Intrinsic value of GenMark Diagnostics - GNMK

Previous Close

$4.54

  Intrinsic Value

$0.31

stock screener

  Rating & Target

str. sell

-93%

Previous close

$4.54

 
Intrinsic value

$0.31

 
Up/down potential

-93%

 
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 0.3

 

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
  63
  76
  89
  104
  120
  137
  156
  176
  196
  218
  241
  265
  291
  317
  344
  373
  402
  433
  465
  499
  533
  569
  606
  645
  686
  728
  772
  817
  865
  915
Variable operating expenses, $m
  127
  151
  178
  208
  240
  275
  311
  351
  392
  436
  482
  530
  580
  632
  687
  744
  803
  864
  928
  995
  1,063
  1,135
  1,210
  1,287
  1,368
  1,452
  1,539
  1,631
  1,726
  1,825
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
  127
  151
  178
  208
  240
  275
  311
  351
  392
  436
  482
  530
  580
  632
  687
  744
  803
  864
  928
  995
  1,063
  1,135
  1,210
  1,287
  1,368
  1,452
  1,539
  1,631
  1,726
  1,825
Operating income, $m
  -63
  -76
  -89
  -104
  -120
  -137
  -155
  -175
  -196
  -218
  -240
  -264
  -289
  -315
  -343
  -371
  -400
  -431
  -463
  -496
  -530
  -566
  -603
  -642
  -682
  -724
  -768
  -813
  -861
  -910
EBITDA, $m
  -58
  -69
  -82
  -95
  -110
  -126
  -142
  -160
  -179
  -199
  -220
  -242
  -265
  -289
  -314
  -340
  -367
  -396
  -425
  -455
  -487
  -520
  -554
  -589
  -626
  -664
  -705
  -746
  -790
  -835
Interest expense (income), $m
  1
  4
  5
  6
  7
  9
  11
  12
  14
  16
  18
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  83
  88
Earnings before tax, $m
  -67
  -80
  -95
  -111
  -129
  -148
  -168
  -189
  -212
  -236
  -261
  -287
  -315
  -344
  -374
  -405
  -437
  -471
  -506
  -542
  -580
  -619
  -660
  -703
  -747
  -793
  -841
  -891
  -943
  -998
Tax expense, $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
Net income, $m
  -67
  -80
  -95
  -111
  -129
  -148
  -168
  -189
  -212
  -236
  -261
  -287
  -315
  -344
  -374
  -405
  -437
  -471
  -506
  -542
  -580
  -619
  -660
  -703
  -747
  -793
  -841
  -891
  -943
  -998

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
  83
  99
  117
  136
  157
  180
  204
  230
  257
  286
  316
  347
  380
  415
  451
  488
  527
  567
  609
  653
  698
  745
  794
  845
  897
  953
  1,010
  1,070
  1,132
  1,197
Adjusted assets (=assets-cash), $m
  83
  99
  117
  136
  157
  180
  204
  230
  257
  286
  316
  347
  380
  415
  451
  488
  527
  567
  609
  653
  698
  745
  794
  845
  897
  953
  1,010
  1,070
  1,132
  1,197
Revenue / Adjusted assets
  0.759
  0.768
  0.761
  0.765
  0.764
  0.761
  0.765
  0.765
  0.763
  0.762
  0.763
  0.764
  0.766
  0.764
  0.763
  0.764
  0.763
  0.764
  0.764
  0.764
  0.764
  0.764
  0.763
  0.763
  0.765
  0.764
  0.764
  0.764
  0.764
  0.764
Average production assets, $m
  26
  31
  37
  43
  49
  56
  64
  72
  81
  90
  99
  109
  119
  130
  141
  153
  165
  178
  191
  204
  219
  233
  249
  265
  281
  298
  316
  335
  355
  375
Working capital, $m
  4
  5
  6
  6
  7
  9
  10
  11
  12
  14
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  57
Total debt, $m
  37
  47
  58
  70
  83
  97
  112
  128
  145
  163
  182
  201
  222
  243
  266
  289
  313
  338
  364
  391
  420
  449
  479
  511
  544
  578
  614
  651
  690
  731
Total liabilities, $m
  52
  62
  73
  85
  98
  112
  127
  143
  160
  178
  197
  216
  237
  258
  281
  304
  328
  353
  379
  407
  435
  464
  494
  526
  559
  593
  629
  667
  705
  746
Total equity, $m
  31
  37
  44
  51
  59
  68
  77
  87
  97
  108
  119
  131
  143
  156
  170
  184
  199
  214
  230
  246
  263
  281
  299
  318
  338
  359
  381
  403
  427
  451
Total liabilities and equity, $m
  83
  99
  117
  136
  157
  180
  204
  230
  257
  286
  316
  347
  380
  414
  451
  488
  527
  567
  609
  653
  698
  745
  793
  844
  897
  952
  1,010
  1,070
  1,132
  1,197
Debt-to-equity ratio
  1.170
  1.250
  1.310
  1.360
  1.400
  1.430
  1.460
  1.480
  1.500
  1.510
  1.520
  1.540
  1.550
  1.560
  1.560
  1.570
  1.580
  1.580
  1.590
  1.590
  1.590
  1.600
  1.600
  1.600
  1.610
  1.610
  1.610
  1.610
  1.620
  1.620
Adjusted equity ratio
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377
  0.377

