Intrinsic value of Meridian Bioscience - VIVO

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$14.00

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$14.00

 
Intrinsic value

$14.61

 
Up/down potential

+4%

 
Rating

hold

 
Value-price divergence* premium content

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

We calculate the intrinsic value of VIVO 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 0.6

 

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, %
  0.51
  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
  196
  200
  205
  210
  216
  222
  229
  237
  246
  255
  265
  275
  286
  298
  311
  324
  338
  353
  369
  386
  404
  422
  442
  463
  485
  508
  532
  558
  585
  613
  643
Variable operating expenses, $m
 
  143
  146
  149
  153
  158
  163
  168
  174
  180
  187
  188
  195
  203
  212
  221
  231
  241
  252
  263
  276
  288
  302
  316
  331
  347
  363
  381
  399
  418
  439
Fixed operating expenses, $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
Total operating expenses, $m
  145
  143
  146
  149
  153
  158
  163
  168
  174
  180
  187
  188
  195
  203
  212
  221
  231
  241
  252
  263
  276
  288
  302
  316
  331
  347
  363
  381
  399
  418
  439
Operating income, $m
  51
  57
  59
  60
  62
  64
  67
  69
  72
  75
  78
  87
  91
  95
  99
  103
  107
  112
  117
  123
  128
  134
  140
  147
  154
  161
  169
  177
  186
  195
  204
EBITDA, $m
  58
  67
  69
  71
  73
  75
  77
  80
  83
  86
  89
  93
  96
  100
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  206
  216
Interest expense (income), $m
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
Earnings before tax, $m
  51
  55
  57
  58
  60
  62
  64
  67
  69
  72
  75
  84
  88
  91
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142
  148
  155
  163
  170
  179
  187
  196
Tax expense, $m
  19
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
Net income, $m
  32
  40
  41
  43
  44
  45
  47
  49
  51
  53
  55
  62
  64
  67
  70
  73
  76
  79
  83
  86
  90
  94
  99
  103
  108
  113
  119
  124
  130
  137
  143

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  47
  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
  252
  209
  214
  219
  226
  232
  240
  248
  257
  266
  277
  288
  299
  312
  325
  339
  354
  370
  386
  404
  422
  442
  463
  484
  507
  531
  557
  584
  612
  641
  673
Adjusted assets (=assets-cash), $m
  205
  209
  214
  219
  226
  232
  240
  248
  257
  266
  277
  288
  299
  312
  325
  339
  354
  370
  386
  404
  422
  442
  463
  484
  507
  531
  557
  584
  612
  641
  673
Revenue / Adjusted assets
  0.956
  0.957
  0.958
  0.959
  0.956
  0.957
  0.954
  0.956
  0.957
  0.959
  0.957
  0.955
  0.957
  0.955
  0.957
  0.956
  0.955
  0.954
  0.956
  0.955
  0.957
  0.955
  0.955
  0.957
  0.957
  0.957
  0.955
  0.955
  0.956
  0.956
  0.955
Average production assets, $m
  48
  48
  49
  51
  52
  54
  56
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  86
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  142
  148
  156
Working capital, $m
  104
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
Total debt, $m
  58
  56
  58
  60
  62
  65
  68
  71
  75
  79
  83
  87
  92
  97
  102
  108
  114
  120
  126
  134
  141
  149
  157
  166
  175
  185
  195
  205
  217
  229
  241
Total liabilities, $m
  85
  84
  86
  88
  90
  93
  96
  99
  103
  107
  111
  115
  120
  125
  130
  136
  142
  148
  154
  162
  169
  177
  185
  194
  203
  213
  223
  233
  245
  257
  269
Total equity, $m
  166
  125
  128
  132
  135
  139
  144
  149
  154
  160
  166
  173
  180
  187
  195
  203
  212
  222
  232
  242
  253
  265
  278
  291
  304
  319
  334
  350
  367
  385
  404
Total liabilities and equity, $m
  251
  209
  214
  220
  225
  232
  240
  248
  257
  267
  277
  288
  300
  312
  325
  339
  354
  370
  386
  404
  422
  442
  463
  485
  507
  532
  557
  583
  612
  642
  673
Debt-to-equity ratio
  0.349
  0.440
  0.450
  0.450
  0.460
  0.470
  0.470
  0.480
  0.490
  0.490
  0.500
  0.500
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
  0.570
  0.570
  0.580
  0.580
  0.590
  0.590
  0.590
  0.600
Adjusted equity ratio
  0.580
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600
  0.600

