Intrinsic value of Chembio Diagnostics - CEMI

Previous Close

$8.70

  Intrinsic Value

$128.64

stock screener

  Rating & Target

str. buy

+999%

Previous close

$8.70

 
Intrinsic value

$128.64

 
Up/down potential

+999%

 
Rating

str. buy

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

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

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
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, %
  -25.00
  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
  18
  29
  44
  67
  97
  136
  187
  251
  330
  425
  536
  666
  814
  982
  1,168
  1,373
  1,598
  1,840
  2,101
  2,380
  2,675
  2,988
  3,317
  3,663
  4,024
  4,402
  4,796
  5,206
  5,633
  6,077
  6,538
Variable operating expenses, $m
 
  14
  22
  33
  48
  68
  94
  126
  165
  212
  268
  333
  407
  491
  584
  687
  799
  920
  1,051
  1,190
  1,338
  1,494
  1,659
  1,831
  2,012
  2,201
  2,398
  2,603
  2,817
  3,038
  3,269
Fixed operating expenses, $m
 
  16
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  28
  28
  29
  30
  30
  31
  32
  33
  34
Total operating expenses, $m
  25
  30
  39
  50
  66
  86
  113
  145
  184
  232
  288
  354
  429
  513
  607
  710
  823
  944
  1,076
  1,216
  1,364
  1,521
  1,687
  1,859
  2,041
  2,231
  2,428
  2,634
  2,849
  3,071
  3,303
Operating income, $m
  -8
  -2
  5
  16
  31
  50
  75
  107
  146
  192
  248
  312
  386
  469
  561
  664
  775
  896
  1,026
  1,164
  1,311
  1,467
  1,631
  1,803
  1,983
  2,171
  2,368
  2,572
  2,785
  3,006
  3,236
EBITDA, $m
  -7
  -1
  7
  18
  33
  54
  80
  114
  155
  204
  263
  331
  408
  496
  594
  702
  819
  947
  1,084
  1,230
  1,386
  1,550
  1,723
  1,905
  2,095
  2,294
  2,501
  2,717
  2,941
  3,175
  3,417
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  5
  6
  7
  9
  11
  12
  14
  16
  18
  21
  23
  26
  28
  31
  34
  37
  40
  44
  47
Earnings before tax, $m
  -8
  -2
  5
  16
  30
  49
  74
  105
  144
  190
  245
  308
  381
  463
  554
  655
  764
  883
  1,011
  1,148
  1,293
  1,446
  1,608
  1,777
  1,955
  2,140
  2,334
  2,535
  2,744
  2,962
  3,188
Tax expense, $m
  5
  0
  1
  4
  8
  13
  20
  28
  39
  51
  66
  83
  103
  125
  150
  177
  206
  239
  273
  310
  349
  391
  434
  480
  528
  578
  630
  684
  741
  800
  861
Net income, $m
  -13
  -2
  4
  12
  22
  36
  54
  77
  105
  139
  179
  225
  278
  338
  404
  478
  558
  645
  738
  838
  944
  1,056
  1,174
  1,298
  1,427
  1,562
  1,703
  1,850
  2,003
  2,162
  2,328

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11
  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
  21
  16
  25
  37
  54
  76
  104
  140
  183
  236
  298
  370
  452
  545
  649
  763
  888
  1,022
  1,167
  1,322
  1,486
  1,660
  1,843
  2,035
  2,236
  2,446
  2,664
  2,892
  3,130
  3,376
  3,632
Adjusted assets (=assets-cash), $m
  10
  16
  25
  37
  54
  76
  104
  140
  183
  236
  298
  370
  452
  545
  649
  763
  888
  1,022
  1,167
  1,322
  1,486
  1,660
  1,843
  2,035
  2,236
  2,446
  2,664
  2,892
  3,130
  3,376
  3,632
Revenue / Adjusted assets
  1.800
  1.813
  1.760
  1.811
  1.796
  1.789
  1.798
  1.793
  1.803
  1.801
  1.799
  1.800
  1.801
  1.802
  1.800
  1.799
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
  1.800
Average production assets, $m
  3
  4
  6
  9
  13
  19
  26
  35
  46
  59
  75
  93
  113
  136
  162
  191
  222
  256
  292
  331
  372
  415
  461
  509
  559
  612
  667
  724
  783
  845
  909
Working capital, $m
  15
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  259
  305
  355
  409
  466
  528
  594
  663
  736
  813
  893
  977
  1,065
  1,156
  1,251
  1,349
  1,451
Total debt, $m
  0
  2
  6
  11
  17
  26
  38
  52
  69
  90
  115
  144
  177
  214
  256
  301
  351
  405
  463
  525
  591
  660
  733
  810
  890
  974
  1,062
  1,153
  1,248
  1,346
  1,449
Total liabilities, $m
  3
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  260
  305
  355
  409
  467
  529
  595
  664
  737
  814
  894
  978
  1,066
  1,157
  1,252
  1,350
  1,453
Total equity, $m
  17
  10
  15
  22
  32
  45
  62
  84
  110
  142
  179
  222
  271
  327
  389
  458
  533
  613
  700
  793
  892
  996
  1,106
  1,221
  1,341
  1,467
  1,599
  1,735
  1,878
  2,026
  2,179
Total liabilities and equity, $m
  20
  16
  25
  37
  53
  75
  104
  140
  183
  236
  298
  370
  452
  545
  649
  763
  888
  1,022
  1,167
  1,322
  1,487
  1,660
  1,843
  2,035
  2,235
  2,445
  2,665
  2,892
  3,130
  3,376
  3,632
Debt-to-equity ratio
  0.000
  0.250
  0.400
  0.490
  0.540
  0.580
  0.600
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
Adjusted equity ratio
  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
  0.600

