Intrinsic value of Tandem Diabetes Care - TNDM

Previous Close

$0.75

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

0%

Previous close

$0.75

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of TNDM 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, %
  15.07
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  84
  86
  88
  90
  92
  95
  98
  102
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  181
  190
  198
  208
  218
  228
  239
  251
  263
  276
Variable operating expenses, $m
 
  156
  160
  164
  168
  173
  179
  185
  192
  199
  206
  215
  223
  233
  242
  253
  264
  276
  288
  301
  315
  330
  345
  361
  378
  396
  415
  435
  456
  479
  502
Fixed operating expenses, $m
 
  9
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  18
  19
Total operating expenses, $m
  162
  165
  169
  174
  178
  183
  189
  196
  203
  210
  218
  227
  235
  245
  255
  266
  277
  290
  302
  315
  330
  345
  360
  377
  394
  413
  432
  453
  474
  497
  521
Operating income, $m
  -78
  -80
  -81
  -84
  -86
  -88
  -91
  -94
  -97
  -101
  -105
  -109
  -113
  -117
  -122
  -127
  -132
  -138
  -144
  -150
  -157
  -164
  -171
  -179
  -187
  -195
  -204
  -214
  -224
  -234
  -245
EBITDA, $m
  -73
  -78
  -79
  -81
  -84
  -86
  -89
  -92
  -95
  -98
  -102
  -106
  -110
  -114
  -119
  -124
  -129
  -135
  -140
  -146
  -153
  -160
  -167
  -174
  -182
  -191
  -199
  -208
  -218
  -228
  -239
Interest expense (income), $m
  4
  6
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
Earnings before tax, $m
  -83
  -85
  -86
  -88
  -91
  -94
  -97
  -100
  -104
  -107
  -111
  -116
  -120
  -125
  -130
  -136
  -142
  -148
  -155
  -161
  -169
  -176
  -184
  -193
  -202
  -211
  -221
  -231
  -242
  -254
  -266
Tax expense, $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
  0
Net income, $m
  -83
  -85
  -86
  -88
  -91
  -94
  -97
  -100
  -104
  -107
  -111
  -116
  -120
  -125
  -130
  -136
  -142
  -148
  -155
  -161
  -169
  -176
  -184
  -193
  -202
  -211
  -221
  -231
  -242
  -254
  -266

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  54
  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
  112
  114
  117
  120
  123
  127
  131
  136
  140
  146
  151
  157
  164
  170
  178
  185
  193
  202
  211
  221
  231
  241
  253
  265
  277
  290
  304
  319
  334
  350
  367
Adjusted assets (=assets-cash), $m
  58
  114
  117
  120
  123
  127
  131
  136
  140
  146
  151
  157
  164
  170
  178
  185
  193
  202
  211
  221
  231
  241
  253
  265
  277
  290
  304
  319
  334
  350
  367
Revenue / Adjusted assets
  1.448
  0.754
  0.752
  0.750
  0.748
  0.748
  0.748
  0.750
  0.750
  0.747
  0.748
  0.752
  0.750
  0.753
  0.747
  0.751
  0.751
  0.748
  0.749
  0.747
  0.749
  0.751
  0.751
  0.747
  0.751
  0.752
  0.750
  0.749
  0.751
  0.751
  0.752
Average production assets, $m
  19
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
Working capital, $m
  61
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
Total debt, $m
  79
  64
  66
  69
  72
  75
  79
  83
  87
  92
  97
  102
  108
  114
  121
  128
  135
  143
  151
  160
  169
  178
  188
  199
  210
  222
  235
  248
  262
  276
  292
Total liabilities, $m
  118
  103
  105
  108
  111
  114
  118
  122
  126
  131
  136
  141
  147
  153
  160
  167
  174
  182
  190
  199
  208
  217
  227
  238
  249
  261
  274
  287
  301
  315
  331
Total equity, $m
  -6
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
Total liabilities and equity, $m
  112
  114
  117
  120
  123
  127
  131
  136
  140
  146
  151
  157
  163
  170
  178
  186
  193
  202
  211
  221
  231
  241
  252
  264
  277
  290
  304
  319
  334
  350
  368
Debt-to-equity ratio
  -13.167
  5.590
  5.660
  5.750
  5.840
  5.930
  6.020
  6.120
  6.220
  6.320
  6.420
  6.520
  6.620
  6.710
  6.800
  6.890
  6.980
  7.070
  7.150
  7.230
  7.310
  7.380
  7.460
  7.530
  7.590
  7.660
  7.720
  7.780
  7.830
  7.890
  7.940
Adjusted equity ratio
  -1.034
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -83
  -85
  -86
  -88
  -91
  -94
  -97
  -100
  -104
  -107
  -111
  -116
  -120
  -125
  -130
  -136
  -142
  -148
  -155
  -161
  -169
  -176
  -184
  -193
  -202
  -211
  -221
  -231
  -242
  -254
  -266
Depreciation, amort., depletion, $m
  5
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
Funds from operations, $m
  -61
  -83
  -84
  -86
  -89
  -92
  -94
  -98
  -101
  -105
  -109
  -113
  -118
  -122
  -127
  -133
  -139
  -145
  -151
  -158
  -165
  -172
  -180
  -188
  -197
  -206
  -216
  -226
  -236
  -248
  -259
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  -61
  -84
  -84
  -87
  -89
  -92
  -95
  -98
  -101
  -105
  -109
  -113
  -118
  -123
  -128
  -133
  -139
  -145
  -151
  -158
  -165
  -173
  -181
  -189
  -198
  -207
  -217
  -227
  -237
  -249
  -260
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
New CAPEX, $m
  -9
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
Cash from investing activities, $m
  10
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -9
  -9
Free cash flow, $m
  -51
  -86
  -87
  -89
  -92
  -94
  -98
  -101
  -105
  -108
  -113
  -117
  -122
  -127
  -132
  -138
  -144
  -150
  -156
  -163
  -171
  -179
  -187
  -195
  -204
  -214
  -224
  -234
  -245
  -257
  -269
Issuance/(repayment) of debt, $m
  50
  -15
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  2
  103
  86
  89
  91
  94
  97
  100
  104
  108
  112
  116
  121
  126
  131
  137
  143
  149
  155
  162
  170
  177
  185
  194
  203
  212
  222
  233
  244
  255
  267
Cash from financing (excl. dividends), $m  
  52
  88
  88
  92
  94
  97
  101
  104
  108
  113
  117
  121
  127
  132
  137
  144
  150
  157
  163
  171
  179
  187
  195
  205
  214
  224
  235
  246
  258
  270
  282
Total cash flow (excl. dividends), $m
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Retained Cash Flow (-), $m
  69
  -103
  -86
  -89
  -91
  -94
  -97
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -131
  -137
  -143
  -149
  -155
  -162
  -170
  -177
  -185
  -194
  -203
  -212
  -222
  -233
  -244
  -255
  -267
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
 