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -67
  -80
  -95
  -111
  -129
  -148
  -168
  -189
  -212
  -236
  -261
  -287
  -315
  -344
  -374
  -405
  -437
  -471
  -506
  -542
  -580
  -619
  -660
  -703
  -747
  -793
  -841
  -891
  -943
  -998
Depreciation, amort., depletion, $m
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
Funds from operations, $m
  -62
  -74
  -87
  -102
  -119
  -136
  -155
  -175
  -196
  -218
  -241
  -265
  -291
  -318
  -345
  -374
  -404
  -435
  -468
  -501
  -536
  -573
  -611
  -650
  -691
  -734
  -778
  -824
  -872
  -923
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  -62
  -75
  -88
  -103
  -120
  -137
  -156
  -176
  -197
  -219
  -242
  -267
  -293
  -319
  -347
  -376
  -406
  -437
  -470
  -503
  -539
  -575
  -613
  -652
  -693
  -736
  -781
  -827
  -875
  -926
Maintenance CAPEX, $m
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -31
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -71
New CAPEX, $m
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
Cash from investing activities, $m
  -8
  -10
  -12
  -13
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -73
  -78
  -82
  -87
  -91
Free cash flow, $m
  -71
  -85
  -100
  -117
  -135
  -154
  -175
  -197
  -220
  -244
  -270
  -297
  -325
  -354
  -384
  -416
  -449
  -483
  -518
  -555
  -594
  -633
  -675
  -718
  -763
  -810
  -858
  -909
  -962
  -1,017
Issuance/(repayment) of debt, $m
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
Issuance/(repurchase) of shares, $m
  72
  86
  102
  118
  137
  156
  177
  199
  222
  247
  272
  299
  327
  357
  387
  419
  452
  486
  522
  559
  597
  637
  679
  722
  767
  814
  863
  914
  967
  1,022
Cash from financing (excl. dividends), $m  
  81
  96
  113
  130
  150
  170
  192
  215
  239
  265
  291
  319
  348
  378
  409
  442
  476
  511
  548
  586
  625
  666
  709
  754
  800
  848
  899
  951
  1,006
  1,063
Total cash flow (excl. dividends), $m
  10
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
Retained Cash Flow (-), $m
  -72
  -86
  -102
  -118
  -137
  -156
  -177
  -199
  -222
  -247
  -272
  -299
  -327
  -357
  -387
  -419
  -452
  -486
  -522
  -559
  -597
  -637
  -679
  -722
  -767
  -814
  -863
  -914
  -967
  -1,022
Prev. year cash balance distribution, $m
  45
  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
  -17
  -75
  -89
  -105
  -122
  -140
  -160
  -181
  -203
  -226
  -251
  -277
  -304
  -332
  -362
  -393
  -425
  -458
  -492
  -528
  -565
  -604
  -644
  -686
  -730
  -775
  -823
  -872
  -923
  -977
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
  -17
  -68
  -77
  -86
  -94
  -102
  -108
  -113
  -117
  -119
  -119
  -118
  -116
  -112
  -106
  -100
  -92
  -84
  -76
  -67
  -58
  -50
  -42
  -35
  -28
  -23
  -18
  -13
  -10
  -7
Current shareholders' claim on cash, %
  56.3
  31.7
  18.0
  10.2
  5.9
  3.4
  1.9
  1.1
  0.7
  0.4
  0.2
  0.1
  0.1
  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
  0.0
  0.0
  0.0

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 (GNMK)

Valuation Ratios
P/E Ratio -4.1
Price to Sales 4.3
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow -5.9
Price to Free Cash Flow -4.7
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 $52.519 million for the last fiscal year's total revenue generated by GenMark Diagnostics. The default revenue input number comes from 0001 income statement of GenMark 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 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, 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.
    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 200%.

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 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 12.7% for GenMark Diagnostics.

Corporate tax rate of 27% is the nominal tax rate for GenMark 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 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 41%.

Life of production assets of 4.3 years is the average useful life of capital assets used in GenMark 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 GNMK is equal to 6.2%. 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 - $71.157 million for GenMark 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 55.753 million for GenMark 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 GenMark Diagnostics at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ GenMark Diagnostics: 3Q Earnings Snapshot   [05:29PM  Associated Press]
▶ GenMark Diagnostics: 2Q Earnings Snapshot   [05:29PM  Associated Press]
▶ GenMark Diagnostics Inc (NASDAQ:GNMK): Is Breakeven Near?   [May-25-18 07:13AM  Simply Wall St.]
▶ GenMark Diagnostics: 1Q Earnings Snapshot   [05:32PM  Associated Press]
▶ GenMark Diagnostics reports 4Q loss   [Feb-27-18 07:11PM  Associated Press]
▶ 8 Stocks That Will Hit All-Time Lows in 2018   [Jan-19-18 01:08PM  InvestorPlace]
▶ GenMark Diagnostics reports 3Q loss   [Nov-02-17 06:32PM  Associated Press]
▶ Is GenMark Diagnostics Inc (GNMK) Undervalued?   [Oct-12-17 02:54PM  Simply Wall St.]
▶ GenMark Diagnostics reports 2Q loss   [Aug-01-17 10:54PM  Associated Press]
▶ GenMark Reports Second Quarter 2017 Results   [08:05AM  Business Wire]
▶ GenMark Diagnostics reports 1Q loss   [May-02-17 06:16PM  Associated Press]
▶ GenMark Diagnostics reports 4Q loss   [05:19PM  Associated Press]

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