Intrinsic value of Masimo Corporation - MASI

Previous Close

$145.58

  Intrinsic Value

$57.19

stock screener

  Rating & Target

str. sell

-61%

Previous close

$145.58

 
Intrinsic value

$57.19

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of MASI 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 7.7

 

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, %
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.17
  5.15
  5.13
  5.12
  5.11
Revenue, $m
  921
  986
  1,053
  1,124
  1,197
  1,273
  1,352
  1,435
  1,521
  1,610
  1,704
  1,801
  1,903
  2,009
  2,120
  2,236
  2,357
  2,484
  2,617
  2,756
  2,902
  3,054
  3,214
  3,381
  3,556
  3,740
  3,932
  4,134
  4,346
  4,568
Variable operating expenses, $m
  594
  636
  679
  724
  771
  820
  871
  923
  978
  1,036
  1,090
  1,153
  1,218
  1,286
  1,357
  1,431
  1,509
  1,590
  1,675
  1,764
  1,857
  1,955
  2,057
  2,164
  2,276
  2,394
  2,517
  2,646
  2,782
  2,924
Fixed operating expenses, $m
  99
  101
  104
  106
  108
  111
  113
  115
  118
  121
  123
  126
  129
  132
  134
  137
  140
  144
  147
  150
  153
  157
  160
  164
  167
  171
  175
  178
  182
  186
Total operating expenses, $m
  693
  737
  783
  830
  879
  931
  984
  1,038
  1,096
  1,157
  1,213
  1,279
  1,347
  1,418
  1,491
  1,568
  1,649
  1,734
  1,822
  1,914
  2,010
  2,112
  2,217
  2,328
  2,443
  2,565
  2,692
  2,824
  2,964
  3,110
Operating income, $m
  227
  248
  271
  294
  318
  343
  369
  396
  424
  454
  490
  522
  556
  592
  629
  667
  708
  751
  795
  842
  891
  943
  997
  1,053
  1,113
  1,175
  1,241
  1,310
  1,382
  1,458
EBITDA, $m
  252
  275
  298
  323
  349
  375
  403
  432
  462
  494
  527
  561
  597
  635
  675
  716
  759
  805
  852
  902
  954
  1,009
  1,066
  1,127
  1,190
  1,256
  1,326
  1,399
  1,476
  1,557
Interest expense (income), $m
  4
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
Earnings before tax, $m
  227
  248
  269
  291
  314
  339
  364
  390
  417
  446
  481
  512
  545
  579
  615
  653
  692
  733
  776
  822
  869
  919
  971
  1,026
  1,083
  1,144
  1,207
  1,274
  1,344
  1,417
Tax expense, $m
  61
  67
  73
  79
  85
  91
  98
  105
  113
  120
  130
  138
  147
  156
  166
  176
  187
  198
  210
  222
  235
  248
  262
  277
  293
  309
  326
  344
  363
  383
Net income, $m
  166
  181
  196
  213
  230
  247
  266
  285
  305
  326
  351
  374
  398
  423
  449
  476
  505
  535
  567
  600
  634
  671
  709
  749
  791
  835
  881
  930
  981
  1,034