  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
 
  -101
  -84
  -86
  -89
  -91
  -94
  -97
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -131
  -136
  -142
  -148
  -155
  -162
  -169
  -177
  -185
  -193
  -202
  -211
  -221
  -232
  -242
  -254
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  -93
  -71
  -66
  -61
  -56
  -51
  -46
  -41
  -37
  -32
  -28
  -24
  -20
  -16
  -13
  -11
  -8
  -6
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  5.8
  0.7
  0.1
  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
  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

Tandem Diabetes Care, Inc., a medical device company, designs, develops, and commercializes various products for people with insulin-dependent diabetes in the United States. The company’s flagship product is the t:slim insulin delivery system that comprises t:slim pump, its disposable insulin cartridge, and an infusion set. It also provides t:flex insulin delivery system that includes t:flex pump, its 480-unit disposable insulin cartridge, and an infusion set; and t:slim G4 insulin delivery system, a touch-screen pump with an integrated CGM system. In addition, the company offers t:connect diabetes management application, a cloud-based data management application, which provides a visual way to display therapy management data from the pump and supported blood glucose meters for users, their caregivers, and their healthcare providers; t:90, an infusion set for use with its insulin pump products; and various pump accessories. Its products in development include Tandem Device Updater, a PC and Mac-compatible Web-based system that allows users to update their pump’s software; t:sport insulin delivery system; and automated insulin delivery, an artificial pancreas system with external device, or combination of devices, intended to aid a person with insulin-dependent diabetes by automatically testing and controlling their blood glucose. The company was formerly known as Phluid Inc. and changed its name to Tandem Diabetes Care, Inc. in January 2008. Tandem Diabetes Care, Inc. was founded in 2006 and is headquartered in San Diego, California.

FINANCIAL RATIOS  of  Tandem Diabetes Care (TNDM)

Valuation Ratios
P/E Ratio -0.3
Price to Sales 0.3
Price to Book -3.9
Price to Tangible Book
Price to Cash Flow -0.4
Price to Free Cash Flow -0.3
Growth Rates
Sales Growth Rate 15.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 17.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity -1316.7%
Total Debt to Equity -1316.7%
Interest Coverage -20
Management Effectiveness
Return On Assets -66.7%
Ret/ On Assets - 3 Yr. Avg. -61.3%
Return On Total Capital -100.6%
Ret/ On T. Cap. - 3 Yr. Avg. -84.1%
Return On Equity -291.2%
Return On Equity - 3 Yr. Avg. -168.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 28.6%
Gross Margin - 3 Yr. Avg. 31.9%
EBITDA Margin -88.1%
EBITDA Margin - 3 Yr. Avg. -106.6%
Operating Margin -92.9%
Oper. Margin - 3 Yr. Avg. -112.5%
Pre-Tax Margin -98.8%
Pre-Tax Margin - 3 Yr. Avg. -118.5%
Net Profit Margin -98.8%
Net Profit Margin - 3 Yr. Avg. -119.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -0.4%
Payout Ratio 0%

TNDM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TNDM stock intrinsic value calculation we used $84 million for the last fiscal year's total revenue generated by Tandem Diabetes Care. The default revenue input number comes from 2016 income statement of Tandem Diabetes Care. 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 TNDM stock valuation model: a) initial revenue growth rate of 2% 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 8.3%, whose default value for TNDM is calculated based on our internal credit rating of Tandem Diabetes Care, 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 Tandem Diabetes Care.
    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 TNDM stock the variable cost ratio is equal to 182.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9 million in the base year in the intrinsic value calculation for TNDM 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 7.4% for Tandem Diabetes Care.

Corporate tax rate of 27% is the nominal tax rate for Tandem Diabetes Care. 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 TNDM 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 TNDM are equal to 22.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Tandem Diabetes Care 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 TNDM is equal to 8.3%. 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 - $-6 million for Tandem Diabetes Care - 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 30.016 million for Tandem Diabetes Care 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 Tandem Diabetes Care at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Tandem Diabetes reports 1Q loss   [Apr-27-17 05:44PM  Associated Press]
▶ 2 Health Care Stocks Crushed on Thursday   [01:35PM  24/7 Wall St.]
Stock chart of TNDM Financial statements of TNDM
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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