Intrinsic value of Chembio Diagnostics - CEMI

Previous Close

$5.78

  Intrinsic Value

$12.53

stock screener

  Rating & Target

str. buy

+117%

Previous close

$5.78

 
Intrinsic value

$12.53

 
Up/down potential

+117%

 
Rating

str. buy

We calculate the intrinsic value of CEMI 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 0.1

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  38
  59
  89
  129
  182
  250
  335
  440
  567
  716
  889
  1,087
  1,310
  1,558
  1,832
  2,131
  2,455
  2,803
  3,175
  3,569
  3,987
  4,426
  4,887
  5,369
  5,873
  6,399
  6,946
  7,516
  8,108
  8,723
Variable operating expenses, $m
  32
  49
  73
  106
  149
  205
  275
  361
  465
  587
  728
  890
  1,073
  1,277
  1,501
  1,747
  2,012
  2,297
  2,601
  2,925
  3,267
  3,626
  4,004
  4,400
  4,813
  5,243
  5,692
  6,158
  6,644
  7,148
Fixed operating expenses, $m
  10
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  18
  18
  18
  19
  19
Total operating expenses, $m
  42
  59
  84
  117
  160
  216
  287
  373
  477
  599
  741
  903
  1,086
  1,291
  1,515
  1,761
  2,026
  2,312
  2,616
  2,940
  3,283
  3,642
  4,020
  4,417
  4,830
  5,261
  5,710
  6,176
  6,663
  7,167
Operating income, $m
  -4
  0
  5
  12
  21
  33
  49
  67
  90
  116
  148
  183
  223
  268
  317
  371
  429
  491
  558
  629
  704
  783
  866
  953
  1,043
  1,138
  1,236
  1,339
  1,445
  1,556
EBITDA, $m
  -2
  2
  7
  15
  26
  39
  56
  77
  103
  132
  167
  207
  252
  302
  357
  417
  482
  553
  627
  707
  791
  880
  973
  1,070
  1,171
  1,277
  1,388
  1,503
  1,622
  1,746
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  6
  7
  8
  10
  12
  14
  17
  19
  22
  25
  28
  32
  35
  39
  43
  47
  51
  55
  60
  64
Earnings before tax, $m
  -4
  0
  5
  12
  21
  32
  47
  65
  87
  112
  142
  176
  215
  258
  305
  356
  412
  472
  536
  604
  676
  752
  831
  914
  1,001
  1,091
  1,186
  1,284
  1,386
  1,492
Tax expense, $m
  0
  0
  1
  3
  6
  9
  13
  18
  23
  30
  38
  48
  58
  70
  82
  96
  111
  127
  145
  163
  183
  203
  224
  247
  270
  295
  320
  347
  374
  403
Net income, $m
  -4
  0
  3
  8
  15
  23
  34
  47
  63
  82
  104
  129
  157
  188
  223
  260
  301
  345
  391
  441
  493
  549
  607
  667
  731
  797
  866
  937
  1,012
  1,089

