Intrinsic value of Genomic Health, Inc. - GHDX

Previous Close

$74.35

  Intrinsic Value

$112.71

stock screener

  Rating & Target

str. buy

+52%

Previous close

$74.35

 
Intrinsic value

$112.71

 
Up/down potential

+52%

 
Rating

str. buy

We calculate the intrinsic value of GHDX 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 2.7

 

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, %
  19.60
  18.14
  16.83
  15.64
  14.58
  13.62
  12.76
  11.98
  11.28
  10.66
  10.09
  9.58
  9.12
  8.71
  8.34
  8.01
  7.71
  7.43
  7.19
  6.97
  6.78
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
Revenue, $m
  471
  557
  650
  752
  862
  979
  1,104
  1,236
  1,376
  1,523
  1,676
  1,837
  2,004
  2,179
  2,361
  2,550
  2,746
  2,950
  3,162
  3,383
  3,612
  3,850
  4,098
  4,356
  4,625
  4,905
  5,196
  5,500
  5,817
  6,148
Variable operating expenses, $m
  202
  238
  278
  321
  367
  416
  469
  524
  583
  645
  705
  773
  844
  917
  993
  1,073
  1,156
  1,242
  1,331
  1,424
  1,520
  1,620
  1,725
  1,833
  1,946
  2,064
  2,187
  2,315
  2,448
  2,587
Fixed operating expenses, $m
  208
  213
  218
  223
  227
  232
  238
  243
  248
  254
  259
  265
  271
  277
  283
  289
  295
  302
  308
  315
  322
  329
  337
  344
  351
  359
  367
  375
  383
  392
Total operating expenses, $m
  410
  451
  496
  544
  594
  648
  707
  767
  831
  899
  964
  1,038
  1,115
  1,194
  1,276
  1,362
  1,451
  1,544
  1,639
  1,739
  1,842
  1,949
  2,062
  2,177
  2,297
  2,423
  2,554
  2,690
  2,831
  2,979
Operating income, $m
  60
  105
  155
  209
  268
  331
  398
  469
  545
  624
  712
  799
  890
  985
  1,084
  1,188
  1,295
  1,407
  1,523
  1,644
  1,770
  1,901
  2,037
  2,179
  2,327
  2,481
  2,642
  2,810
  2,985
  3,169
EBITDA, $m
  75
  121
  173
  229
  290
  356
  426
  500
  579
  661
  748
  839
  934
  1,033
  1,136
  1,243
  1,355
  1,471
  1,592
  1,718
  1,849
  1,985
  2,126
  2,274
  2,428
  2,588
  2,755
  2,930
  3,112
  3,303
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  48
Earnings before tax, $m
  60
  105
  153
  207
  264
  327
  393
  463
  537
  616
  702
  788
  877
  971
  1,069
  1,170
  1,276
  1,386
  1,501
  1,620
  1,744
  1,872
  2,007
  2,146
  2,292
  2,444
  2,603
  2,768
  2,941
  3,121
Tax expense, $m
  16
  28
  41
  56
  71
  88
  106
  125
  145
  166
  189
  213
  237
  262
  289
  316
  345
  374
  405
  437
  471
  506
  542
  580
  619
  660
  703
  747
  794
  843
Net income, $m
  44
  76
  112
  151
  193
  238
  287
  338
  392
  449
  512
  575
  641
  709
  780
  854
  932
  1,012
  1,095
  1,182
  1,273
  1,367
  1,465
  1,567
  1,673
  1,784
  1,900
  2,021
  2,147
  2,278