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
  805
  862
  921
  982
  1,046
  1,113
  1,182
  1,254
  1,329
  1,407
  1,489
  1,574
  1,663
  1,756
  1,853
  1,955
  2,061
  2,172
  2,288
  2,409
  2,536
  2,670
  2,809
  2,955
  3,109
  3,269
  3,437
  3,614
  3,799
  3,993
Adjusted assets (=assets-cash), $m
  805
  862
  921
  982
  1,046
  1,113
  1,182
  1,254
  1,329
  1,407
  1,489
  1,574
  1,663
  1,756
  1,853
  1,955
  2,061
  2,172
  2,288
  2,409
  2,536
  2,670
  2,809
  2,955
  3,109
  3,269
  3,437
  3,614
  3,799
  3,993
Revenue / Adjusted assets
  1.144
  1.144
  1.143
  1.145
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
  1.144
Average production assets, $m
  203
  218
  233
  248
  265
  281
  299
  317
  336
  356
  376
  398
  421
  444
  469
  494
  521
  549
  578
  609
  641
  675
  710
  747
  786
  827
  869
  914
  960
  1,010
Working capital, $m
  91
  98
  104
  111
  118
  126
  134
  142
  151
  159
  169
  178
  188
  199
  210
  221
  233
  246
  259
  273
  287
  302
  318
  335
  352
  370
  389
  409
  430
  452
Total debt, $m
  14
  28
  43
  58
  74
  90
  107
  125
  144
  163
  184
  205
  227
  250
  274
  299
  325
  353
  382
  412
  443
  476
  511
  547
  585
  625
  667
  710
  756
  805
Total liabilities, $m
  200
  214
  228
  244
  259
  276
  293
  311
  330
  349
  369
  390
  412
  436
  460
  485
  511
  539
  567
  597
  629
  662
  697
  733
  771
  811
  852
  896
  942
  990
Total equity, $m
  605
  648
  692
  739
  787
  837
  889
  943
  1,000
  1,058
  1,120
  1,184
  1,251
  1,321
  1,394
  1,470
  1,550
  1,633
  1,720
  1,812
  1,907
  2,008
  2,112
  2,222
  2,338
  2,458
  2,585
  2,718
  2,857
  3,003
Total liabilities and equity, $m
  805
  862
  920
  983
  1,046
  1,113
  1,182
  1,254
  1,330
  1,407
  1,489
  1,574
  1,663
  1,757
  1,854
  1,955
  2,061
  2,172
  2,287
  2,409
  2,536
  2,670
  2,809
  2,955
  3,109
  3,269
  3,437
  3,614
  3,799
  3,993
Debt-to-equity ratio
  0.020
  0.040
  0.060
  0.080
  0.090
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.270
Adjusted equity ratio
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  166
  181
  196
  213
  230
  247
  266
  285
  305
  326
  351
  374
  398
  423
  449
  476
  505
  535
  567
  600
  634
  671
  709
  749
  791
  835
  881
  930
  981
  1,034
Depreciation, amort., depletion, $m
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  90
  94
  99
Funds from operations, $m
  191
  207
  224
  242
  261
  280
  300
  321
  343
  366
  388
  413
  439
  466
  495
  525
  556
  589
  623
  659
  697
  737
  778
  822
  868
  916
  966
  1,019
  1,075
  1,133
Change in working capital, $m
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
Cash from operations, $m
  185
  201
  218
  235
  253
  272
  292
  313
  334
  357
  379
  403
  429
  456
  484
  513
  544
  576
  610
  646
  683
  722
  763
  806
  851
  898
  947
  999
  1,054
  1,111
Maintenance CAPEX, $m
  -19
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -90
  -94
New CAPEX, $m
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
Cash from investing activities, $m
  -33
  -34
  -36
  -39
  -40
  -43
  -46
  -47
  -50
  -53
  -56
  -59
  -61
  -64
  -69
  -72
  -75
  -79
  -83
  -88
  -92
  -97
  -101
  -107
  -112
  -118
  -124
  -130
  -137
  -143
Free cash flow, $m
  152
  166
  181
  197
  213
  230
  247
  265
  284
  304
  323
  345
  368
  391
  416
  442
  469
  497
  527
  558
  591
  625
  661
  699
  739
  780
  824
  870
  918
  968
Issuance/(repayment) of debt, $m
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
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  
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
Total cash flow (excl. dividends), $m
  166
  181
  196
  212
  229
  246
  264
  283
  303
  323
  344
  366
  390
  414
  440
  467
  495
  525
  556
  588
  623
  658
  696
  735
  777
  820
  866
  913
  964
  1,016
Retained Cash Flow (-), $m
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -139
  -146
Prev. year cash balance distribution, $m
  405
  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
  530
  138
  151
  166
  181
  196
  212
  229
  246
  265
  282
  302
  323
  344
  367
  391
  415
  441
  469
  497
  527
  558
  591
  625
  661
  699
  739
  781
  824
  870
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
  508
  126
  132
  136
  140
  142
  143
  143
  142
  139
  134
  129
  123
  116
  108
  99
  90
  81
  72
  63
  54
  46
  39
  32
  26
  20
  16
  12
  9
  7
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

Masimo Corporation is a medical technology company that develops, manufactures and markets a range of non-invasive patient monitoring technologies. The Company's business is Measure-through Motion and Low Perfusion pulse oximetry monitoring, known as Masimo Signal Extraction Technology (SET) pulse oximetry. Its product offerings include non-invasive monitoring of blood constituents with an optical signature, optical organ oximetry monitoring, electrical, brain function monitoring, acoustic respiration monitoring and exhaled gas monitoring. In addition, the Company has developed the Root patient monitoring and connectivity platform, the Radical-7 bedside and portable patient monitor, and the Radius-7 wearable wireless patient monitor. It offers Patient SafetyNet remote patient surveillance monitoring system, which allows patients to be monitored through a personal computer-based monitor or by care providers through their pagers, voice-over-Internet Protocol (IP) phones or smartphones.

FINANCIAL RATIOS  of  Masimo Corporation (MASI)

Valuation Ratios
P/E Ratio 24.3
Price to Sales 10.5
Price to Book 13
Price to Tangible Book
Price to Cash Flow 17.5
Price to Free Cash Flow 18.6
Growth Rates
Sales Growth Rate 10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.4%
Cap. Spend. - 3 Yr. Gr. Rate 13%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 106
Management Effectiveness
Return On Assets 42.7%
Ret/ On Assets - 3 Yr. Avg. 23.9%
Return On Total Capital 59%
Ret/ On T. Cap. - 3 Yr. Avg. 32.3%
Return On Equity 72.1%
Return On Equity - 3 Yr. Avg. 41.3%
Asset Turnover 1
Profitability Ratios
Gross Margin 66.8%
Gross Margin - 3 Yr. Avg. 66.2%
EBITDA Margin 63.2%
EBITDA Margin - 3 Yr. Avg. 34.7%
Operating Margin 60.6%
Oper. Margin - 3 Yr. Avg. 32.4%
Pre-Tax Margin 60.1%
Pre-Tax Margin - 3 Yr. Avg. 32%
Net Profit Margin 43.3%
Net Profit Margin - 3 Yr. Avg. 23%
Effective Tax Rate 28%
Eff/ Tax Rate - 3 Yr. Avg. 28.3%
Payout Ratio 0%

MASI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MASI stock intrinsic value calculation we used $858 million for the last fiscal year's total revenue generated by Masimo Corporation. The default revenue input number comes from 0001 income statement of Masimo Corporation. 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 MASI stock valuation model: a) initial revenue growth rate of 7.3% 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 MASI is calculated based on our internal credit rating of Masimo Corporation, 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 Masimo Corporation.
    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 MASI stock the variable cost ratio is equal to 64.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $97 million in the base year in the intrinsic value calculation for MASI 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 Masimo Corporation.

Corporate tax rate of 27% is the nominal tax rate for Masimo Corporation. 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 MASI 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 MASI are equal to 22.1%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Masimo Corporation 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 MASI is equal to 9.9%. 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 - $969.065 million for Masimo Corporation - 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 53.184 million for Masimo Corporation 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 Masimo Corporation at the current share price and the inputted number of shares is $7.7 billion.

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