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -13
  -2
  4
  12
  22
  36
  54
  77
  105
  139
  179
  225
  278
  338
  404
  478
  558
  645
  738
  838
  944
  1,056
  1,174
  1,298
  1,427
  1,562
  1,703
  1,850
  2,003
  2,162
  2,328
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  3
  4
  5
  7
  9
  12
  15
  19
  23
  27
  32
  38
  44
  51
  58
  66
  74
  83
  92
  102
  112
  122
  133
  145
  157
  169
  182
Funds from operations, $m
  -8
  -1
  5
  13
  25
  40
  59
  84
  114
  150
  193
  243
  301
  365
  437
  516
  602
  696
  797
  904
  1,018
  1,139
  1,266
  1,399
  1,539
  1,685
  1,837
  1,995
  2,160
  2,331
  2,509
Change in working capital, $m
  -1
  2
  3
  5
  7
  9
  11
  14
  17
  21
  25
  29
  33
  37
  41
  46
  50
  54
  58
  62
  66
  69
  73
  77
  80
  84
  87
  91
  95
  99
  102
Cash from operations, $m
  -7
  -4
  2
  9
  18
  31
  48
  70
  97
  129
  169
  215
  268
  328
  395
  470
  553
  642
  739
  842
  953
  1,070
  1,193
  1,323
  1,459
  1,601
  1,749
  1,904
  2,065
  2,233
  2,407
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -3
  -4
  -5
  -7
  -9
  -12
  -15
  -19
  -23
  -27
  -32
  -38
  -44
  -51
  -58
  -66
  -74
  -83
  -92
  -102
  -112
  -122
  -133
  -145
  -157
  -169
New CAPEX, $m
  0
  -2
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -13
  -16
  -18
  -21
  -23
  -26
  -29
  -31
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -55
  -57
  -59
  -62
  -64
Cash from investing activities, $m
  -1
  -3
  -3
  -4
  -6
  -9
  -11
  -14
  -18
  -22
  -28
  -33
  -40
  -46
  -53
  -61
  -69
  -78
  -87
  -97
  -107
  -117
  -129
  -140
  -152
  -165
  -177
  -190
  -204
  -219
  -233
Free cash flow, $m
  -8
  -6
  -1
  4
  12
  23
  37
  56
  79
  107
  141
  182
  228
  282
  342
  409
  483
  564
  651
  745
  845
  952
  1,064
  1,182
  1,307
  1,437
  1,572
  1,714
  1,861
  2,014
  2,174
Issuance/(repayment) of debt, $m
  0
  2
  3
  5
  7
  9
  11
  14
  17
  21
  25
  29
  33
  37
  41
  46
  50
  54
  58
  62
  66
  69
  73
  77
  80
  84
  88
  91
  95
  99
  103
Issuance/(repurchase) of shares, $m
  13
  6
  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
Cash from financing (excl. dividends), $m  
  13
  8
  4
  5
  7
  9
  11
  14
  17
  21
  25
  29
  33
  37
  41
  46
  50
  54
  58
  62
  66
  69
  73
  77
  80
  84
  88
  91
  95
  99
  103
Total cash flow (excl. dividends), $m
  5
  2
  3
  9
  19
  32
  48
  70
  96
  128
  166
  210
  261
  319
  384
  455
  533
  618
  709
  807
  911
  1,021
  1,137
  1,259
  1,387
  1,520
  1,660
  1,805
  1,956
  2,113
  2,276
Retained Cash Flow (-), $m
  1
  -6
  -5
  -7
  -10
  -13
  -17
  -21
  -26
  -32
  -37
  -43
  -49
  -56
  -62
  -68
  -75
  -81
  -87
  -93
  -99
  -104
  -110
  -115
  -121
  -126
  -131
  -137
  -142
  -148
  -154
Prev. year cash balance distribution, $m
 
  11
  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
 
  8
  -2
  2
  9
  18
  31
  48
  70
  97
  129
  167
  212
  263
  322
  387
  458
  537
  622
  714
  813
  917
  1,028
  1,144
  1,266
  1,395
  1,528
  1,668
  1,814
  1,965
  2,123
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
 
  7
  -2
  2
  7
  14
  23
  33
  44
  55
  68
  79
  90
  100
  108
  113
  117
  117
  115
  110
  103
  95
  85
  75
  64
  54
  45
  36
  28
  21
  16
Current shareholders' claim on cash, %
  100
  87.1
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2
  85.2

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 -8.1
Price to Sales 5.8
Price to Book 6.2
Price to Tangible Book
Price to Cash Flow -15
Price to Free Cash Flow -15
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 $18 million for the last fiscal year's total revenue generated by Chembio Diagnostics. The default revenue input number comes from 2016 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 50%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $16 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 3.5% 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 13.9%.

Life of production assets of 2.5 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 22.2%. 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 - $17 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 12.318 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

▶ 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]
▶ Chembio Expands Global Commercial Operations Leadership   [Oct-11-16 08:50AM  GlobeNewswire]
Financial statements of CEMI
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