Intrinsic value of Intersect ENT - XENT

Previous Close

$30.00

  Intrinsic Value

$0.98

stock screener

  Rating & Target

str. sell

-97%

Previous close

$30.00

 
Intrinsic value

$0.98

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of XENT 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 0.9

 

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, %
  27.42
  26.30
  24.17
  22.25
  20.53
  18.97
  17.58
  16.32
  15.19
  14.17
  13.25
  12.43
  11.68
  11.02
  10.41
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.11
  6.00
Revenue, $m
  79
  100
  124
  151
  183
  217
  255
  297
  342
  391
  442
  497
  556
  617
  681
  748
  818
  892
  968
  1,047
  1,130
  1,215
  1,304
  1,397
  1,493
  1,593
  1,697
  1,806
  1,918
  2,036
  2,158
Variable operating expenses, $m
 
  93
  116
  142
  171
  204
  239
  278
  321
  366
  415
  466
  521
  578
  638
  701
  767
  835
  907
  981
  1,058
  1,139
  1,222
  1,309
  1,399
  1,493
  1,590
  1,692
  1,797
  1,907
  2,022
Fixed operating expenses, $m
 
  33
  34
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
Total operating expenses, $m
  105
  126
  150
  176
  206
  240
  276
  316
  360
  406
  456
  508
  564
  622
  683
  747
  815
  884
  957
  1,032
  1,110
  1,193
  1,277
  1,365
  1,457
  1,552
  1,651
  1,754
  1,861
  1,972
  2,089
Operating income, $m
  -26
  -27
  -26
  -25
  -24
  -23
  -21
  -19
  -17
  -15
  -13
  -11
  -8
  -5
  -2
  1
  4
  7
  11
  15
  19
  23
  27
  32
  36
  41
  46
  51
  57
  63
  69
EBITDA, $m
  -25
  -25
  -25
  -23
  -22
  -20
  -18
  -16
  -14
  -11
  -9
  -6
  -2
  1
  5
  8
  12
  17
  21
  25
  30
  35
  40
  46
  51
  57
  63
  70
  77
  84
  91
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
Earnings before tax, $m
  -25
  -27
  -26
  -25
  -24
  -23
  -22
  -21
  -19
  -17
  -15
  -13
  -11
  -9
  -6
  -3
  -1
  2
  5
  9
  12
  15
  19
  23
  27
  31
  35
  40
  45
  50
  55
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  10
  11
  12
  13
  15
Net income, $m
  -25
  -27
  -26
  -25
  -24
  -23
  -22
  -21
  -19
  -17
  -15
  -13
  -11
  -9
  -6
  -3
  -1
  2
  4
  6
  9
  11
  14
  17
  20
  23
  26
  29
  33
  36
  40