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
  221
  261
  304
  352
  403
  458
  517
  579
  644
  712
  784
  860
  938
  1,020
  1,105
  1,193
  1,285
  1,381
  1,480
  1,583
  1,690
  1,802
  1,918
  2,039
  2,164
  2,295
  2,431
  2,574
  2,722
  2,877
Adjusted assets (=assets-cash), $m
  221
  261
  304
  352
  403
  458
  517
  579
  644
  712
  784
  860
  938
  1,020
  1,105
  1,193
  1,285
  1,381
  1,480
  1,583
  1,690
  1,802
  1,918
  2,039
  2,164
  2,295
  2,431
  2,574
  2,722
  2,877
Revenue / Adjusted assets
  2.131
  2.134
  2.138
  2.136
  2.139
  2.138
  2.135
  2.135
  2.137
  2.139
  2.138
  2.136
  2.136
  2.136
  2.137
  2.137
  2.137
  2.136
  2.136
  2.137
  2.137
  2.137
  2.137
  2.136
  2.137
  2.137
  2.137
  2.137
  2.137
  2.137
Average production assets, $m
  51
  61
  71
  82
  94
  107
  120
  135
  150
  166
  183
  200
  218
  238
  257
  278
  299
  322
  345
  369
  394
  420
  447
  475
  504
  535
  566
  599
  634
  670
Working capital, $m
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  71
  76
  80
Total debt, $m
  13
  26
  42
  58
  76
  95
  116
  137
  160
  184
  209
  235
  262
  291
  320
  351
  383
  416
  451
  487
  524
  563
  603
  645
  689
  734
  782
  831
  883
  937
Total liabilities, $m
  77
  91
  106
  122
  140
  159
  180
  201
  224
  248
  273
  299
  326
  355
  384
  415
  447
  480
  515
  551
  588
  627
  667
  709
  753
  799
  846
  896
  947
  1,001
Total equity, $m
  144
  170
  198
  229
  263
  299
  337
  377
  420
  465
  511
  560
  612
  665
  720
  778
  838
  900
  965
  1,032
  1,102
  1,175
  1,250
  1,329
  1,411
  1,496
  1,585
  1,678
  1,775
  1,876
Total liabilities and equity, $m
  221
  261
  304
  351
  403
  458
  517
  578
  644
  713
  784
  859
  938
  1,020
  1,104
  1,193
  1,285
  1,380
  1,480
  1,583
  1,690
  1,802
  1,917
  2,038
  2,164
  2,295
  2,431
  2,574
  2,722
  2,877
Debt-to-equity ratio
  0.090
  0.160
  0.210
  0.250
  0.290
  0.320
  0.340
  0.360
  0.380
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
Adjusted equity ratio
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  76
  112
  151
  193
  238
  287
  338
  392
  449
  512
  575
  641
  709
  780
  854
  932
  1,012
  1,095
  1,182
  1,273
  1,367
  1,465
  1,567
  1,673
  1,784
  1,900
  2,021
  2,147
  2,278
Depreciation, amort., depletion, $m
  14
  16
  18
  20
  23
  25
  28
  31
  34
  37
  37
  40
  44
  48
  51
  56
  60
  64
  69
  74
  79
  84
  89
  95
  101
  107
  113
  120
  127
  134
Funds from operations, $m
  58
  93
  130
  171
  216
  264
  315
  369
  426
  487
  549
  615
  684
  756
  832
  910
  991
  1,076
  1,164
  1,256
  1,352
  1,451
  1,554
  1,662
  1,774
  1,891
  2,013
  2,140
  2,273
  2,412
Change in working capital, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Cash from operations, $m
  57
  91
  129
  170
  214
  262
  313
  367
  424
  485
  547
  613
  682
  754
  829
  908
  989
  1,074
  1,162
  1,253
  1,349
  1,448
  1,551
  1,659
  1,771
  1,887
  2,009
  2,137
  2,269
  2,408
Maintenance CAPEX, $m
  -9
  -10
  -12
  -14
  -16
  -19
  -21
  -24
  -27
  -30
  -33
  -37
  -40
  -44
  -48
  -51
  -56
  -60
  -64
  -69
  -74
  -79
  -84
  -89
  -95
  -101
  -107
  -113
  -120
  -127
New CAPEX, $m
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
Cash from investing activities, $m
  -17
  -19
  -22
  -25
  -28
  -32
  -35
  -38
  -42
  -46
  -50
  -55
  -58
  -63
  -68
  -72
  -77
  -82
  -87
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -139
  -146
  -155
  -163
Free cash flow, $m
  40
  72
  107
  145
  186
  231
  278
  329
  382
  439
  497
  559
  624
  691
  762
  835
  912
  991
  1,074
  1,160
  1,250
  1,343
  1,440
  1,541
  1,646
  1,756
  1,871
  1,990
  2,115
  2,245
Issuance/(repayment) of debt, $m
  13
  14
  15
  17
  18
  19
  20
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  46
  47
  49
  52
  54
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
Cash from financing (excl. dividends), $m  
  13
  14
  15
  17
  18
  19
  20
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  46
  47
  49
  52
  54
Total cash flow (excl. dividends), $m
  53
  86
  122
  161
  204
  250
  299
  350
  405
  463
  522
  585
  651
  720
  792
  866
  944
  1,025
  1,109
  1,196
  1,287
  1,382
  1,480
  1,583
  1,690
  1,802
  1,918
  2,040
  2,166
  2,299
Retained Cash Flow (-), $m
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -40
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -93
  -97
  -101
Prev. year cash balance distribution, $m
  150
  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
  179
  60
  93
  130
  170
  214
  260
  310
  362
  418
  475
  536
  600
  667
  736
  809
  884
  962
  1,044
  1,129
  1,217
  1,309
  1,405
  1,504
  1,608
  1,716
  1,829
  1,947
  2,070
  2,198
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
  172
  55
  81
  107
  132
  155
  176
  194
  208
  219
  226
  229
  228
  224
  216
  205
  192
  177
  161
  143
  126
  109
  92
  77
  63
  50
  39
  30
  23
  17
Current shareholders' claim on cash, %
  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