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
  25
  39
  59
  85
  121
  166
  223
  292
  376
  475
  590
  721
  869
  1,034
  1,216
  1,414
  1,629
  1,860
  2,107
  2,369
  2,645
  2,937
  3,243
  3,563
  3,897
  4,246
  4,609
  4,987
  5,380
  5,788
Adjusted assets (=assets-cash), $m
  25
  39
  59
  85
  121
  166
  223
  292
  376
  475
  590
  721
  869
  1,034
  1,216
  1,414
  1,629
  1,860
  2,107
  2,369
  2,645
  2,937
  3,243
  3,563
  3,897
  4,246
  4,609
  4,987
  5,380
  5,788
Revenue / Adjusted assets
  1.520
  1.513
  1.508
  1.518
  1.504
  1.506
  1.502
  1.507
  1.508
  1.507
  1.507
  1.508
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
  1.507
Average production assets, $m
  4
  6
  10
  14
  20
  27
  37
  48
  62
  78
  97
  118
  143
  170
  200
  232
  268
  306
  346
  389
  435
  482
  533
  585
  640
  697
  757
  819
  884
  951
Working capital, $m
  6
  10
  15
  21
  30
  41
  55
  73
  93
  118
  147
  179
  216
  257
  302
  352
  405
  463
  524
  589
  658
  730
  806
  886
  969
  1,056
  1,146
  1,240
  1,338
  1,439
Total debt, $m
  2
  5
  10
  16
  23
  33
  46
  61
  80
  102
  127
  157
  190
  226
  266
  311
  358
  410
  464
  522
  584
  649
  716
  788
  862
  939
  1,020
  1,104
  1,191
  1,282
Total liabilities, $m
  6
  9
  13
  19
  27
  37
  49
  65
  83
  105
  131
  160
  193
  230
  270
  314
  362
  413
  468
  526
  587
  652
  720
  791
  865
  943
  1,023
  1,107
  1,194
  1,285
Total equity, $m
  20
  31
  46
  67
  94
  129
  173
  227
  293
  370
  459
  561
  676
  804
  946
  1,100
  1,268
  1,447
  1,639
  1,843
  2,058
  2,285
  2,523
  2,772
  3,032
  3,303
  3,586
  3,880
  4,186
  4,503
Total liabilities and equity, $m
  26
  40
  59
  86
  121
  166
  222
  292
  376
  475
  590
  721
  869
  1,034
  1,216
  1,414
  1,630
  1,860
  2,107
  2,369
  2,645
  2,937
  3,243
  3,563
  3,897
  4,246
  4,609
  4,987
  5,380
  5,788
Debt-to-equity ratio
  0.110
  0.170
  0.210
  0.230
  0.250
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Adjusted equity ratio
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  0
  3
  8
  15
  23
  34
  47
  63
  82
  104
  129
  157
  188
  223
  260
  301
  345
  391
  441
  493
  549
  607
  667
  731
  797
  866
  937
  1,012
  1,089
Depreciation, amort., depletion, $m
  1
  2
  2
  3
  4
  6
  8
  10
  13
  16
  19
  24
  29
  34
  40
  46
  54
  61
  69
  78
  87
  96
  107
  117
  128
  139
  151
  164
  177
  190
Funds from operations, $m
  -2
  1
  6
  12
  19
  29
  42
  57
  76
  98
  123
  152
  185
  222
  262
  307
  354
  406
  461
  519
  580
  645
  713
  784
  859
  936
  1,017
  1,101
  1,188
  1,279
Change in working capital, $m
  2
  3
  5
  7
  9
  11
  14
  17
  21
  25
  29
  33
  37
  41
  45
  49
  53
  57
  61
  65
  69
  72
  76
  80
  83
  87
  90
  94
  98
  102
Cash from operations, $m
  -5
  -2
  1
  5
  11
  18
  28
  40
  55
  73
  95
  120
  149
  181
  217
  257
  301
  348
  399
  454
  512
  573
  637
  705
  776
  850
  927
  1,007
  1,091
  1,178
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -3
  -4
  -5
  -7
  -10
  -12
  -16
  -19
  -24
  -29
  -34
  -40
  -46
  -54
  -61
  -69
  -78
  -87
  -96
  -107
  -117
  -128
  -139
  -151
  -164
  -177
New CAPEX, $m
  -2
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -14
  -16
  -19
  -22
  -24
  -27
  -30
  -33
  -35
  -38
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -57
  -60
  -62
  -65
  -67
Cash from investing activities, $m
  -3
  -3
  -4
  -6
  -9
  -11
  -14
  -18
  -24
  -28
  -35
  -41
  -48
  -56
  -64
  -73
  -81
  -92
  -102
  -112
  -123
  -135
  -146
  -160
  -172
  -185
  -199
  -213
  -229
  -244
Free cash flow, $m
  -7
  -5
  -4
  -1
  2
  7
  13
  21
  32
  45
  60
  79
  101
  125
  153
  185
  219
  257
  298
  341
  388
  438
  490
  546
  604
  664
  728
  794
  862
  934
Issuance/(repayment) of debt, $m
  2
  3
  4
  6
  8
  10
  13
  15
  19
  22
  25
  29
  33
  37
  40
  44
  48
  51
  55
  58
  61
  65
  68
  71
  74
  77
  81
  84
  87
  91
Issuance/(repurchase) of shares, $m
  11
  11
  12
  12
  12
  12
  10
  7
  2
  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  
  13
  14
  16
  18
  20
  22
  23
  22
  21
  22
  25
  29
  33
  37
  40
  44
  48
  51
  55
  58
  61
  65
  68
  71
  74
  77
  81
  84
  87
  91
Total cash flow (excl. dividends), $m
  6
  9
  12
  17
  22
  28
  36
  44
  52
  67
  86
  108
  133
  162
  194
  229
  267
  308
  352
  400
  450
  503
  558
  617
  678
  742
  808
  877
  950
  1,024
Retained Cash Flow (-), $m
  -11
  -11
  -15
  -21
  -27
  -35
  -44
  -54
  -65
  -77
  -89
  -102
  -115
  -128
  -141
  -154
  -167
  -180
  -192
  -204
  -215
  -227
  -238
  -249
  -260
  -271
  -283
  -294
  -306
  -318
Prev. year cash balance distribution, $m
  1
  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
  -4
  -2
  -3
  -4
  -5
  -7
  -9
  -11
  -13
  -10
  -4
  6
  18
  34
  52
  74
  100
  128
  161
  196
  234
  276
  320
  368
  418
  470
  526
  583
  644
  707
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
  -4
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -7
  -5
  -2
  3
  7
  11
  15
  19
  22
  24
  25
  25
  24
  23
  21
  19
  16
  14
  11
  9
  7
  5
Current shareholders' claim on cash, %
  87.5
  80.4
  75.8
  72.7
  70.6
  69.2
  68.4
  67.9
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8
  67.8