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  104
  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
  130
  33
  41
  50
  60
  71
  84
  98
  113
  129
  146
  164
  183
  203
  224
  246
  269
  293
  319
  345
  372
  400
  429
  460
  492
  524
  559
  594
  631
  670
  710
Adjusted assets (=assets-cash), $m
  26
  33
  41
  50
  60
  71
  84
  98
  113
  129
  146
  164
  183
  203
  224
  246
  269
  293
  319
  345
  372
  400
  429
  460
  492
  524
  559
  594
  631
  670
  710
Revenue / Adjusted assets
  3.038
  3.030
  3.024
  3.020
  3.050
  3.056
  3.036
  3.031
  3.027
  3.031
  3.027
  3.030
  3.038
  3.039
  3.040
  3.041
  3.041
  3.044
  3.034
  3.035
  3.038
  3.038
  3.040
  3.037
  3.035
  3.040
  3.036
  3.040
  3.040
  3.039
  3.039
Average production assets, $m
  4
  5
  6
  8
  9
  11
  13
  15
  17
  20
  23
  25
  28
  31
  35
  38
  42
  45
  49
  53
  58
  62
  67
  71
  76
  81
  87
  92
  98
  104
  110
Working capital, $m
  111
  9
  11
  13
  16
  19
  23
  26
  30
  35
  39
  44
  49
  55
  61
  67
  73
  79
  86
  93
  101
  108
  116
  124
  133
  142
  151
  161
  171
  181
  192
Total debt, $m
  0
  4
  9
  15
  21
  28
  36
  44
  53
  63
  74
  85
  96
  109
  122
  135
  150
  164
  180
  196
  213
  230
  248
  267
  286
  307
  328
  350
  372
  396
  421
Total liabilities, $m
  15
  20
  25
  31
  37
  44
  52
  60
  69
  79
  90
  101
  112
  125
  138
  151
  166
  180
  196
  212
  229
  246
  264
  283
  302
  323
  344
  366
  388
  412
  437
Total equity, $m
  114
  13
  16
  19
  23
  28
  32
  38
  43
  50
  56
  63
  70
  78
  86
  95
  104
  113
  123
  133
  143
  154
  165
  177
  189
  202
  215
  229
  243
  258
  273
Total liabilities and equity, $m
  129
  33
  41
  50
  60
  72
  84
  98
  112
  129
  146
  164
  182
  203
  224
  246
  270
  293
  319
  345
  372
  400
  429
  460
  491
  525
  559
  595
  631
  670
  710
Debt-to-equity ratio
  0.000
  0.330
  0.580
  0.760
  0.910
  1.020
  1.100
  1.170
  1.230
  1.270
  1.310
  1.340
  1.370
  1.390
  1.410
  1.430
  1.440
  1.460
  1.470
  1.480
  1.490
  1.490
  1.500
  1.510
  1.510
  1.520
  1.520
  1.530
  1.530
  1.540
  1.540
Adjusted equity ratio
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -25
  -27
  -26
  -25
  -24
  -23
  -22
  -21
  -19
  -17
  -15
  -13
  -11
  -9
  -6
  -3
  -1
  2
  4
  6
  9
  11
  14
  17
  20
  23
  26
  29
  33
  36
  40
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
Funds from operations, $m
  -24
  -25
  -25
  -24
  -22
  -21
  -19
  -18
  -15
  -13
  -11
  -8
  -5
  -2
  1
  4
  8
  11
  14
  17
  20
  24
  27
  31
  35
  39
  43
  48
  52
  57
  62
Change in working capital, $m
  -4
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
Cash from operations, $m
  -20
  -27
  -27
  -26
  -25
  -24
  -23
  -21
  -20
  -18
  -15
  -13
  -11
  -8
  -5
  -2
  1
  4
  7
  10
  13
  16
  19
  23
  26
  30
  34
  38
  42
  47
  51
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
New CAPEX, $m
  -2
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Cash from investing activities, $m
  -7
  -2
  -2
  -2
  -4
  -4
  -4
  -5
  -5
  -5
  -7
  -8
  -8
  -9
  -9
  -10
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -26
  -27
Free cash flow, $m
  -27
  -29
  -29
  -29
  -28
  -28
  -27
  -26
  -25
  -24
  -22
  -20
  -19
  -17
  -14
  -12
  -10
  -8
  -6
  -4
  -2
  0
  2
  5
  7
  10
  12
  15
  18
  21
  24
Issuance/(repayment) of debt, $m
  0
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
Issuance/(repurchase) of shares, $m
  2
  29
  29
  29
  28
  28
  27
  26
  25
  23
  22
  20
  18
  16
  14
  12
  10
  8
  6
  4
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2
  33
  34
  35
  34
  35
  35
  34
  34
  33
  32
  31
  30
  28
  27
  26
  24
  23
  21
  20
  19
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
Total cash flow (excl. dividends), $m
  -25
  4
  5
  5
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  20
  23
  27
  30
  33
  37
  41
  45
  49
Retained Cash Flow (-), $m
  16
  -29
  -29
  -29
  -28
  -28
  -27
  -26
  -25
  -23
  -22
  -20
  -18
  -16
  -14
  -12
  -10
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
Prev. year cash balance distribution, $m
 
  104
  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
 
  79
  -24
  -23
  -22
  -21
  -19
  -18
  -16
  -14
  -12
  -9
  -7
  -4
  -1
  1
  4
  5
  6
  6
  6
  7
  9
  12
  14
  17
  20
  23
  27
  30
  34
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
 
  76
  -22
  -20
  -18
  -16
  -14
  -12
  -10
  -8
  -6
  -4
  -3
  -2
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  72.5
  55.8
  45.1
  37.8
  32.7
  29.0
  26.3
  24.2
  22.6
  21.4
  20.5
  19.7
  19.1
  18.7
  18.4
  18.1
  17.9
  17.8
  17.8
  17.7
  17.7
  17.7
  17.7
  17.7
  17.7
  17.7
  17.7
  17.7
  17.7
  17.7