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  32
  40
  41
  43
  44
  45
  47
  49
  51
  53
  55
  62
  64
  67
  70
  73
  76
  79
  83
  86
  90
  94
  99
  103
  108
  113
  119
  124
  130
  137
  143
Depreciation, amort., depletion, $m
  7
  10
  10
  10
  10
  10
  11
  11
  11
  11
  11
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Funds from operations, $m
  31
  50
  52
  53
  54
  56
  58
  59
  61
  64
  66
  67
  70
  72
  75
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
Change in working capital, $m
  -6
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
Cash from operations, $m
  37
  63
  50
  51
  52
  54
  55
  57
  59
  61
  63
  64
  66
  69
  72
  74
  78
  81
  85
  88
  92
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
New CAPEX, $m
  -4
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Cash from investing activities, $m
  -67
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -13
  -13
  -13
  -14
  -15
  -16
  -16
  -18
  -18
  -19
Free cash flow, $m
  -30
  58
  45
  46
  47
  48
  49
  51
  52
  54
  56
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
Issuance/(repayment) of debt, $m
  58
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  61
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Total cash flow (excl. dividends), $m
  31
  60
  47
  48
  49
  51
  52
  54
  56
  58
  60
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
  111
  116
  121
  127
  133
  140
Retained Cash Flow (-), $m
  0
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
Prev. year cash balance distribution, $m
 
  43
  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
 
  100
  44
  45
  46
  47
  48
  49
  51
  52
  54
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
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
 
  96
  41
  39
  38
  36
  35
  33
  32
  30
  28
  26
  24
  22
  20
  18
  17
  15
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  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
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Meridian Bioscience, Inc., a life science company, develops, manufactures, distributes, and sells diagnostic test kits primarily for various gastrointestinal, viral, respiratory, and parasitic infectious diseases worldwide. The company operates through Diagnostics and Life Science segments. The Diagnostics segment offers testing platforms and technologies, including isothermal DNA amplification under the illumigene brand; rapid immunoassays, a single-use immunoassays that can be used in point-of-care settings under the TRU, ImmunoCard, and ImmunoCard STAT! brand names; enzyme-linked immunoassays under the Premier brand; and anodic stripping voltammetry, an electrical chemical sensor platform for quantitative determination under the LeadCare brand. This segment’s products are primarily used in the detection of infectious diseases caused by various bacteria, viruses, parasites, and pathogens. Its products consists of C. difficile, a causative agent for antibiotic-associated diarrhea from a hospital-acquired infection; foodborne products, such as tests for Enterohemorrhagic E. coli and Campylobacter jejuni; Helicobacter pylori to detect stomach ulcers; respiratory products; and tests to detect Group B Streptococcu, Chlamydia trachomatis, Neisseria gonorrhea, and Herpes Simplex Virus Type 1 and Type 2. This segment sells its products through direct sales force and independent distributors to acute care hospitals, reference laboratories, outpatient clinics, and physician office laboratories. The Life Science segment offers bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, competent cells, and bioresearch reagents used by researchers, agri-bio companies, and other diagnostic manufacturing companies. Meridian Bioscience, Inc. was founded in 1976 and is headquartered in Cincinnati, Ohio.

FINANCIAL RATIOS  of  Meridian Bioscience (VIVO)

Valuation Ratios
P/E Ratio 18.4
Price to Sales 3
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 15.9
Price to Free Cash Flow 17.9
Growth Rates
Sales Growth Rate 0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 5.9%
Financial Strength
Quick Ratio 12
Current Ratio 0
LT Debt to Equity 32.5%
Total Debt to Equity 34.9%
Interest Coverage 52
Management Effectiveness
Return On Assets 15%
Ret/ On Assets - 3 Yr. Avg. 18.3%
Return On Total Capital 16.4%
Ret/ On T. Cap. - 3 Yr. Avg. 20.2%
Return On Equity 19.3%
Return On Equity - 3 Yr. Avg. 21.1%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 65.3%
Gross Margin - 3 Yr. Avg. 63.3%
EBITDA Margin 30.1%
EBITDA Margin - 3 Yr. Avg. 30.5%
Operating Margin 26%
Oper. Margin - 3 Yr. Avg. 27.6%
Pre-Tax Margin 26%
Pre-Tax Margin - 3 Yr. Avg. 27.2%
Net Profit Margin 16.3%
Net Profit Margin - 3 Yr. Avg. 17.8%
Effective Tax Rate 37.3%
Eff/ Tax Rate - 3 Yr. Avg. 34.8%
Payout Ratio 106.3%

VIVO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VIVO stock intrinsic value calculation we used $196 million for the last fiscal year's total revenue generated by Meridian Bioscience. The default revenue input number comes from 2016 income statement of Meridian Bioscience. 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 VIVO 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 4.3%, whose default value for VIVO is calculated based on our internal credit rating of Meridian Bioscience, 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 Meridian Bioscience.
    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 VIVO stock the variable cost ratio is equal to 71.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for VIVO 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 Meridian Bioscience.

Corporate tax rate of 27% is the nominal tax rate for Meridian Bioscience. 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 VIVO 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 VIVO are equal to 24.2%.

Life of production assets of 12.8 years is the average useful life of capital assets used in Meridian Bioscience 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 VIVO is equal to 31.1%. 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 - $166 million for Meridian Bioscience - 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 42.666 million for Meridian Bioscience 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 Meridian Bioscience at the current share price and the inputted number of shares is $0.6 billion.


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Stock chart of VIVO Financial statements of VIVO
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