Chembio Diagnostics, Inc. (Chembio), and its subsidiary, Chembio Diagnostic Systems, Inc., develop, manufacture, market and license rapid point-of-care diagnostic tests (POCTs) that detect infectious diseases. The Company's products available are rapid tests for the detection of human immunodeficiency virus (HIV) 1/2 antibodies, and a multiplex rapid test for the detection of HIV and Syphilis antibodies. The HIV 1/2 rapid tests employ in-licensed and lateral flow technologies that are used with all blood matrices as samples, and are manufactured in a standard cassette format, a dipstick format and a barrel format. Its HIV 1/2 rapid antibody detection test incorporates the Dual Path Platform (DPP) POCT technology. The DPP HIV 1/2 Assay detects antibodies to HIV 1 and 2 in oral fluid samples, as well as in all blood matrices. The Company's product pipeline includes a multiplex rapid test for earlier detection of HIV and a multiplex test that detects HIV and Syphilis specific antibodies.

FINANCIAL RATIOS  of  Chembio Diagnostics (CEMI)

Valuation Ratios
P/E Ratio -5.3
Price to Sales 3.9
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow -9.9
Price to Free Cash Flow -9.9
Growth Rates
Sales Growth Rate -25%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
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 -61.9%
Ret/ On Assets - 3 Yr. Avg. -24.9%
Return On Total Capital -74.3%
Ret/ On T. Cap. - 3 Yr. Avg. -29.9%
Return On Equity -74.3%
Return On Equity - 3 Yr. Avg. -29.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 44.4%
Gross Margin - 3 Yr. Avg. 41.8%
EBITDA Margin -38.9%
EBITDA Margin - 3 Yr. Avg. -18.3%
Operating Margin -38.9%
Oper. Margin - 3 Yr. Avg. -19.7%
Pre-Tax Margin -44.4%
Pre-Tax Margin - 3 Yr. Avg. -22.8%
Net Profit Margin -72.2%
Net Profit Margin - 3 Yr. Avg. -28%
Effective Tax Rate -62.5%
Eff/ Tax Rate - 3 Yr. Avg. 12.5%
Payout Ratio 0%

CEMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CEMI stock intrinsic value calculation we used $24.015427 million for the last fiscal year's total revenue generated by Chembio Diagnostics. The default revenue input number comes from 0001 income statement of Chembio Diagnostics. 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 CEMI stock valuation model: a) initial revenue growth rate of 60% 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 CEMI is calculated based on our internal credit rating of Chembio Diagnostics, 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 Chembio Diagnostics.
    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 CEMI stock the variable cost ratio is equal to 83.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10 million in the base year in the intrinsic value calculation for CEMI 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 Chembio Diagnostics.

Corporate tax rate of 27% is the nominal tax rate for Chembio Diagnostics. 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 CEMI 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 CEMI are equal to 10.9%.

Life of production assets of 2.7 years is the average useful life of capital assets used in Chembio Diagnostics 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 CEMI is equal to 16.5%. 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 - $13.079196 million for Chembio Diagnostics - 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 14.174 million for Chembio Diagnostics 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 Chembio Diagnostics at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Chembio Announces Proposed Public Offering of Common Stock   [Oct-22-18 05:27PM  GlobeNewswire]
▶ EXPLAINER-Why its so hard to diagnose Zika   [Oct-17-18 07:00AM  Reuters]
▶ Is Chembio Diagnostics Inc (NASDAQ:CEMI) A Cash Cow?   [Sep-19-18 09:47AM  Simply Wall St.]
▶ CEMI: DPP HIV/Syph, Several DPP Fever Products to Drive 2018 Growth   [Nov-20-17 09:00AM  Zacks Small Cap Research]
▶ Gail S. Page Joins Chembio Diagnostics Board of Directors   [Jul-06-17 08:50AM  GlobeNewswire]
▶ Chembio Diagnostics Announces At-The-Market Program   [Jun-27-17 04:30PM  GlobeNewswire]
▶ CEMI New Strategy Paying Dividends As Product Sales Bounce Back   [May-18-17 12:00PM  Zacks Small Cap Research]
▶ CEMI: Surprise Rebound In Lateral Flow, Expect DPP Strong Showing In 2017   [Mar-10-17 11:15AM  Zacks Small Cap Research]
▶ Chembio Diagnostics Reports 2016 Financial Results   [Mar-07-17 04:10PM  GlobeNewswire]

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