Intersect ENT, Inc. is a commercial-stage drug-device company. The Company develops drugs for patients with ear, nose and throat (ENT) conditions. The Company has developed a drug releasing bioabsorbable implant technology that enables targeted and sustained release of therapeutic agents. This targeted drug delivery technology is designed to allow ENT physicians to manage patient care. The Company's commercial products are the PROPEL and PROPEL mini drug-releasing implants for patients undergoing sinus surgery to treat chronic sinusitis. The Company is building a portfolio of products based on its drug releasing bio-absorbable implant technology that are designed to provide localized drug delivery to treat patients across the continuum of care in chronic sinusitis. The Company markets PROPEL, which is indicated for use following ethmoid sinus surgery, and PROPEL Mini, which is indicated for use following ethmoid and/or frontal sinus surgery.

FINANCIAL RATIOS  of  Intersect ENT (XENT)

Valuation Ratios
P/E Ratio -34.4
Price to Sales 10.9
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow -43
Price to Free Cash Flow -39.1
Growth Rates
Sales Growth Rate 27.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
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 -18.2%
Ret/ On Assets - 3 Yr. Avg. -29%
Return On Total Capital -20.5%
Ret/ On T. Cap. - 3 Yr. Avg. -34%
Return On Equity -20.5%
Return On Equity - 3 Yr. Avg. -34.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 83.5%
Gross Margin - 3 Yr. Avg. 78.1%
EBITDA Margin -30.4%
EBITDA Margin - 3 Yr. Avg. -38.6%
Operating Margin -32.9%
Oper. Margin - 3 Yr. Avg. -40.9%
Pre-Tax Margin -31.6%
Pre-Tax Margin - 3 Yr. Avg. -40.4%
Net Profit Margin -31.6%
Net Profit Margin - 3 Yr. Avg. -40.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

XENT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XENT stock intrinsic value calculation we used $79 million for the last fiscal year's total revenue generated by Intersect ENT. The default revenue input number comes from 2016 income statement of Intersect ENT. 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 XENT stock valuation model: a) initial revenue growth rate of 26.3% 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 XENT is calculated based on our internal credit rating of Intersect ENT, 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 Intersect ENT.
    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 XENT stock the variable cost ratio is equal to 93.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $32 million in the base year in the intrinsic value calculation for XENT 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 Intersect ENT.

Corporate tax rate of 27% is the nominal tax rate for Intersect ENT. 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 XENT 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 XENT are equal to 5.1%.

Life of production assets of 4 years is the average useful life of capital assets used in Intersect ENT 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 XENT is equal to 8.9%. 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 - $114 million for Intersect ENT - 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 29.19 million for Intersect ENT 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 Intersect ENT at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ 5 MedTech Stocks for Stellar Returns in Q3   [Oct-10-17 04:59PM  Zacks]
▶ Intersect ENT reports 2Q loss   [Aug-01-17 06:06PM  Associated Press]
▶ ETFs with exposure to Intersect ENT, Inc. : July 31, 2017   [Jul-31-17 05:22PM  Capital Cube]
▶ Teresa L. Kline Joins Intersect ENTs Board of Directors   [Jul-20-17 04:05PM  Business Wire]
▶ ETFs with exposure to Intersect ENT, Inc. : July 12, 2017   [Jul-12-17 03:05PM  Capital Cube]
▶ ETFs with exposure to Intersect ENT, Inc. : June 27, 2017   [Jun-27-17 04:01PM  Capital Cube]
▶ ETFs with exposure to Intersect ENT, Inc. : June 16, 2017   [Jun-16-17 04:27PM  Capital Cube]
▶ Why Intersect ENT Shares Are Rallying 17% Today   [May-03-17 02:44PM  Motley Fool]
▶ Intersect ENT reports 1Q loss   [May-02-17 06:18PM  Associated Press]
▶ ETFs with exposure to Intersect ENT, Inc. : April 7, 2017   [Apr-07-17 05:49PM  Capital Cube]
▶ Intersect ENT reports 4Q loss   [05:25PM  Associated Press]
▶ Here is What Hedge Funds Think About Intersect ENT Inc (XENT)   [Dec-08-16 05:27AM  at Insider Monkey]
Financial statements of XENT
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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