Intrinsic value of NeoGenomics - NEO

Previous Close

$9.18

  Intrinsic Value

$1.26

stock screener

  Rating & Target

str. sell

-86%

Previous close

$9.18

 
Intrinsic value

$1.26

 
Up/down potential

-86%

 
Rating

str. sell

We calculate the intrinsic value of NEO 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 0.7

 

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, %
  144.00
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  244
  256
  268
  281
  295
  309
  324
  340
  357
  374
  393
  412
  432
  454
  476
  500
  524
  550
  578
  606
  637
  668
  702
  737
  773
  812
  852
  895
  939
  986
  1,035
Variable operating expenses, $m
 
  242
  253
  265
  277
  290
  303
  317
  332
  348
  364
  367
  385
  404
  424
  445
  467
  490
  515
  540
  567
  595
  625
  656
  689
  723
  759
  797
  837
  879
  922
Fixed operating expenses, $m
 
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  16
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
Total operating expenses, $m
  242
  252
  264
  276
  288
  301
  315
  329
  344
  360
  377
  380
  398
  418
  438
  459
  482
  505
  531
  556
  583
  612
  642
  674
  707
  742
  778
  816
  857
  899
  943
Operating income, $m
  3
  3
  4
  5
  6
  8
  9
  11
  12
  14
  15
  32
  34
  36
  38
  40
  42
  45
  48
  50
  53
  56
  59
  63
  66
  70
  74
  78
  83
  87
  92
EBITDA, $m
  26
  28
  30
  32
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
  129
  135
Interest expense (income), $m
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
Earnings before tax, $m
  -7
  -2
  -2
  -1
  0
  1
  2
  3
  4
  5
  6
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  63
Tax expense, $m
  -1
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
Net income, $m
  -6
  -2
  -2
  -1
  0
  0
  1
  2
  3
  3
  4
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  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
  337
  340
  356
  373
  391
  410
  430
  451
  474
  497
  521
  547
  574
  602
  632
  664
  696
  731
  767
  805
  845
  888
  932
  978
  1,027
  1,078
  1,132
  1,188
  1,248
  1,310
  1,375
Adjusted assets (=assets-cash), $m
  324
  340
  356
  373
  391
  410
  430
  451
  474
  497
  521
  547
  574
  602
  632
  664
  696
  731
  767
  805
  845
  888
  932
  978
  1,027
  1,078
  1,132
  1,188
  1,248
  1,310
  1,375
Revenue / Adjusted assets
  0.753
  0.753
  0.753
  0.753
  0.754
  0.754
  0.753
  0.754
  0.753
  0.753
  0.754
  0.753
  0.753
  0.754
  0.753
  0.753
  0.753
  0.752
  0.754
  0.753
  0.754
  0.752
  0.753
  0.754
  0.753
  0.753
  0.753
  0.753
  0.752
  0.753
  0.753
Average production assets, $m
  117
  122
  128
  134
  141
  147
  155
  162
  170
  178
  187
  196
  206
  216
  227
  238
  250
  263
  276
  289
  304
  319
  335
  351
  369
  387
  407
  427
  448
  470
  494
Working capital, $m
  41
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  72
  76
  80
  84
  88
  92
  97
  102
  107
  112
  118
  123
  130
  136
  143
  150
  157
Total debt, $m
  106
  104
  111
  118
  126
  135
  143
  152
  162
  172
  183
  194
  206
  218
  231
  245
  259
  274
  290
  306
  324
  342
  361
  381
  403
  425
  448
  473
  499
  526
  554
Total liabilities, $m
  151
  148
  155
  162
  170
  179
  187
  196
  206
  216
  227
  238
  250
  262
  275
  289
  303
  318
  334
  350
  368
  386
  405
  425
  447
  469
  492
  517
  543
  570
  598
Total equity, $m
  187
  192
  201
  211
  221
  232
  243
  255
  268
  281
  295
  309
  324
  340
  357
  375
  393
  413
  434
  455
  478
  501
  526
  553
  580
  609
  639
  671
  705
  740
  777
Total liabilities and equity, $m
  338
  340
  356
  373
  391
  411
  430
  451
  474
  497
  522
  547
  574
  602
  632
  664
  696
  731
  768
  805
  846
  887
  931
  978
  1,027
  1,078
  1,131
  1,188
  1,248
  1,310
  1,375
Debt-to-equity ratio
  0.567
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.680
  0.690
  0.690
  0.690
  0.700
  0.700
  0.700
  0.710
  0.710
  0.710
Adjusted equity ratio
  0.537
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -2
  -2
  -1
  0
  0
  1
  2
  3
  3
  4
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
Depreciation, amort., depletion, $m
  23
  25
  26
  26
  27
  28
  28
  29
  30
  30
  31
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
Funds from operations, $m
  0
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  85
  89
Change in working capital, $m
  -21
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
Cash from operations, $m
  21
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
  30
  32
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  70
  74
  77
  82
Maintenance CAPEX, $m
  0
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
New CAPEX, $m
  -8
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  -7
  -15
  -17
  -17
  -19
  -19
  -20
  -22
  -22
  -23
  -25
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -42
  -44
  -46
  -49
  -50
  -53
  -56
  -58
  -61
  -64
Free cash flow, $m
  14
  5
  6
  6
  7
  7
  7
  7
  7
  8
  8
  4
  5
  5
  6
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
Issuance/(repayment) of debt, $m
  28
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
Issuance/(repurchase) of shares, $m
  -51
  11
  11
  11
  10
  10
  10
  10
  10
  10
  10
  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  
  -26
  18
  18
  18
  18
  18
  19
  19
  20
  20
  21
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
Total cash flow (excl. dividends), $m
  -11
  24
  24
  24
  25
  25
  26
  26
  27
  28
  28
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  41
  43
  45
Retained Cash Flow (-), $m
  51
  -11
  -11
  -11
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
Prev. year cash balance distribution, $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
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
 
