Intrinsic value of Accuray - ARAY

Previous Close

$4.10

  Intrinsic Value

$0.07

stock screener

  Rating & Target

str. sell

-98%

Previous close

$4.10

 
Intrinsic value

$0.07

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of ARAY 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 0001), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  393
  405
  417
  430
  445
  461
  478
  497
  516
  537
  560
  584
  609
  636
  664
  694
  725
  759
  794
  831
  870
  911
  955
  1,001
  1,049
  1,099
  1,153
  1,209
  1,268
  1,329
Variable operating expenses, $m
  260
  267
  275
  284
  293
  304
  315
  327
  339
  353
  361
  377
  393
  410
  429
  448
  468
  490
  513
  537
  562
  589
  617
  646
  677
  710
  744
  780
  818
  858
Fixed operating expenses, $m
  147
  150
  154
  157
  161
  164
  168
  171
  175
  179
  183
  187
  191
  195
  200
  204
  208
  213
  218
  223
  227
  232
  238
  243
  248
  254
  259
  265
  271
  277
Total operating expenses, $m
  407
  417
  429
  441
  454
  468
  483
  498
  514
  532
  544
  564
  584
  605
  629
  652
  676
  703
  731
  760
  789
  821
  855
  889
  925
  964
  1,003
  1,045
  1,089
  1,135
Operating income, $m
  -14
  -13
  -12
  -10
  -9
  -7
  -4
  -1
  2
  6
  15
  20
  25
  30
  36
  42
  49
  56
  64
  72
  81
  91
  101
  112
  123
  136
  149
  163
  178
  194
EBITDA, $m
  4
  5
  6
  8
  10
  13
  16
  19
  23
  27
  32
  37
  43
  49
  55
  62
  70
  78
  87
  97
  107
  118
  129
  141
  155
  169
  183
  199
  216
  234
Interest expense (income), $m
  10
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  54
Earnings before tax, $m
  -23
  -22
  -22
  -21
  -20
  -19
  -17
  -15
  -13
  -10
  -1
  2
  6
  10
  14
  19
  24
  30
  36
  42
  49
  57
  65
  74
  83
  93
  104
  115
  128
  141
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  6
  8
  10
  11
  13
  15
  18
  20
  22
  25
  28
  31
  34
  38
Net income, $m
  -23
  -22
  -22
  -21
  -20
  -19
  -17
  -15
  -13
  -10
  -1
  1
  4
  7
  10
  14
  17
  22
  26
  31
  36
  42
  47
  54
  61
  68
  76
  84
  93
  103

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  418
  429
  443
  457
  473
  490
  508
  527
  548
  571
  594
  620
  646
  675
  705
  737
  770
  806
  843
  882
  924
  968
  1,014
  1,062
  1,113
  1,167
  1,224
  1,283
  1,346
  1,411
Adjusted assets (=assets-cash), $m
  418
  429
  443
  457
  473
  490
  508
  527
  548
  571
  594
  620
  646
  675
  705
  737
  770
  806
  843
  882
  924
  968
  1,014
  1,062
  1,113
  1,167
  1,224
  1,283
  1,346
  1,411
Revenue / Adjusted assets
  0.940
  0.944
  0.941
  0.941
  0.941
  0.941
  0.941
  0.943
  0.942
  0.940
  0.943
  0.942
  0.943
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.941
  0.942
  0.943
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
Average production assets, $m
  58
  60
  62
  64
  66
  68
  71
  74
  76
  80
  83
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  141
  148
  155
  163
  171
  179
  188
  197
Working capital, $m
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  64
  67
  71
  74
  78
  81
  85
  89
  94
  98
Total debt, $m
  175
  185
  197
  210
  223
  238
  255
  272
  290
  310
  331
  354
  377
  402
  429
  457
  487
  518
  551
  586
  623
  662
  703
  746
  791
  839
  889
  941
  997
  1,055
Total liabilities, $m
  370
  381
  392
  405
  419
  434
  450
  467
  486
  506
  527
  549
  573
  598
  624
  653
  682
  714
  747
  782
  819
  857
  898
  941
  986
  1,034
  1,084
  1,137
  1,192
  1,250
Total equity, $m
  48
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  139
  146
  153
  161
Total liabilities and equity, $m
  418
  430
  442
  457
  473
  490
  508
  527
  549
  571
  595
  620
  647
  675
  704
  737
  770
  806
  843
  883
  924
  967
  1,014
  1,062
  1,113
  1,167
  1,223
  1,283
  1,345
  1,411
Debt-to-equity ratio
  3.670
  3.780
  3.900
  4.020
  4.150
  4.270
  4.400
  4.520
  4.650
  4.770
  4.890
  5.010
  5.120
  5.230
  5.340
  5.450
  5.550
  5.640
  5.740
  5.830
  5.920
  6.000
  6.080
  6.160
  6.230
  6.300
  6.370
  6.440
  6.500
  6.560
Adjusted equity ratio
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114
  0.114

