Intrinsic value of Globus Medical, Inc. - GMED

Previous Close

$41.20

  Intrinsic Value

$16.30

stock screener

  Rating & Target

str. sell

-60%

Previous close

$41.20

 
Intrinsic value

$16.30

 
Up/down potential

-60%

 
Rating

str. sell

We calculate the intrinsic value of GMED 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 4.1

 

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, %
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  794
  878
  967
  1,060
  1,157
  1,257
  1,362
  1,472
  1,585
  1,703
  1,825
  1,953
  2,085
  2,223
  2,366
  2,515
  2,670
  2,832
  3,000
  3,176
  3,359
  3,550
  3,749
  3,958
  4,176
  4,403
  4,641
  4,890
  5,151
  5,424
Variable operating expenses, $m
  590
  650
  714
  780
  850
  922
  997
  1,075
  1,157
  1,241
  1,308
  1,399
  1,494
  1,592
  1,695
  1,802
  1,913
  2,029
  2,149
  2,275
  2,406
  2,543
  2,686
  2,835
  2,991
  3,154
  3,325
  3,503
  3,690
  3,886
Fixed operating expenses, $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 operating expenses, $m
  590
  650
  714
  780
  850
  922
  997
  1,075
  1,157
  1,241
  1,308
  1,399
  1,494
  1,592
  1,695
  1,802
  1,913
  2,029
  2,149
  2,275
  2,406
  2,543
  2,686
  2,835
  2,991
  3,154
  3,325
  3,503
  3,690
  3,886
Operating income, $m
  204
  228
  253
  279
  307
  335
  365
  396
  428
  462
  518
  554
  591
  630
  671
  713
  757
  803
  851
  901
  953
  1,007
  1,063
  1,122
  1,184
  1,249
  1,316
  1,387
  1,461
  1,538
EBITDA, $m
  258
  286
  314
  345
  376
  409
  443
  479
  515
  554
  594
  635
  678
  723
  769
  818
  868
  921
  976
  1,033
  1,092
  1,154
  1,219
  1,287
  1,358
  1,432
  1,509
  1,590
  1,675
  1,764
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  39
Earnings before tax, $m
  204
  227
  252
  277
  304
  332
  360
  391
  422
  454
  509
  544
  581
  618
  658
  699
  741
  786
  832
  881
  931
  984
  1,039
  1,096
  1,156
  1,218
  1,284
  1,353
  1,424
  1,499
Tax expense, $m
  55
  61
  68
  75
  82
  90
  97
  105
  114
  123
  137
  147
  157
  167
  178
  189
  200
  212
  225
  238
  251
  266
  280
  296
  312
  329
  347
  365
  385
  405
Net income, $m
  149
  166
  184
  202
  222
  242
  263
  285
  308
  332
  372
  397
  424
  451
  480
  510
  541
  574
  608
  643
  680
  718
  758
  800
  844
  889
  937
  987
  1,040
  1,095

