Intrinsic value of Veracyte - VCYT

Previous Close

$6.46

  Intrinsic Value

$0.44

stock screener

  Rating & Target

str. sell

-93%

Previous close

$6.46

 
Intrinsic value

$0.44

 
Up/down potential

-93%

 
Rating

str. sell

We calculate the intrinsic value of VCYT 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 0.2

 

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, %
  30.00
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  65
  78
  92
  108
  126
  144
  164
  185
  208
  232
  257
  283
  311
  339
  369
  400
  433
  466
  501
  538
  576
  615
  656
  698
  742
  788
  836
  886
  938
  993
  1,049
Variable operating expenses, $m
 
  58
  68
  80
  93
  106
  121
  137
  153
  171
  189
  209
  229
  250
  272
  295
  319
  344
  369
  396
  424
  453
  483
  514
  547
  581
  616
  653
  691
  731
  773
Fixed operating expenses, $m
 
  48
  49
  51
  52
  53
  55
  56
  57
  59
  60
  62
  63
  65
  66
  68
  70
  72
  73
  75
  77
  79
  81
  83
  85
  87
  89
  92
  94
  96
  99
Total operating expenses, $m
  94
  106
  117
  131
  145
  159
  176
  193
  210
  230
  249
  271
  292
  315
  338
  363
  389
  416
  442
  471
  501
  532
  564
  597
  632
  668
  705
  745
  785
  827
  872
Operating income, $m
  -29
  -28
  -25
  -22
  -19
  -15
  -11
  -7
  -3
  2
  7
  13
  19
  25
  31
  37
  44
  51
  59
  67
  75
  83
  92
  101
  111
  121
  131
  142
  153
  165
  178
EBITDA, $m
  -25
  -25
  -22
  -18
  -15
  -10
  -6
  -1
  5
  10
  16
  23
  29
  36
  43
  51
  59
  67
  76
  85
  94
  104
  114
  125
  136
  147
  159
  172
  185
  199
  213
Interest expense (income), $m
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  15
  17
  19
  21
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  54
  57
  61
  65
  68
  73
Earnings before tax, $m
  -31
  -31
  -29
  -27
  -25
  -23
  -20
  -17
  -15
  -11
  -8
  -4
  -1
  3
  7
  12
  16
  21
  26
  31
  36
  42
  48
  54
  60
  67
  74
  81
  89
  97
  105
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  6
  7
  8
  10
  11
  13
  15
  16
  18
  20
  22
  24
  26
  28
Net income, $m
  -31
  -31
  -29
  -27
  -25
  -23
  -20
  -17
  -15
  -11
  -8
  -4
  -1
  2
  5
  9
  12
  15
  19
  23
  26
  31
  35
  39
  44
  49
  54
  59
  65
  71
  77

