Intrinsic value of Meridian Bioscience - VIVO

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$14.50

  Intrinsic Value

$15.10

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  Rating & Target

hold

+4%

Previous close

$14.50

 
Intrinsic value

$15.10

 
Up/down potential

+4%

 
Rating

hold

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

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
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  201
  214
  227
  241
  256
  271
  287
  303
  320
  338
  357
  377
  397
  418
  441
  464
  489
  515
  542
  570
  599
  630
  663
  697
  733
  770
  809
  850
  894
  939
  987
Variable operating expenses, $m
 
  158
  168
  178
  188
  199
  210
  222
  234
  247
  260
  269
  283
  299
  315
  331
  349
  367
  386
  407
  428
  450
  473
  497
  523
  549
  578
  607
  638
  670
  704
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
  163
  158
  168
  178
  188
  199
  210
  222
  234
  247
  260
  269
  283
  299
  315
  331
  349
  367
  386
  407
  428
  450
  473
  497
  523
  549
  578
  607
  638
  670
  704
Operating income, $m
  37
  56
  60
  64
  68
  72
  77
  81
  86
  91
  97
  108
  114
  120
  126
  133
  140
  147
  155
  163
  172
  180
  190
  200
  210
  220
  232
  244
  256
  269
  283
EBITDA, $m
  45
  66
  70
  74
  78
  83
  88
  93
  98
  104
  109
  115
  122
  128
  135
  142
  150
  158
  166
  175
  184
  193
  203
  213
  224
  236
  248
  261
  274
  288
  302
Interest expense (income), $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Earnings before tax, $m
  36
  54
  58
  61
  65
  70
  74
  78
  83
  88
  93
  104
  110
  116
  122
  128
  135
  142
  149
  157
  165
  174
  182
  192
  202
  212
  223
  234
  246
  258
  271
Tax expense, $m
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47
  49
  52
  54
  57
  60
  63
  66
  70
  73
Net income, $m
  22
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  76
  80
  84
  89
  93
  98
  104
  109
  115
  120
  127
  133
  140
  147
  155
  162
  171
  179
  188
  198

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  57
  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
  250
  205
  218
  232
  246
  260
  275
  291
  308
  325
  343
  362
  381
  402
  424
  446
  470
  494
  520
  547
  576
  605
  637
  669
  704
  740
  777
  817
  858
  902
  948
Adjusted assets (=assets-cash), $m
  193
  205
  218
  232
  246
  260
  275
  291
  308
  325
  343
  362
  381
  402
  424
  446
  470
  494
  520
  547
  576
  605
  637
  669
  704
  740
  777
  817
  858
  902
  948
Revenue / Adjusted assets
  1.041
  1.044
  1.041
  1.039
  1.041
  1.042
  1.044
  1.041
  1.039
  1.040
  1.041
  1.041
  1.042
  1.040
  1.040
  1.040
  1.040
  1.043
  1.042
  1.042
  1.040
  1.041
  1.041
  1.042
  1.041
  1.041
  1.041
  1.040
  1.042
  1.041
  1.041
Average production assets, $m
  59
  63
  67
  71
  75
  80
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  144
  151
  159
  168
  176
  185
  195
  205
  215
  226
  238
  250
  263
  276
  290
Working capital, $m
  111
  63
  67
  71
  75
  80
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  144
  151
  159
  168
  176
  185
  195
  205
  215
  226
  238
  250
  263
  276
  290
Total debt, $m
  55
  55
  60
  65
  71
  76
  82
  88
  95
  101
  108
  116
  123
  131
  140
  149
  158
  167
  177
  188
  199
  211
  223
  235
  249
  263
  277
  293
  309
  326
  344
Total liabilities, $m
  80
  80
  85
  90
  96
  101
  107
  113
  120
  126
  133
  141
  148
  156
  165
  174
  183
  192
  202
  213
  224
  236
  248
  260
  274
  288
  302
  318
  334
  351
  369
Total equity, $m
  170
  126
  133
  142
  150
  159
  168
  178
  188
  199
  210
  221
  233
  246
  259
  273
  287
  302
  318
  334
  352
  370
  389
  409
  430
  452
  475
  499
  525
  551
  579
Total liabilities and equity, $m
  250
  206
  218
  232
  246
  260
  275
  291
  308
  325
  343
  362
  381
  402
  424
  447
  470
  494
  520
  547
  576
  606
  637
  669
  704
  740
  777
  817
  859
  902
  948
Debt-to-equity ratio
  0.324
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.500
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
  0.570
  0.570
  0.580
  0.580
  0.580
  0.580
  0.590
  0.590
  0.590
  0.590
Adjusted equity ratio
  0.585
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  22
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  76
  80
  84
  89
  93
  98
  104
  109
  115
  120
  127
  133
  140
  147
  155
  162
  171
  179
  188
  198
Depreciation, amort., depletion, $m
  8
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
Funds from operations, $m
  40
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  83
  88
  93
  98
  103
  108
  114
  120
  126
  132
  139
  146
  154
  162
  170
  179
  188
  197
  207
  218
Change in working capital, $m
  -1
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  41
  45
  48
  51
  54
  57
  61
  64
  68
  71
  75
  78
  82
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
  185
  194
  204
Maintenance CAPEX, $m
  0
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
Cash from investing activities, $m
  -4
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
  -23
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
Free cash flow, $m
  37
  38
  40
  42
  45
  48
  50
  53
  56
  60
  63
  65
  68
  72
  76
  80
  84
  89
  94
  99
  104
  109
  115
  121
  127
  133
  140
  147
  155
  163
  171
Issuance/(repayment) of debt, $m
  -4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
Total cash flow (excl. dividends), $m
  34
  42
  45
  48
  50
  53
  56
  60
  63
  66
  70
  72
  76
  80
  84
  89
  94
  99
  104
  109
  115
  121
  127
  133
  140
  147
  155
  163
  171
  180
  189
Retained Cash Flow (-), $m
  -4
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
Prev. year cash balance distribution, $m
 