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -23
  -22
  -22
  -21
  -20
  -19
  -17
  -15
  -13
  -10
  -1
  1
  4
  7
  10
  14
  17
  22
  26
  31
  36
  42
  47
  54
  61
  68
  76
  84
  93
  103
Depreciation, amort., depletion, $m
  18
  18
  18
  19
  19
  20
  20
  21
  21
  22
  17
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
Funds from operations, $m
  -5
  -5
  -4
  -2
  -1
  1
  3
  6
  8
  12
  15
  19
  22
  26
  30
  34
  39
  44
  49
  55
  62
  69
  76
  84
  92
  101
  110
  120
  131
  142
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
Cash from operations, $m
  -6
  -5
  -5
  -3
  -2
  0
  2
  4
  7
  10
  14
  17
  20
  24
  28
  32
  37
  42
  47
  53
  59
  65
  73
  80
  88
  97
  106
  116
  126
  137
Maintenance CAPEX, $m
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -13
  -14
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -18
  -19
  -21
  -21
  -22
  -23
  -24
  -26
  -26
  -27
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -41
  -42
  -45
  -47
Free cash flow, $m
  -19
  -19
  -18
  -18
  -17
  -16
  -14
  -13
  -11
  -8
  -6
  -3
  -1
  2
  5
  8
  11
  15
  19
  24
  28
  34
  39
  45
  51
  58
  66
  73
  82
  91
Issuance/(repayment) of debt, $m
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
Issuance/(repurchase) of shares, $m
  24
  24
  23
  23
  22
  21
  19
  17
  15
  13
  4
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  34
  35
  35
  36
  36
  36
  35
  34
  34
  33
  25
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
Total cash flow (excl. dividends), $m
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  19
  21
  23
  27
  31
  36
  41
  47
  52
  59
  65
  72
  80
  88
  97
  106
  116
  126
  137
  149
Retained Cash Flow (-), $m
  -24
  -24
  -23
  -23
  -22
  -21
  -19
  -17
  -15
  -13
  -4
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
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
  -9
  -8
  -7
  -5
  -3
  -1
  2
  5
  8
  11
  15
  18
  20
  24
  28
  32
  37
  42
  48
  54
  61
  67
  75
  83
  91
  100
  109
  119
  130
  142
Discount rate, %
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
  -8
  -7
  -5
  -4
  -2
  0
  1
  2
  3
  4
  4
  4
  4
  4
  4
  3
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  93.7
  87.9
  82.7
  78.0
  73.9
  70.4
  67.3
  64.8
  62.7
  61.0
  60.5
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4
  60.4

Accuray Incorporated is a radiation oncology company. The Company develops, manufactures and markets medical devices used in radiation therapy for the treatment of cancer patients. Its products include the CyberKnife Systems, the TomoTherapy Systems, and the Radixact Delivery Treatment Platform. Its technologies, the CyberKnife and TomoTherapy Systems, are designed to deliver treatments, including stereotactic radiosurgery (SRS), stereotactic body radiation therapy (SBRT), intensity modulated radiation therapy (IMRT), image guided radiation therapy (IGRT) and adaptive radiation therapy. The CyberKnife Systems are robotic systems that are used to treat various types of cancer and tumors throughout the body. The CyberKnife Systems track, detect and correct for tumor and patient movement in real-time during the procedure. The TomoTherapy Systems include the TomoTherapy H Series with configuration options of TomoH, TomoHD and TomoHDA.