  16
  13
  14
  14
  15
  15
  15
  15
  15
  15
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  7
  7
  8
  8
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  15
  12
  12
  11
  11
  10
  9
  8
  7
  7
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.4
  97.0
  95.7
  94.5
  93.4
  92.4
  91.4
  90.5
  89.6
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9
  88.9

NeoGenomics, Inc. is an operator of a network of cancer-focused genetic testing laboratories. The Company operates in Laboratory Testing Segment. This segment delivers testing services to hospitals, pathologists, oncologists, other clinicians and researchers. It has laboratory locations in Ft. Myers and Tampa, Florida; Aliso Viejo, Fresno, Irvine, and West Sacramento, California; Houston, Texas and Nashville, and Tennessee. It offers testing services, which include Cytogenetics, Fluorescence In-Situ Hybridization (FISH), Flow cytometry, Immunohistochemistry (IHC), Molecular testing and Pathology consultation. Its Pharma Services and Clinical Trials group provides testing services in support of its pharmaceutical clients' oncology programs from discovery to commercialization. It helps its customers develop a biomarker hypothesis by recommending an optimal platform for molecular screening and backing its discovery tools with the informatics to capture meaningful data.

FINANCIAL RATIOS  of  NeoGenomics (NEO)

Valuation Ratios
P/E Ratio -120.2
Price to Sales 3
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 34.3
Price to Free Cash Flow 55.5
Growth Rates
Sales Growth Rate 144%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 300%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 51.9%
Total Debt to Equity 56.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.5%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital -2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity -2.8%
Return On Equity - 3 Yr. Avg. -0.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 45.1%
Gross Margin - 3 Yr. Avg. 45.4%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 0.8%
Oper. Margin - 3 Yr. Avg. -0.6%
Pre-Tax Margin -2.9%
Pre-Tax Margin - 3 Yr. Avg. -1.9%
Net Profit Margin -2.5%
Net Profit Margin - 3 Yr. Avg. -1.4%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 13.1%
Payout Ratio 0%

NEO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEO stock intrinsic value calculation we used $244 million for the last fiscal year's total revenue generated by NeoGenomics. The default revenue input number comes from 2016 income statement of NeoGenomics. 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 NEO stock valuation model: a) initial revenue growth rate of 4.8% 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 5.2%, whose default value for NEO is calculated based on our internal credit rating of NeoGenomics, 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 NeoGenomics.
    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 NEO stock the variable cost ratio is equal to 95.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10 million in the base year in the intrinsic value calculation for NEO 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 5.6% for NeoGenomics.

Corporate tax rate of 27% is the nominal tax rate for NeoGenomics. 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 NEO 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 NEO are equal to 47.7%.

Life of production assets of 11.4 years is the average useful life of capital assets used in NeoGenomics 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 NEO is equal to 15.2%. 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 - $187 million for NeoGenomics - 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 79.388 million for NeoGenomics 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 NeoGenomics at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ NeoGenomics reports 3Q loss   [07:21AM  Associated Press]
▶ NeoGenomics, Inc. to Host Earnings Call   [07:05AM  ACCESSWIRE]
▶ Company News For Oct 16, 2017   [Oct-16-17 10:11AM  Zacks]
▶ ETFs with exposure to NeoGenomics, Inc. : October 2, 2017   [Oct-02-17 10:58AM  Capital Cube]
▶ NeoGenomics Reports on Impacts from Hurricane Irma   [Sep-11-17 03:04PM  Marketwired]
▶ NeoGenomics reports 2Q loss   [Jul-25-17 04:56PM  Associated Press]
▶ ETFs with exposure to NeoGenomics, Inc. : July 3, 2017   [Jul-03-17 03:29PM  Capital Cube]
▶ ETFs with exposure to NeoGenomics, Inc. : June 22, 2017   [Jun-22-17 04:04PM  Capital Cube]
▶ ETFs with exposure to NeoGenomics, Inc. : June 8, 2017   [Jun-08-17 01:48PM  Capital Cube]
▶ Here's Why NeoGenomics, Inc. Is Dropping Today   [Apr-26-17 12:28PM  Motley Fool]
▶ NeoGenomics reports 1Q loss   [07:54AM  Associated Press]
▶ NeoGenomics reports 4Q loss   [07:23AM  Associated Press]
▶ Is NeoGenomics, Inc. (NEO) A Good Stock To Buy?   [Dec-09-16 08:28AM  at Insider Monkey]
▶ 6 Analyst Stock Picks Under $10 for Massive Upside   [Oct-30-16 11:06AM  at 24/7 Wall St.]
Financial statements of NEO
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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