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  59
  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
  101
  50
  60
  70
  81
  93
  106
  120
  134
  150
  166
  183
  201
  219
  239
  259
  280
  301
  324
  347
  372
  397
  424
  451
  480
  509
  540
  573
  606
  641
  678
Adjusted assets (=assets-cash), $m
  42
  50
  60
  70
  81
  93
  106
  120
  134
  150
  166
  183
  201
  219
  239
  259
  280
  301
  324
  347
  372
  397
  424
  451
  480
  509
  540
  573
  606
  641
  678
Revenue / Adjusted assets
  1.548
  1.560
  1.533
  1.543
  1.556
  1.548
  1.547
  1.542
  1.552
  1.547
  1.548
  1.546
  1.547
  1.548
  1.544
  1.544
  1.546
  1.548
  1.546
  1.550
  1.548
  1.549
  1.547
  1.548
  1.546
  1.548
  1.548
  1.546
  1.548
  1.549
  1.547
Average production assets, $m
  11
  13
  16
  18
  21
  24
  28
  31
  35
  39
  43
  48
  53
  57
  62
  68
  73
  79
  85
  91
  97
  104
  111
  118
  125
  133
  141
  150
  159
  168
  177
Working capital, $m
  62
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
Total debt, $m
  26
  30
  39
  48
  58
  69
  80
  93
  106
  120
  134
  150
  166
  182
  200
  218
  237
  256
  277
  298
  320
  343
  366
  391
  417
  443
  471
  500
  531
  562
  595
Total liabilities, $m
  41
  45
  54
  63
  73
  84
  95
  108
  121
  135
  149
  165
  181
  197
  215
  233
  252
  271
  292
  313
  335
  358
  381
  406
  432
  458
  486
  515
  546
  577
  610
Total equity, $m
  60
  5
  6
  7
  8
  9
  11
  12
  13
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
Total liabilities and equity, $m
  101
  50
  60
  70
  81
  93
  106
  120
  134
  150
  166
  183
  201
  219
  239
  259
  280
  301
  324
  348
  372
  398
  423
  451
  480
  509
  540
  572
  607
  641
  678
Debt-to-equity ratio
  0.433
  6.020
  6.490
  6.860
  7.150
  7.390
  7.590
  7.750
  7.880
  8.000
  8.100
  8.180
  8.250
  8.320
  8.370
  8.420
  8.460
  8.500
  8.540
  8.570
  8.600
  8.620
  8.650
  8.670
  8.690
  8.710
  8.720
  8.740
  8.750
  8.770
  8.780
Adjusted equity ratio
  0.024
  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
  -31
  -31
  -29
  -27
  -25
  -23
  -20
  -17
  -15
  -11
  -8
  -4
  -1
  2
  5
  9
  12
  15
  19
  23
  26
  31
  35
  39
  44
  49
  54
  59
  65
  71
  77
Depreciation, amort., depletion, $m
  4
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  11
  12
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  35
Funds from operations, $m
  -34
  -28
  -26
  -23
  -21
  -18
  -15
  -11
  -7
  -3
  1
  5
  10
  14
  18
  22
  26
  31
  36
  41
  46
  51
  57
  63
  69
  75
  82
  89
  97
  104
  112
Change in working capital, $m
  -6
  1
  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
  2
  2
  2
  3
Cash from operations, $m
  -28
  -29
  -26
  -24
  -22
  -19
  -15
  -12
  -8
  -5
  0
  4
  9
  13
  17
  21
  25
  29
  34
  39
  44
  50
  55
  61
  67
  73
  80
  87
  94
  102
  110
Maintenance CAPEX, $m
  0
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
New CAPEX, $m
  -4
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Cash from investing activities, $m
  -4
  -4
  -5
  -6
  -7
  -7
  -8
  -10
  -10
  -11
  -12
  -13
  -15
  -16
  -16
  -17
  -19
  -21
  -22
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -36
  -39
  -41
  -44
Free cash flow, $m
  -32
  -33
  -32
  -30
  -28
  -26
  -24
  -21
  -19
  -16
  -12
  -9
  -6
  -3
  0
  3
  6
  9
  12
  16
  20
  23
  27
  32
  36
  40
  45
  50
  55
  61
  67
Issuance/(repayment) of debt, $m
  19
  4
  8
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
Issuance/(repurchase) of shares, $m
  33
  35
  30
  28
  26
  24
  22
  19
  16
  13
  10
  6
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  52
  39
  38
  37
  36
  35
  34
  31
  29
  27
  25
  21
  18
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
Total cash flow (excl. dividends), $m
  20
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  17
  21
  25
  29
  33
  37
  42
  46
  51
  56
  62
  67
  73
  79
  86
  93
  100
Retained Cash Flow (-), $m
  -9
  -35
  -30
  -28
  -26
  -24
  -22
  -19
  -16
  -13
  -10
  -6
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
Prev. year cash balance distribution, $m
 
  59
  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
 
  30
  -23
  -21
  -18
  -15
  -12
  -9
  -5
  -2
  2
  6
  10
  12
  15
  19
  23
  27
  31
  35
  39
  44
  49
  54
  59
  64
  70
  76
  82
  89
  96
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
 
