Intrinsic value of Pro-Dex - PDEX

Previous Close

$7.75

  Intrinsic Value

$15.42

stock screener

  Rating & Target

str. buy

+99%

  Value-price divergence*

+137%

Previous close

$7.75

 
Intrinsic value

$15.42

 
Up/down potential

+99%

 
Rating

str. buy

 
Value-price divergence*

+137%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PDEX 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 0.0

 

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, %
  53.85
  40.00
  36.50
  33.35
  30.52
  27.96
  25.67
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.89
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
Revenue, $m
  20
  28
  38
  51
  67
  85
  107
  132
  161
  193
  229
  269
  311
  358
  408
  461
  517
  576
  639
  704
  773
  844
  919
  996
  1,077
  1,161
  1,248
  1,339
  1,433
  1,531
  1,632
Variable operating expenses, $m
 
  24
  32
  43
  57
  72
  91
  112
  137
  164
  195
  228
  265
  304
  346
  391
  439
  490
  543
  598
  657
  717
  781
  847
  915
  987
  1,061
  1,138
  1,218
  1,301
  1,388
Fixed operating expenses, $m
 
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
Total operating expenses, $m
  20
  27
  35
  46
  60
  75
  94
  116
  141
  168
  199
  232
  269
  308
  350
  395
  443
  495
  548
  603
  662
  722
  786
  852
  920
  993
  1,067
  1,144
  1,224
  1,307
  1,394
Operating income, $m
  1
  1
  3
  4
  7
  9
  13
  16
  20
  25
  31
  36
  43
  50
  57
  65
  73
  82
  91
  101
  111
  122
  133
  144
  156
  169
  181
  195
  209
  223
  239
EBITDA, $m
  2
  1
  3
  5
  7
  10
  13
  17
  21
  26
  32
  38
  44
  51
  59
  67
  76
  85
  94
  104
  115
  126
  137
  149
  161
  174
  188
  202
  216
  231
  247
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  1
  1
  3
  4
  7
  9
  12
  16
  20
  25
  30
  36
  42
  49
  56
  63
  72
  80
  89
  99
  109
  119
  130
  141
  153
  165
  178
  191
  204
  219
  233
Tax expense, $m
  0
  0
  1
  1
  2
  2
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  45
  48
  51
  55
  59
  63
Net income, $m
  1
  1
  2
  3
  5
  7
  9
  12
  15
  18
  22
  26
  31
  35
  41
  46
  52
  58
  65
  72
  79
  87
  95
  103
  111
  120
  130
  139
  149
  160
  170

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  11
  13
  17
  23
  30
  38
  48
  60
  72
  87
  103
  121
  140
  161
  183
  207
  233
  259
  287
  317
  348
  380
  413
  448
  485
  522
  562
  602
  645
  689
  735
Adjusted assets (=assets-cash), $m
  9
  13
  17
  23
  30
  38
  48
  60
  72
  87
  103
  121
  140
  161
  183
  207
  233
  259
  287
  317
  348
  380
  413
  448
  485
  522
  562
  602
  645
  689
  735
Revenue / Adjusted assets
  2.222
  2.154
  2.235
  2.217
  2.233
  2.237
  2.229
  2.200
  2.236
  2.218
  2.223
  2.223
  2.221
  2.224
  2.230
  2.227
  2.219
  2.224
  2.226
  2.221
  2.221
  2.221
  2.225
  2.223
  2.221
  2.224
  2.221
  2.224
  2.222
  2.222
  2.220
Average production assets, $m
  1
  1
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
Working capital, $m
  7
  7
  10
  13
  17
  21
  27
  33
  40
  48
  57
  67
  78
  89
  102
  115
  129
  144
  160
  176
  193
  211
  230
  249
  269
  290
  312
  335
  358
  383
  408
Total debt, $m
  0
  1
  2
  3
  5
  7
  9
  11
  14
  17
  21
  25
  29
  34
  39
  44
  50
  56
  62
  68
  75
  82
  90
  98
  106
  114
  123
  132
  141
  151
  161
Total liabilities, $m
  2
  3
  4
  5
  7
  9
  11
  13
  16
  19
  23
  27
  31
  36
  41
  46
  52
  58
  64
  70
  77
  84
  92
  100
  108
  116
  125
  134
  143
  153
  163
Total equity, $m
  9
  10
  13
  18
  23
  30
  37
  46
  56
  68
  80
  94
  109
  125
  143
  161
  181
  202
  224
  247
  270
  296
  322
  349
  377
  406
  437
  469
  502
  536
  572
Total liabilities and equity, $m
  11
  13
  17
  23
  30
  39
  48
  59
  72
  87
  103
  121
  140
  161
  184
  207
  233
  260
  288
  317
  347
  380
  414
  449
  485
  522
  562
  603
  645
  689
  735
Debt-to-equity ratio
  0.000
  0.080
  0.140
  0.170
  0.200
  0.220
  0.230
  0.240
  0.250
  0.260
  0.260
  0.260
  0.270
  0.270
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Adjusted equity ratio
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  1
  2
  3
  5
  7
  9
  12
  15
  18
  22
  26
  31
  35
  41
  46
  52
  58
  65
  72
  79
  87
  95
  103
  111
  120
  130
  139
  149
  160
  170
Depreciation, amort., depletion, $m
  1
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
Funds from operations, $m
  -1
  1
  2
  3
  5
  7
  10
  12
  15
  19
  23
  27
  32
  37
  43
  49
  55
  61
  68
  76
  83
  91
  99
  108
  117
  126
  136
  146
  156
  167
  178
Change in working capital, $m
  -1
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
Cash from operations, $m
  0
  -1
  -1
  0
  1
  2
  4
  6
  8
  11
  14
  17
  21
  26
  30
  35
  41
  47
  53
  59
  66
  73
  81
  89
  97
  105
  114
  123
  133
  143
  153
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
Cash from investing activities, $m
  2
  0
  0
  0
  0
  0
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -11
Free cash flow, $m
  2
  -1
  -1
  0
  1
  2
  3
  5
  7
  9
  12
  15
  19
  23
  27
  32
  37
  42
  48
  54
  61
  68
  75
  82
  90
  98
  106
  115
  124
  133
  143
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
Issuance/(repurchase) of shares, $m
  0
  2
  2
  1
  1
  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  
  0
  3
  3
  2
  3
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
Total cash flow (excl. dividends), $m
  2
  1
  2
  2
  3
  4
  5
  7
  10
  13
  16
  19
  23
  28
  32
  37
  43
  48
  54
  61
  68
  75
  82
  90
  98
  106
  115
  124
  133
  143
  153
Retained Cash Flow (-), $m
  -1
  -3
  -4
  -4
  -5
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
Prev. year cash balance distribution, $m
 
