  763
  822
  884
  949
  1,017
  1,088
  1,162
  1,240
  1,322
  1,407
  1,497
  1,591
  1,690
  1,794
  1,903
Total liabilities, $m
  446
  476
  507
  539
  573
  608
  645
  683
  722
  764
  807
  852
  899
  949
  1,000
  1,054
  1,110
  1,169
  1,231
  1,296
  1,364
  1,435
  1,509
  1,587
  1,669
  1,754
  1,844
  1,938
  2,037
  2,141
  2,250
Total equity, $m
  778
  668
  712
  757
  804
  854
  905
  958
  1,014
  1,072
  1,133
  1,196
  1,262
  1,332
  1,404
  1,480
  1,559
  1,642
  1,728
  1,819
  1,914
  2,014
  2,118
  2,228
  2,343
  2,463
  2,589
  2,721
  2,860
  3,006
  3,158
Total liabilities and equity, $m
  1,224
  1,144
  1,219
  1,296
  1,377
  1,462
  1,550
  1,641
  1,736
  1,836
  1,940
  2,048
  2,161
  2,281
  2,404
  2,534
  2,669
  2,811
  2,959
  3,115
  3,278
  3,449
  3,627
  3,815
  4,012
  4,217
  4,433
  4,659
  4,897
  5,147
  5,408
Debt-to-equity ratio
  0.127
  0.190
  0.220
  0.250
  0.280
  0.310
  0.330
  0.350
  0.370
  0.390
  0.410
  0.420
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.600
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
  132
  142
  152
  162
  173
  184
  196
  208
  221
  234
  271
  285
  301
  316
  333
  350
  368
  387
  407
  428
  450
  473
  497
  522
  548
  576
  605
  635
  667
  701
Depreciation, amort., depletion, $m
  48
  63
  65
  67
  70
  72
  74
  77
  80
  82
  85
  57
  60
  63
  66
  70
  74
  78
  82
  86
  91
  95
  100
  105
  111
  117
  122
  129
  135
  142
  149
Funds from operations, $m
  69
  196
  207
  219
  232
  245
  259
  273
  288
  303
  319
  328
  345
  364
  383
  403
  424
  446
  469
  493
  519
  545
  573
  602
  633
  665
  698
  734
  771
  809
  850
Change in working capital, $m
  -37
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
Cash from operations, $m
  106
  199
  211
  223
  236
  249
  263
  277
  292
  308
  324
  333
  351
  369
  389
  409
  431
  453
  476
  501
  527
  554
  582
  611
  642
  675
  709
  745
  782
  821
  863
Maintenance CAPEX, $m
  0
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -95
  -100
  -105
  -111
  -117
  -122
  -129
  -135
  -142
New CAPEX, $m
  -6
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
Cash from investing activities, $m
  -146
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -111
  -116
  -122
  -129
  -135
  -142
  -149
  -157
  -164
  -173
  -181
  -191
  -201
  -210
  -221
  -231
  -243
Free cash flow, $m
  -40
  142
  150
  159
  169
  178
  188
  199
  210
  221
  233
  237
  250
  264
  278
  293
  308
  324
  341
  359
  378
  397
  417
  439
  461
  484
  509
  534
  561
  590
  619
Issuance/(repayment) of debt, $m
  98
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
  104
  109
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
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
  104
  109
Total cash flow (excl. dividends), $m
  34
  172
  181
  192
  202
  213
  225
  237
  250
  263
  277
  282
  297
  313
  329
  347
  365
  383
  403
  424
  445
  468
  492
  517
  543
  570
  599
  629
  660
  693
  728
Retained Cash Flow (-), $m
  -30
  -41
  -44
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -109
  -115
  -120
  -126
  -132
  -139
  -146
  -153
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
 
  282
  138
  146
  155
  164
  174
  184
  194
  205
  216
  219
  231
  244
  257
  271
  285
  301
  316
  333
  350
  368
  387
  407
  428
  450
  473
  496
  522
  548
  575
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
 
  270
  126
  127
  128
  127
  126
  124
  121
  118
  113
  104
  99
  93
  86
  80
  73
  65
  58
  51
  44
  38
  32
  27
  22
  17
  14
  11
  8
  6
  4
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 104.8
Price to Sales 3
Price to Book 3
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 23.1
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 6.7% 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 69.869 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 $2.4 billion.

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COMPANY NEWS

▶ Myriad tops Street 2Q forecasts   [Feb-06-18 05:11PM  Associated Press]
▶ CVS and Gilead Sciences Hit the Casualty List   [Jan-19-18 05:23PM  GuruFocus.com]
▶ What Could Boost Adoption of Prolaris in 2018?   [Dec-05-17 10:32AM  Market Realist]
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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