Intrinsic value of NeoGenomics - NEO

Previous Close

$14.12

  Intrinsic Value

$1.60

stock screener

  Rating & Target

str. sell

-89%

Previous close

$14.12

 
Intrinsic value

$1.60

 
Up/down potential

-89%

 
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

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
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
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
Revenue, $m
  244
  275
  291
  308
  325
  344
  363
  383
  404
  426
  449
  473
  498
  524
  552
  581
  611
  643
  676
  711
  747
  785
  825
  867
  912
  958
  1,006
  1,057
  1,111
  1,167
  1,226
Variable operating expenses, $m
 
  258
  272
  286
  301
  317
  334
  351
  369
  388
  407
  406
  428
  450
  474
  499
  525
  552
  580
  610
  641
  674
  709
  745
  783
  823
  864
  908
  954
  1,002
  1,053
Fixed operating expenses, $m
 
  11
  11
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
Total operating expenses, $m
  242
  269
  283
  298
  313
  329
  347
  364
  382
  401
  421
  420
  442
  465
  489
  514
  541
  568
  596
  627
  658
  691
  727
  763
  802
  842
  883
  928
  974
  1,023
  1,074
Operating income, $m
  3
  5
  8
  10
  12
  14
  17
  19
  22
  25
  28
  53
  56
  59
  63
  67
  71
  75
  79
  84
  89
  94
  99
  104
  110
  116
  123
  130
  137
  144
  152
EBITDA, $m
  26
  55
  59
  62
  66
  71
  75
  79
  84
  89
  94
  100
  106
  112
  118
  125
  132
  139
  147
  155
  163
  172
  181
  191
  201
  212
  223
  235
  248
  261
  274
Interest expense (income), $m
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
Earnings before tax, $m
  -7
  0
  1
  3
  4
  6
  8
  10
  12
  14
  16
  40
  43
  45
  48
  51
  54
  57
  60
  63
  67
  71
  74
  79
  83
  88
  92
  97
  103
  108
  114
Tax expense, $m
  -1
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
Net income, $m
  -6
  0
  1
  2
  3
  4
  6
  7
  9
  10
  12
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  61
  64
  67
  71
  75
  79
  83