Genomic Health, Inc. is a healthcare company that provides genomic-based diagnostic tests to personalize cancer treatment. The Company develops and commercializes genomic-based clinical laboratory services. The Company's Oncotype IQ Genomic Intelligence Platform is consisted of its flagship line of Oncotype DX gene expression tests, as well as its Oncotype SEQ Liquid Select test. Its research and development activities are focused on developing a pipeline of tests to optimize the treatment of various cancers including breast, colon, prostate and other cancers. It offers its Oncotype DX tests as a clinical laboratory service, where it analyzes the expression levels of genes in tumor tissue samples and provides physicians with a quantitative gene expression profile expressed as a single quantitative score, which it calls a Recurrence Score for invasive breast cancer and colon cancer, a DCIS Score for ductal carcinoma in situ (DCIS), and a Genomic Prostate Score, for prostate cancer.

FINANCIAL RATIOS  of  Genomic Health, Inc. (GHDX)

Valuation Ratios
P/E Ratio -179.7
Price to Sales 7.7
Price to Book 16.1
Price to Tangible Book
Price to Cash Flow 193.5
Price to Free Cash Flow -359.3
Growth Rates
Sales Growth Rate 14.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13%
Cap. Spend. - 3 Yr. Gr. Rate 12.7%
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 -7.3%
Ret/ On Assets - 3 Yr. Avg. -12.9%
Return On Total Capital -9.5%
Ret/ On T. Cap. - 3 Yr. Avg. -16.6%
Return On Equity -9.5%
Return On Equity - 3 Yr. Avg. -16.6%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 82.6%
Gross Margin - 3 Yr. Avg. 82.1%
EBITDA Margin -1.2%
EBITDA Margin - 3 Yr. Avg. -5.6%
Operating Margin -4.6%
Oper. Margin - 3 Yr. Avg. -8.3%
Pre-Tax Margin -4%
Pre-Tax Margin - 3 Yr. Avg. -8.2%
Net Profit Margin -4.3%
Net Profit Margin - 3 Yr. Avg. -8.3%
Effective Tax Rate -7.7%
Eff/ Tax Rate - 3 Yr. Avg. -3%
Payout Ratio 0%

GHDX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GHDX stock intrinsic value calculation we used $394 million for the last fiscal year's total revenue generated by Genomic Health, Inc.. The default revenue input number comes from 0001 income statement of Genomic Health, Inc.. 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 GHDX stock valuation model: a) initial revenue growth rate of 19.6% 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 4.3%, whose default value for GHDX is calculated based on our internal credit rating of Genomic Health, Inc., 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 Genomic Health, Inc..
    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 GHDX stock the variable cost ratio is equal to 43.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $204 million in the base year in the intrinsic value calculation for GHDX 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 Genomic Health, Inc..

Corporate tax rate of 27% is the nominal tax rate for Genomic Health, Inc.. 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 GHDX 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 GHDX are equal to 10.9%.

Life of production assets of 3.4 years is the average useful life of capital assets used in Genomic Health, Inc. 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 GHDX is equal to 1.3%. 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 - $270.16 million for Genomic Health, Inc. - 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 36.913 million for Genomic Health, Inc. 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 Genomic Health, Inc. at the current share price and the inputted number of shares is $2.7 billion.

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