FINANCIAL RATIOS  of  Accuray (ARAY)

Valuation Ratios
P/E Ratio -11.4
Price to Sales 0.9
Price to Book 7.3
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -68.7
Growth Rates
Sales Growth Rate -4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.5%
Cap. Spend. - 3 Yr. Gr. Rate -16.1%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 110.6%
Total Debt to Equity 351.1%
Interest Coverage -2
Management Effectiveness
Return On Assets -4.5%
Ret/ On Assets - 3 Yr. Avg. -4.8%
Return On Total Capital -12.4%
Ret/ On T. Cap. - 3 Yr. Avg. -12%
Return On Equity -56.1%
Return On Equity - 3 Yr. Avg. -46.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 36.8%
Gross Margin - 3 Yr. Avg. 38.3%
EBITDA Margin -0.3%
EBITDA Margin - 3 Yr. Avg. -0.7%
Operating Margin -2.6%
Oper. Margin - 3 Yr. Avg. -3%
Pre-Tax Margin -7.6%
Pre-Tax Margin - 3 Yr. Avg. -7.8%
Net Profit Margin -7.8%
Net Profit Margin - 3 Yr. Avg. -8.3%
Effective Tax Rate -3.4%
Eff/ Tax Rate - 3 Yr. Avg. -7.3%
Payout Ratio 0%

ARAY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARAY stock intrinsic value calculation we used $383.414 million for the last fiscal year's total revenue generated by Accuray. The default revenue input number comes from 0001 income statement of Accuray. 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 ARAY stock valuation model: a) initial revenue growth rate of 2.6% 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 7.4%, whose default value for ARAY is calculated based on our internal credit rating of Accuray, 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 Accuray.
    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 ARAY stock the variable cost ratio is equal to 66.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $144 million in the base year in the intrinsic value calculation for ARAY 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 5.4% for Accuray.

Corporate tax rate of 27% is the nominal tax rate for Accuray. 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 ARAY 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 ARAY are equal to 14.8%.

Life of production assets of 4.9 years is the average useful life of capital assets used in Accuray 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 ARAY is equal to 7.4%. 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 - $46.533 million for Accuray - 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 85.638 million for Accuray 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 Accuray at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ A Look At The Fair Value Of Accuray Incorporated (NASDAQ:ARAY)   [Sep-10-18 03:25PM  Simply Wall St.]
▶ Why Accuray Is Soaring Today   [11:37AM  Motley Fool]
▶ Accuray: Fiscal 4Q Earnings Snapshot   [Aug-16-18 04:21PM  Associated Press]
▶ New Strong Sell Stocks for June 11th   [Jun-11-18 08:12AM  Zacks]
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▶ New Strong Sell Stocks for May 9th   [May-09-18 10:06AM  Zacks]
▶ Accuray: Fiscal 3Q Earnings Snapshot   [Apr-30-18 04:14PM  Associated Press]
▶ Accuray reports 2Q loss   [Jan-23-18 04:15PM  Associated Press]
▶ Beverly A. Huss Joins Accuray Board of Directors   [Jan-11-18 04:01PM  PR Newswire]
▶ ETFs with exposure to Accuray, Inc. : December 11, 2017   [Dec-11-17 01:29PM  Capital Cube]
▶ Better Buy: Intuitive Surgical, Inc. vs. Accuray, Inc.   [Dec-09-17 10:37AM  Motley Fool]
▶ ETFs with exposure to Accuray, Inc. : November 30, 2017   [Nov-30-17 01:23PM  Capital Cube]
▶ ETFs with exposure to Accuray, Inc. : November 20, 2017   [Nov-20-17 11:38AM  Capital Cube]
▶ ETFs with exposure to Accuray, Inc. : November 8, 2017   [Nov-08-17 05:36PM  Capital Cube]
▶ AT&T, Dr Pepper Snapple and Chipotle tumble; Accuray rises   [Oct-25-17 04:26PM  Associated Press]

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