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
  365
  386
  409
  432
  456
  482
  509
  536
  566
  596
  628
  661
  696
  733
  771
  811
  853
  897
  944
  992
  1,043
  1,096
  1,152
  1,211
  1,272
  1,337
  1,404
  1,475
  1,550
  1,628
Adjusted assets (=assets-cash), $m
  324
  365
  386
  409
  432
  456
  482
  509
  536
  566
  596
  628
  661
  696
  733
  771
  811
  853
  897
  944
  992
  1,043
  1,096
  1,152
  1,211
  1,272
  1,337
  1,404
  1,475
  1,550
  1,628
Revenue / Adjusted assets
  0.753
  0.753
  0.754
  0.753
  0.752
  0.754
  0.753
  0.752
  0.754
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.754
  0.753
  0.754
  0.754
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.752
  0.753
  0.753
  0.753
  0.753
Average production assets, $m
  117
  274
  290
  307
  324
  343
  362
  382
  403
  425
  447
  471
  496
  523
  550
  579
  609
  641
  674
  708
  745
  783
  823
  865
  909
  955
  1,003
  1,054
  1,108
  1,164
  1,222
Working capital, $m
  41
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
Total debt, $m
  106
  116
  127
  138
  149
  161
  174
  187
  201
  216
  231
  247
  263
  280
  299
  318
  337
  358
  380
  403
  427
  452
  479
  506
  536
  566
  598
  632
  667
  704
  743
Total liabilities, $m
  151
  181
  192
  203
  214
  226
  239
  252
  266
  281
  296
  311
  328
  345
  363
  382
  402
  423
  445
  468
  492
  517
  544
  571
  600
  631
  663
  697
  732
  769
  808
Total equity, $m
  187
  184
  195
  206
  218
  230
  243
  256
  270
  285
  300
  316
  333
  351
  369
  389
  409
  430
  452
  476
  500
  526
  552
  581
  610
  641
  674
  708
  744
  781
  821
Total liabilities and equity, $m
  338
  365
  387
  409
  432
  456
  482
  508
  536
  566
  596
  627
  661
  696
  732
  771
  811
  853
  897
  944
  992
  1,043
  1,096
  1,152
  1,210
  1,272
  1,337
  1,405
  1,476
  1,550
  1,629
Debt-to-equity ratio
  0.567
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
  0.730
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.850
  0.850
  0.860
  0.870
  0.870
  0.880
  0.880
  0.890
  0.890
  0.900
  0.900
  0.910
Adjusted equity ratio
  0.537
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  0
  1
  2
  3
  4
  6
  7
  9
  10
  12
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  61
  64
  67
  71
  75
  79
  83
Depreciation, amort., depletion, $m
  23
  49
  51
  53
  55
  56
  58
  60
  62
  65
  67
  47
  50
  52
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  91
  96
  100
  105
  111
  116
  122
Funds from operations, $m
  0
  49
  52
  55
  58
  61
  64
  67
  71
  75
  79
  77
  81
  85
  90
  95
  100
  105
  111
  117
  123
  130
  137
  144
  151
  159
  168
  177
  186
  195
  206
Change in working capital, $m
  -21
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  21
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  77
  81
  86
  90
  95
  100
  106
  111
  117
  124
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
Maintenance CAPEX, $m
  0
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -91
  -96
  -100
  -105
  -111
  -116
New CAPEX, $m
  -8
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
Cash from investing activities, $m
  -7
  -42
  -43
  -46
  -49
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -79
  -84
  -88
  -93
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -158
  -167
  -175
Free cash flow, $m
  14
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  26
  28
  29
  31
Issuance/(repayment) of debt, $m
  28
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
  37
  39
Issuance/(repurchase) of shares, $m
  -51
  11
  10
  9
  9
  8
  7
  6
  5
  5
  4
  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
  21
  21
  20
  21
  20
  20
  19
  19
  19
  19
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
  37
  39
Total cash flow (excl. dividends), $m
  -11
  29
  29
  30
  30
  30
  31
  31
  31
  32
  32
  24
  26
  27
  29
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
  53
  56
  60
  63
  66
  70
Retained Cash Flow (-), $m
  51
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
Prev. year cash balance distribution, $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 flow adjustment, $m
 
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Cash available for distribution, $m
 
  18
  18
  18
  18
  18
  18
  18
  17
  17
  17
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  29
  31
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  17
  16
  15
  13
  12
  11
  9
  8
  7
  6
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.0
  98.2
  97.5
  96.9
  96.3
  95.9
  95.5
  95.2
  94.9
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7
  94.7

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 -184.9
Price to Sales 4.5
Price to Book 5.9
Price to Tangible Book
Price to Cash Flow 52.8
Price to Free Cash Flow 85.3
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 $259 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 6% 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 7%, 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 94.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 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 5.4% 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 2.5%.

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 99.7%.

Life of production assets of 10 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 -1.2%. 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 - $173 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 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 $1.1 billion.

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COMPANY NEWS

▶ [$$] GE Is Doing Well---in Its Stock Investments   [Jun-29-18 07:30AM  Barrons.com]
▶ NeoGenomics: 1Q Earnings Snapshot   [May-01-18 09:45AM  Associated Press]
▶ NeoGenomics, Inc. to Host Earnings Call   [06:45AM  ACCESSWIRE]
▶ NeoGenomics Announces Executive Appointments   [Mar-20-18 07:00AM  Marketwired]
▶ NeoGenomics beats Street 4Q forecasts   [07:55AM  Associated Press]
▶ NeoGenomics, Inc. to Host Earnings Call   [07:20AM  ACCESSWIRE]
▶ 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]
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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