Intrinsic value of GenMark Diagnostics, Inc. - GNMK

Previous Close

$6.68

  Intrinsic Value

$1.47

stock screener

  Rating & Target

str. sell

-78%

Previous close

$6.68

 
Intrinsic value

$1.47

 
Up/down potential

-78%

 
Rating

str. sell

We calculate the intrinsic value of GNMK 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, %
  20.90
  19.31
  17.88
  16.59
  15.43
  14.39
  13.45
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.95
  7.65
  7.39
  7.15
  6.93
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
Revenue, $m
  86
  102
  121
  141
  162
  186
  211
  237
  266
  295
  326
  359
  393
  429
  466
  504
  544
  586
  629
  674
  721
  769
  820
  872
  927
  984
  1,043
  1,105
  1,169
  1,237
Variable operating expenses, $m
  36
  42
  50
  57
  66
  75
  85
  96
  107
  118
  128
  141
  155
  169
  183
  198
  214
  230
  247
  265
  284
  303
  323
  343
  365
  387
  410
  435
  460
  487
Fixed operating expenses, $m
  94
  96
  98
  100
  103
  105
  107
  109
  112
  114
  117
  119
  122
  125
  128
  130
  133
  136
  139
  142
  145
  148
  152
  155
  159
  162
  166
  169
  173
  177
Total operating expenses, $m
  130
  138
  148
  157
  169
  180
  192
  205
  219
  232
  245
  260
  277
  294
  311
  328
  347
  366
  386
  407
  429
  451
  475
  498
  524
  549
  576
  604
  633
  664
Operating income, $m
  -44
  -36
  -27
  -17
  -6
  6
  19
  32
  47
  63
  81
  98
  116
  135
  155
  175
  197
  219
  242
  267
  292
  318
  345
  374
  404
  435
  467
  501
  536
  573
EBITDA, $m
  -36
  -27
  -17
  -6
  7
  20
  34
  50
  66
  84
  102
  122
  142
  163
  185
  208
  232
  257
  283
  310
  339
  368
  399
  431
  464
  499
  535
  573
  612
  654
Interest expense (income), $m
  1
  3
  5
  6
  8
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  69
  73
  78
  83
  88
  93
Earnings before tax, $m
  -48
  -41
  -33
  -25
  -15
  -5
  6
  18
  30
  43
  59
  74
  89
  105
  122
  140
  158
  177
  197
  218
  239
  262
  285
  310
  335
  362
  390
  419
  449
  481
Tax expense, $m
  0
  0
  0
  0
  0
  0
  2
  5
  8
  12
  16
  20
  24
  28
  33
  38
  43
  48
  53
  59
  65
  71
  77
  84
  90
  98
  105
  113
  121
  130
Net income, $m
  -48
  -41
  -33
  -25
  -15
  -5
  4
  13
  22
  32
  43
  54
  65
  77
  89
  102
  115
  129
  144
  159
  175
  191
  208
  226
  245
  264
  284
  306
  328
  351