  29
  -21
  -18
  -15
  -12
  -9
  -6
  -3
  -1
  1
  3
  4
  5
  5
  6
  6
  6
  6
  5
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  9.4
  3.6
  1.6
  0.8
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
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Veracyte, Inc. is a genomic diagnostics company. The Company uses genomic technology to resolve diagnostic ambiguity. It targets diseases in which patients undergo invasive diagnostic procedures. Its products combine genomic technology, clinical science and machine learning. The Company commercializes over three genomic tests, which are transforming the diagnosis of thyroid cancer, lung cancer and idiopathic pulmonary fibrosis. The Company’s commercial solution, the Afirma Thyroid fine needle aspiration (FNA) Analysis, centers on the Afirma Gene Expression Classifier (GEC). The Afirma GEC is offered directly or as part of a solution that also includes cytopathology. The Company operates in the pulmonology diagnostics market. It offers Percepta Bronchial Genomic Classifier, a genomic test to resolve ambiguity in lung cancer diagnosis. It also offers the Envisia Genomic Classifier, which is designed to help in the assessment of patients suspected to have idiopathic pulmonary fibrosis.

FINANCIAL RATIOS  of  Veracyte (VCYT)

Valuation Ratios
P/E Ratio -7
Price to Sales 3.4
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow -7.8
Price to Free Cash Flow -6.8
Growth Rates
Sales Growth Rate 30%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 43.3%
Total Debt to Equity 43.3%
Interest Coverage -15
Management Effectiveness
Return On Assets -33%
Ret/ On Assets - 3 Yr. Avg. -40.5%
Return On Total Capital -43.7%
Ret/ On T. Cap. - 3 Yr. Avg. -54.8%
Return On Equity -55.9%
Return On Equity - 3 Yr. Avg. -63.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 61.5%
Gross Margin - 3 Yr. Avg. 58.5%
EBITDA Margin -38.5%
EBITDA Margin - 3 Yr. Avg. -58.7%
Operating Margin -44.6%
Oper. Margin - 3 Yr. Avg. -62.3%
Pre-Tax Margin -47.7%
Pre-Tax Margin - 3 Yr. Avg. -64%
Net Profit Margin -47.7%
Net Profit Margin - 3 Yr. Avg. -64%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

VCYT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VCYT stock intrinsic value calculation we used $65 million for the last fiscal year's total revenue generated by Veracyte. The default revenue input number comes from 2016 income statement of Veracyte. 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 VCYT stock valuation model: a) initial revenue growth rate of 20% 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 VCYT is calculated based on our internal credit rating of Veracyte, 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 Veracyte.
    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 VCYT stock the variable cost ratio is equal to 73.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $47 million in the base year in the intrinsic value calculation for VCYT 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 12.9% for Veracyte.

Corporate tax rate of 27% is the nominal tax rate for Veracyte. 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 VCYT 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 VCYT are equal to 16.9%.

Life of production assets of 3 years is the average useful life of capital assets used in Veracyte 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 VCYT is equal to 4.6%. 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 - $60 million for Veracyte - 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 33.894 million for Veracyte 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 Veracyte at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ ETFs with exposure to Veracyte, Inc. : December 11, 2017   [Dec-11-17 02:14PM  Capital Cube]
▶ ETFs with exposure to Veracyte, Inc. : December 1, 2017   [Dec-01-17 10:49AM  Capital Cube]
▶ Veracyte reports 3Q loss   [05:07PM  Associated Press]
▶ 5 MedTech Stocks to Pick for Stellar Returns   [Sep-18-17 10:07AM  Zacks]
▶ ETFs with exposure to Veracyte, Inc. : August 17, 2017   [Aug-17-17 04:06PM  Capital Cube]
▶ Veracyte reports 2Q loss   [Jul-31-17 09:17PM  Associated Press]
▶ ETFs with exposure to Veracyte, Inc. : May 9, 2017   [May-09-17 05:10PM  Capital Cube]
▶ Veracyte reports 1Q loss   [May-03-17 06:11PM  Associated Press]
▶ Veracyte reports 4Q loss   [Mar-01-17 04:56PM  Associated Press]
▶ Veracyte Announces Executive Promotions   [Feb-28-17 04:05PM  PR Newswire]
▶ Veracyte Inc (VCYT): Are Hedge Funds Right About This Stock?   [Dec-12-16 05:57PM  at Insider Monkey]
Financial statements of VCYT
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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