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
  1,177
  1,303
  1,435
  1,572
  1,716
  1,866
  2,021
  2,183
  2,352
  2,527
  2,708
  2,897
  3,094
  3,298
  3,510
  3,732
  3,962
  4,201
  4,451
  4,712
  4,983
  5,267
  5,563
  5,872
  6,195
  6,533
  6,886
  7,256
  7,642
  8,047
Adjusted assets (=assets-cash), $m
  1,177
  1,303
  1,435
  1,572
  1,716
  1,866
  2,021
  2,183
  2,352
  2,527
  2,708
  2,897
  3,094
  3,298
  3,510
  3,732
  3,962
  4,201
  4,451
  4,712
  4,983
  5,267
  5,563
  5,872
  6,195
  6,533
  6,886
  7,256
  7,642
  8,047
Revenue / Adjusted assets
  0.675
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
Average production assets, $m
  290
  321
  354
  388
  423
  460
  499
  539
  580
  623
  668
  715
  763
  814
  866
  921
  977
  1,036
  1,098
  1,162
  1,229
  1,299
  1,372
  1,449
  1,528
  1,612
  1,699
  1,790
  1,885
  1,985
Working capital, $m
  217
  240
  264
  289
  316
  343
  372
  402
  433
  465
  498
  533
  569
  607
  646
  687
  729
  773
  819
  867
  917
  969
  1,024
  1,080
  1,140
  1,202
  1,267
  1,335
  1,406
  1,481
Total debt, $m
  13
  27
  41
  56
  72
  88
  105
  123
  141
  160
  180
  201
  222
  244
  267
  292
  317
  343
  370
  398
  428
  459
  491
  525
  560
  597
  635
  676
  718
  762
Total liabilities, $m
  128
  142
  156
  171
  187
  203
  220
  238
  256
  275
  295
  316
  337
  359
  383
  407
  432
  458
  485
  514
  543
  574
  606
  640
  675
  712
  751
  791
  833
  877
Total equity, $m
  1,049
  1,161
  1,278
  1,401
  1,529
  1,662
  1,801
  1,945
  2,095
  2,251
  2,413
  2,582
  2,757
  2,939
  3,128
  3,325
  3,530
  3,743
  3,966
  4,198
  4,440
  4,693
  4,956
  5,232
  5,520
  5,821
  6,136
  6,465
  6,809
  7,170
Total liabilities and equity, $m
  1,177
  1,303
  1,434
  1,572
  1,716
  1,865
  2,021
  2,183
  2,351
  2,526
  2,708
  2,898
  3,094
  3,298
  3,511
  3,732
  3,962
  4,201
  4,451
  4,712
  4,983
  5,267
  5,562
  5,872
  6,195
  6,533
  6,887
  7,256
  7,642
  8,047
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.050
  0.060
  0.060
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.110
  0.110
Adjusted equity ratio
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891
  0.891

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  149
  166
  184
  202
  222
  242
  263
  285
  308
  332
  372
  397
  424
  451
  480
  510
  541
  574
  608
  643
  680
  718
  758
  800
  844
  889
  937
  987
  1,040
  1,095
Depreciation, amort., depletion, $m
  54
  58
  61
  65
  69
  73
  78
  82
  87
  92
  76
  81
  87
  92
  98
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
  203
  214
  226
Funds from operations, $m
  203
  224
  245
  268
  291
  315
  341
  367
  395
  424
  448
  478
  511
  544
  579
  615
  652
  692
  732
  775
  819
  866
  914
  965
  1,017
  1,073
  1,130
  1,191
  1,254
  1,320
Change in working capital, $m
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
Cash from operations, $m
  181
  200
  221
  242
  265
  288
  312
  338
  364
  391
  414
  444
  474
  506
  540
  574
  610
  647
  686
  727
  769
  813
  860
  908
  958
  1,010
  1,065
  1,123
  1,183
  1,246
Maintenance CAPEX, $m
  -30
  -33
  -37
  -40
  -44
  -48
  -52
  -57
  -61
  -66
  -71
  -76
  -81
  -87
  -92
  -98
  -105
  -111
  -118
  -125
  -132
  -140
  -148
  -156
  -165
  -174
  -183
  -193
  -203
  -214
New CAPEX, $m
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -100
Cash from investing activities, $m
  -60
  -64
  -69
  -74
  -79
  -85
  -90
  -97
  -103
  -109
  -116
  -123
  -129
  -137
  -144
  -153
  -162
  -170
  -180
  -189
  -199
  -210
  -221
  -232
  -245
  -257
  -270
  -284
  -298
  -314
Free cash flow, $m
  122
  136
  152
  168
  185
  203
  222
  241
  261
  282
  298
  321
  345
  369
  395
  421
  449
  477
  507
  538
  570
  604
  639
  675
  714
  753
  795
  839
  884
  932
Issuance/(repayment) of debt, $m
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
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
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
Total cash flow (excl. dividends), $m
  135
  150
  166
  183
  201
  219
  239
  259
  280
  301
  318
  342
  366
  391
  418
  445
  474
  503
  534
  566
  600
  635
  671
  709
  749
  790
  834
  879
  926
  976
Retained Cash Flow (-), $m
  -107
  -112
  -117
  -123
  -128
  -133
  -139
  -144
  -150
  -156
  -162
  -168
  -175
  -182
  -189
  -197
  -205
  -214
  -223
  -232
  -242
  -253
  -264
  -275
  -288
  -301
  -315
  -329
  -345
  -361
Prev. year cash balance distribution, $m
  244
  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
  271
  38
  49
  60
  73
  86
  100
  114
  130
  145
  156
  173
  191
  209
  229
  248
  269
  290
  312
  334
  358
  382
  407
  434
  461
  489
  519
  550
  582
  615
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
  260
  35
  43
  50
  56
  62
  67
  71
  74
  76
  74
  74
  73
  70
  67
  63
  58
  53
  48
  42
  37
  32
  27
  22
  18
  14
  11
  9
  6
  5
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