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
  81
  97
  115
  134
  154
  176
  200
  225
  252
  280
  310
  341
  373
  407
  442
  478
  516
  556
  597
  639
  684
  730
  778
  828
  879
  933
  990
  1,048
  1,110
  1,173
Adjusted assets (=assets-cash), $m
  81
  97
  115
  134
  154
  176
  200
  225
  252
  280
  310
  341
  373
  407
  442
  478
  516
  556
  597
  639
  684
  730
  778
  828
  879
  933
  990
  1,048
  1,110
  1,173
Revenue / Adjusted assets
  1.062
  1.052
  1.052
  1.052
  1.052
  1.057
  1.055
  1.053
  1.056
  1.054
  1.052
  1.053
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.055
  1.054
  1.053
  1.054
  1.053
  1.055
  1.055
  1.054
  1.054
  1.053
  1.055
Average production assets, $m
  28
  33
  39
  46
  53
  60
  68
  77
  86
  96
  106
  116
  127
  139
  151
  163
  176
  190
  204
  218
  233
  249
  266
  283
  300
  319
  338
  358
  379
  401
Working capital, $m
  3
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
  34
  36
  38
Total debt, $m
  49
  62
  78
  95
  113
  132
  153
  176
  199
  224
  250
  277
  306
  336
  367
  399
  432
  467
  504
  541
  580
  621
  663
  707
  753
  801
  851
  902
  956
  1,013
Total liabilities, $m
  72
  86
  101
  118
  136
  156
  177
  199
  222
  247
  273
  301
  329
  359
  390
  422
  456
  491
  527
  565
  604
  644
  687
  731
  777
  824
  874
  926
  980
  1,036
Total equity, $m
  10
  11
  13
  16
  18
  21
  23
  26
  29
  33
  36
  40
  44
  48
  52
  56
  60
  65
  70
  75
  80
  85
  91
  97
  103
  109
  116
  123
  130
  137
Total liabilities and equity, $m
  82
  97
  114
  134
  154
  177
  200
  225
  251
  280
  309
  341
  373
  407
  442
  478
  516
  556
  597
  640
  684
  729
  778
  828
  880
  933
  990
  1,049
  1,110
  1,173
Debt-to-equity ratio
  5.090
  5.490
  5.800
  6.050
  6.250
  6.410
  6.550
  6.660
  6.750
  6.830
  6.900
  6.960
  7.010
  7.060
  7.090
  7.130
  7.160
  7.190
  7.210
  7.230
  7.250
  7.270
  7.290
  7.310
  7.320
  7.330
  7.350
  7.360
  7.370
  7.380
Adjusted equity ratio
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -48
  -41
  -33
  -25
  -15
  -5
  4
  13
  22
  32
  43
  54
  65
  77
  89
  102
  115
  129
  144
  159
  175
  191
  208
  226
  245
  264
  284
  306
  328
  351
Depreciation, amort., depletion, $m
  8
  9
  10
  11
  13
  14
  16
  17
  19
  21
  21
  23
  25
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
Funds from operations, $m
  -40
  -32
  -23
  -13
  -3
  9
  20
  30
  41
  53
  64
  77
  91
  105
  119
  135
  151
  167
  185
  203
  221
  241
  261
  283
  305
  328
  352
  377
  403
  431
Change in working capital, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  -40
  -33
  -24
  -14
  -3
  8
  19
  29
  40
  52
  63
  76
  90
  104
  118
  134
  149
  166
  183
  201
  220
  239
  260
  281
  303
  326
  350
  375
  401
  429
Maintenance CAPEX, $m
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
New CAPEX, $m
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -10
  -11
  -13
  -14
  -16
  -19
  -20
  -23
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -42
  -46
  -48
  -52
  -56
  -59
  -63
  -66
  -70
  -75
  -78
  -83
  -88
  -93
  -98
Free cash flow, $m
  -50
  -43
  -36
  -28
  -19
  -10
  -1
  7
  16
  25
  34
  45
  55
  67
  79
  91
  104
  117
  131
  146
  161
  177
  194
  211
  229
  248
  267
  288
  309
  331
Issuance/(repayment) of debt, $m
  12
  14
  15
  17
  18
  20
  21
  22
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
Issuance/(repurchase) of shares, $m
  49
  43
  35
  27
  18
  8
  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  
  61
  57
  50
  44
  36
  28
  21
  22
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
Total cash flow (excl. dividends), $m
  12
  13
  14
  15
  16
  17
  20
  29
  39
  50
  60
  72
  84
  96
  110
  123
  137
  152
  168
  184
  200
  218
  236
  255
  275
  295
  317
  339
  363
  388
Retained Cash Flow (-), $m
  -49
  -43
  -35
  -27
  -18
  -8
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
Prev. year cash balance distribution, $m
  26
  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
  -12
  -30
  -21
  -12
  -1
  10
  17
  27
  36
  47
  57
  68
  80
  93
  105
  119
  133
  148
  163
  179
  195
  212
  230
  249
  269
  289
  310
  333
  356
  380
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
  -11
  -27
  -18
  -10
  -1
  7
  12
  17
  21
  24
  27
  29
  30
  31
  31
  30
  29
  27
  25
  23
  20
  18
  15
  13
  10
  8
  7
  5
  4
  3
Current shareholders' claim on cash, %
  61.7
  42.6
  32.5
  27.1
  24.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3
  23.3