  52
  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
 
  87
  37
  39
  42
  44
  47
  50
  53
  56
  59
  61
  64
  68
  71
  75
  79
  83
  88
  93
  97
  102
  108
  113
  119
  125
  132
  139
  146
  153
  161
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
 
  83
  34
  34
  35
  34
  34
  34
  33
  32
  31
  29
  27
  26
  24
  22
  20
  18
  16
  14
  12
  11
  9
  7
  6
  5
  4
  3
  2
  2
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Meridian Bioscience, Inc. is a life science company engaged in the development, manufacture, sale and distribution of diagnostic test kits for gastrointestinal, viral, respiratory and parasitic infectious diseases, and elevated blood lead levels, and the manufacture and distribution of bulk antigens, antibodies, polymerase chain reaction (PCR)/quantitative PCR (qPCR) reagents, nucleotides, competent cells and bioresearch reagents used by researchers and other diagnostic manufacturers. Its segments include Diagnostics and Life Science. The Diagnostics segment includes manufacturing operations in Cincinnati, and the sale and distribution of diagnostic test kits in the countries consisting of North, Central and South America; Europe, the Middle East and Africa (EMEA), and other countries outside of the Americas and EMEA. The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; Luckenwalde, Germany, and Sydney, Australia.

FINANCIAL RATIOS  of  Meridian Bioscience (VIVO)

Valuation Ratios
P/E Ratio 27.8
Price to Sales 3
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 14.9
Price to Free Cash Flow 16.5
Growth Rates
Sales Growth Rate 2.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -10.6%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 29.4%
Total Debt to Equity 32.4%
Interest Coverage 19
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 14.8%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 16.1%
Return On Equity 13.1%
Return On Equity - 3 Yr. Avg. 18.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 62.2%
Gross Margin - 3 Yr. Avg. 63.4%
EBITDA Margin 22.9%
EBITDA Margin - 3 Yr. Avg. 27.9%
Operating Margin 18.9%
Oper. Margin - 3 Yr. Avg. 24.5%
Pre-Tax Margin 17.9%
Pre-Tax Margin - 3 Yr. Avg. 24%
Net Profit Margin 10.9%
Net Profit Margin - 3 Yr. Avg. 15.2%
Effective Tax Rate 38.9%
Eff/ Tax Rate - 3 Yr. Avg. 36.9%
Payout Ratio 109.1%

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 $201 million for the last fiscal year's total revenue generated by Meridian Bioscience. The default revenue input number comes from 2017 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 6.4% 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 74.1%.

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 29.4%.

Life of production assets of 14.7 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 29.4%. 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 - $170 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 42.761 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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COMPANY NEWS

▶ Top NasdaqGS Healthcare Dividend Paying Companies   [Feb-09-18 05:02AM  Simply Wall St.]
▶ Meridian Bioscience beats 1Q profit forecasts   [Jan-25-18 07:30AM  Associated Press]
▶ Greater Cincinnati firm faces lawsuits linked to FDA warning, stock dip   [Jan-11-18 04:00PM  American City Business Journals]
▶ Meridian Bioscience meets 4Q profit forecasts   [Nov-09-17 08:03AM  Associated Press]
▶ Stock in Cincinnati firm dips after FDA warning   [05:35AM  American City Business Journals]
▶ One of Cincinnatis largest public companies names new CEO   [Oct-17-17 10:20AM  American City Business Journals]
Financial statements of VIVO
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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