  2
  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
 
  1
  -2
  -2
  -3
  -3
  -2
  -1
  0
  1
  3
  5
  8
  11
  15
  19
  23
  28
  33
  38
  44
  50
  56
  63
  69
  77
  84
  92
  100
  109
  117
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
 
  1
  -2
  -2
  -2
  -2
  -2
  -1
  0
  1
  2
  3
  3
  4
  5
  5
  6
  6
  6
  6
  6
  5
  5
  4
  4
  3
  2
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  92.4
  87.9
  85.5
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6

Pro-Dex, Inc. (Pro-Dex) designs and produces surgical and dental instruments and motion control products used in the medical, factory automation and scientific research industries. The Company operates through four segments: Pro-Dex, OMS, Fineline and Engineering Services Division (ESD). The Pro-Dex segment provides primarily medical and dental instruments using shared production and assembly machines and workforce. The OMS segment is engaged in providing multi-axis motion control applications. The Fineline segment manufactures plastic injection molds for various industries. The ESD segment provides permanent placement and contract services in the fields of engineering, manufacturing and quality to diverse businesses. In addition to Pro-Dex, the names Micro Motors and Oregon Micro Systems are used for marketing purposes as brand names. It provides engineering consulting services, as well as quality and regulatory consulting services, to a range of industries through EDS.

FINANCIAL RATIOS  of  Pro-Dex (PDEX)

Valuation Ratios
P/E Ratio 31.4
Price to Sales 1.6
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 53.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.3%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 11.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity 11.8%
Return On Equity - 3 Yr. Avg. 3.9%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 25%
Gross Margin - 3 Yr. Avg. 27.7%
EBITDA Margin 10%
EBITDA Margin - 3 Yr. Avg. 5.9%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. -5.6%
Pre-Tax Margin 5%
Pre-Tax Margin - 3 Yr. Avg. -1.4%
Net Profit Margin 5%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PDEX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PDEX stock intrinsic value calculation we used $20 million for the last fiscal year's total revenue generated by Pro-Dex. The default revenue input number comes from 2016 income statement of Pro-Dex. 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 PDEX stock valuation model: a) initial revenue growth rate of 40% 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 PDEX is calculated based on our internal credit rating of Pro-Dex, 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 Pro-Dex.
    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 PDEX stock the variable cost ratio is equal to 85%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3 million in the base year in the intrinsic value calculation for PDEX 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 Pro-Dex.

Corporate tax rate of 27% is the nominal tax rate for Pro-Dex. 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 PDEX 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 PDEX are equal to 2.5%.

Life of production assets of 0.5 years is the average useful life of capital assets used in Pro-Dex 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 PDEX is equal to 25%. 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 - $9 million for Pro-Dex - 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 3.983 million for Pro-Dex 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 Pro-Dex at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ ETFs with exposure to Pro-Dex, Inc. : October 2, 2017   [Oct-02-17 11:01AM  Capital Cube]
▶ Should You Buy Pro-Dex Inc (PDEX) At $7.2?   [Sep-29-17 04:42PM  Simply Wall St.]
▶ ETFs with exposure to Pro-Dex, Inc. : September 19, 2017   [Sep-19-17 06:18PM  Capital Cube]
▶ ETFs with exposure to Pro-Dex, Inc. : June 8, 2017   [Jun-08-17 01:51PM  Capital Cube]
▶ ETFs with exposure to Pro-Dex, Inc. : April 7, 2017   [Apr-07-17 05:15PM  Capital Cube]
▶ Pro-Dex, Inc.: Strong price momentum but will it sustain?   [Oct-10-16 04:12PM  Capital Cube]
▶ 4 Stocks That are Trading With Heavy Volume Today   [Feb-12-16 10:16AM  Accesswire]
▶ 10-Q for Pro-Dex, Inc.   [May-16  08:09PM  at Company Spotlight]
▶ 10-Q for Pro-Dex, Inc.   [Feb-12  07:07PM  at Company Spotlight]
▶ 10-Q for Pro-Dex, Inc.   [Nov-15  07:07PM  Company Spotlight]
▶ PRO DEX INC Files SEC form 8-K, Other Events   [Sep-29  04:30PM  EDGAR Online]
▶ Pro-Dex (PDEX) Upgraded From Sell to Hold   [Sep-24  09:05AM  at TheStreet]
Financial statements of PDEX
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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