GenMark Diagnostics, Inc. is a molecular diagnostics company. The Company is focused on developing and commercializing multiplex molecular tests that aid in the diagnosis of complex medical conditions. It develops and commercializes multiplex molecular tests based on its eSensor electrochemical detection technology. It offers four Food and Drug Administration (FDA)-cleared diagnostic tests which run on its XT-8 instrument; its Respiratory Viral Panel; its Cystic Fibrosis Genotyping Test; its Warfarin Sensitivity Test, and its Thrombophilia Risk Test. It also offers a Hepatitis C (HCV) genotyping test and associated custom manufactured reagents, as well as a 2C19 Genotyping Test, versions of which are available for use with its XT-8 instrument for research use only (RUO). Its XT-8 and ePlex test cartridges utilize the combination of distinct electrodes and multiple signal probes to detect dozens of target biomarkers from a single sample, thereby enabling highly multiplexed testing.

FINANCIAL RATIOS  of  GenMark Diagnostics, Inc. (GNMK)

Valuation Ratios
P/E Ratio -6.1
Price to Sales 6.3
Price to Book 8.2
Price to Tangible Book
Price to Cash Flow -8.6
Price to Free Cash Flow -6.9
Growth Rates
Sales Growth Rate 25.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 125%
Cap. Spend. - 3 Yr. Gr. Rate 12.5%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 31.6%
Total Debt to Equity 52.6%
Interest Coverage -50
Management Effectiveness
Return On Assets -66.2%
Ret/ On Assets - 3 Yr. Avg. -50.7%
Return On Total Capital -87.2%
Ret/ On T. Cap. - 3 Yr. Avg. -63%
Return On Equity -117.2%
Return On Equity - 3 Yr. Avg. -74.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 61.2%
Gross Margin - 3 Yr. Avg. 59.2%
EBITDA Margin -93.9%
EBITDA Margin - 3 Yr. Avg. -102.5%
Operating Margin -100%
Oper. Margin - 3 Yr. Avg. -111.2%
Pre-Tax Margin -104.1%
Pre-Tax Margin - 3 Yr. Avg. -112.5%
Net Profit Margin -104.1%
Net Profit Margin - 3 Yr. Avg. -111.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0.9%
Payout Ratio 0%

GNMK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GNMK stock intrinsic value calculation we used $71 million for the last fiscal year's total revenue generated by GenMark Diagnostics, Inc.. The default revenue input number comes from 0001 income statement of GenMark Diagnostics, 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 GNMK stock valuation model: a) initial revenue growth rate of 20.9% 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 GNMK is calculated based on our internal credit rating of GenMark Diagnostics, 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 GenMark Diagnostics, 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 GNMK stock the variable cost ratio is equal to 42.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $92 million in the base year in the intrinsic value calculation for GNMK 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 9.7% for GenMark Diagnostics, Inc..

Corporate tax rate of 27% is the nominal tax rate for GenMark Diagnostics, 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 GNMK 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 GNMK are equal to 32.4%.

Life of production assets of 3.4 years is the average useful life of capital assets used in GenMark Diagnostics, 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 GNMK is equal to 3.1%. 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 - $33.547 million for GenMark Diagnostics, 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 56.472 million for GenMark Diagnostics, 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 GenMark Diagnostics, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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