Globus Medical, Inc. is a medical device company. The Company is focused on developing products for patients with musculoskeletal disorders. It is focused on products to treat patients with spine disorders. The Company's products fall under categories, which include Innovative Fusion and Disruptive Technologies. The Innovative Fusion category products include fusion products to treat spinal disorders for the entire spine, and they can be used in various surgical approaches. The Disruptive Technologies category represents a shift in the treatment of spinal disorders by allowing for surgical procedures and the treatment of spinal disorders. QUARTEX is its Occipito-Cervico-Thoracic (OCT) stabilization system. QUARTEX features a threading locking cap to enable low-torque. The Company's portfolio of approved and pipeline Disruptive Technology products includes products that allow for minimally invasive surgical (MIS) techniques. _tck('aft');

FINANCIAL RATIOS  of  Globus Medical, Inc. (GMED)

Valuation Ratios
P/E Ratio 55.8
Price to Sales 8.9
Price to Book 8.2
Price to Tangible Book
Price to Cash Flow 41.4
Price to Free Cash Flow 55.8
Growth Rates
Sales Growth Rate 12.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.5
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.6%
Ret/ On Assets - 3 Yr. Avg. 17.7%
Return On Total Capital 16.1%
Ret/ On T. Cap. - 3 Yr. Avg. 20.6%
Return On Equity 16.1%
Return On Equity - 3 Yr. Avg. 20.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 77.2%
Gross Margin - 3 Yr. Avg. 79.1%
EBITDA Margin 27.9%
EBITDA Margin - 3 Yr. Avg. 32.3%
Operating Margin 23.3%
Oper. Margin - 3 Yr. Avg. 27.5%
Pre-Tax Margin 23.5%
Pre-Tax Margin - 3 Yr. Avg. 27.5%
Net Profit Margin 15.9%
Net Profit Margin - 3 Yr. Avg. 17.8%
Effective Tax Rate 32.4%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio 0%

GMED stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GMED stock intrinsic value calculation we used $713 million for the last fiscal year's total revenue generated by Globus Medical, Inc.. The default revenue input number comes from 0001 income statement of Globus Medical, 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 GMED stock valuation model: a) initial revenue growth rate of 11.3% 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 GMED is calculated based on our internal credit rating of Globus Medical, 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 Globus Medical, 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 GMED stock the variable cost ratio is equal to 74.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for GMED 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 Globus Medical, Inc..

Corporate tax rate of 27% is the nominal tax rate for Globus Medical, 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 GMED 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 GMED are equal to 36.6%.

Life of production assets of 8.8 years is the average useful life of capital assets used in Globus Medical, 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 GMED is equal to 27.3%. 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 - $1185.516 million for Globus Medical, 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 98.757 million for Globus Medical, 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 Globus Medical, Inc. at the current share price and the inputted number of shares is $4.1 billion.

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