Intrinsic value of Medidata Solutions, Inc. - MDSO

Previous Close

$91.50

  Intrinsic Value

$15.64

stock screener

  Rating & Target

str. sell

-83%

Previous close

$91.50

 
Intrinsic value

$15.64

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of MDSO 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 5.7

 

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, %
  18.10
  16.79
  15.61
  14.55
  13.59
  12.74
  11.96
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
Revenue, $m
  751
  877
  1,014
  1,162
  1,320
  1,488
  1,666
  1,853
  2,051
  2,257
  2,473
  2,698
  2,933
  3,177
  3,432
  3,696
  3,970
  4,255
  4,552
  4,860
  5,180
  5,514
  5,861
  6,222
  6,598
  6,990
  7,398
  7,825
  8,269
  8,734
Variable operating expenses, $m
  657
  764
  879
  1,003
  1,136
  1,278
  1,428
  1,586
  1,752
  1,926
  2,083
  2,273
  2,471
  2,676
  2,890
  3,113
  3,344
  3,584
  3,834
  4,094
  4,364
  4,644
  4,936
  5,241
  5,557
  5,888
  6,232
  6,591
  6,966
  7,357
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
  657
  764
  879
  1,003
  1,136
  1,278
  1,428
  1,586
  1,752
  1,926
  2,083
  2,273
  2,471
  2,676
  2,890
  3,113
  3,344
  3,584
  3,834
  4,094
  4,364
  4,644
  4,936
  5,241
  5,557
  5,888
  6,232
  6,591
  6,966
  7,357
Operating income, $m
  94
  114
  135
  159
  183
  210
  238
  268
  299
  331
  390
  425
  462
  501
  541
  583
  626
  671
  718
  766
  817
  869
  924
  981
  1,040
  1,102
  1,167
  1,234
  1,304
  1,377
EBITDA, $m
  147
  172
  198
  227
  258
  291
  326
  362
  401
  441
  484
  528
  574
  621
  671
  723
  776
  832
  890
  950
  1,013
  1,078
  1,146
  1,217
  1,290
  1,367
  1,447
  1,530
  1,617
  1,708
Interest expense (income), $m
  3
  6
  10
  13
  18
  22
  27
  32
  38
  43
  49
  56
  62
  69
  76
  84
  92
  100
  108
  117
  126
  135
  145
  155
  166
  177
  188
  200
  213
  226
  239
Earnings before tax, $m
  88
  104
  122
  141
  161
  183
  206
  230
  255
  282
  334
  363
  393
  425
  457
  491
  526
  563
  601
  641
  682
  724
  769
  815
  864
  914
  966
  1,021
  1,078
  1,138
Tax expense, $m
  24
  28
  33
  38
  44
  49
  56
  62
  69
  76
  90
  98
  106
  115
  123
  133
  142
  152
  162
  173
  184
  196
  208
  220
  233
  247
  261
  276
  291
  307
Net income, $m
  64
  76
  89
  103
  118
  134
  150
  168
  186
  206
  244
  265
  287
  310
  334
  359
  384
  411
  439
  468
  498
  529
  561
  595
  630
  667
  705
  745
  787
  831

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
  987
  1,153
  1,333
  1,527
  1,734
  1,955
  2,189
  2,435
  2,695
  2,966
  3,250
  3,546
  3,854
  4,175
  4,509
  4,856
  5,217
  5,592
  5,981
  6,386
  6,807
  7,245
  7,701
  8,176
  8,670
  9,185
  9,722
  10,282
  10,867
  11,477
Adjusted assets (=assets-cash), $m
  987
  1,153
  1,333
  1,527
  1,734
  1,955
  2,189
  2,435
  2,695
  2,966
  3,250
  3,546
  3,854
  4,175
  4,509
  4,856
  5,217
  5,592
  5,981
  6,386
  6,807
  7,245
  7,701
  8,176
  8,670
  9,185
  9,722
  10,282
  10,867
  11,477
Revenue / Adjusted assets
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
Average production assets, $m
  202
  236
  273
  313
  355
  400
  448
  499
  552
  607
  665
  726
  789
  855
  923
  994
  1,068
  1,145
  1,224
  1,307
  1,394
  1,483
  1,576
  1,674
  1,775
  1,880
  1,990
  2,105
  2,224
  2,349
Working capital, $m
  52
  61
  70
  80
  91
  103
  115
  128
  141
  156
  171
  186
  202
  219
  237
  255
  274
  294
  314
  335
  357
  380
  404
  429
  455
  482
  510
  540
  571
  603
Total debt, $m
  139
  195
  256
  321
  391
  465
  544
  627
  715
  806
  902
  1,002
  1,106
  1,214
  1,326
  1,443
  1,565
  1,691
  1,822
  1,959
  2,101
  2,248
  2,402
  2,562
  2,728
  2,902
  3,083
  3,272
  3,469
  3,674
Total liabilities, $m
  333
  388
  449
  514
  584
  659
  738
  821
  908
  1,000
  1,095
  1,195
  1,299
  1,407
  1,520
  1,637
  1,758
  1,884
  2,016
  2,152
  2,294
  2,442
  2,595
  2,755
  2,922
  3,095
  3,276
  3,465
  3,662
  3,868
Total equity, $m
  654
  764
  884
  1,012
  1,150
  1,296
  1,451
  1,615
  1,786
  1,966
  2,155
  2,351
  2,555
  2,768
  2,990
  3,220
  3,459
  3,707
  3,966
  4,234
  4,513
  4,804
  5,106
  5,420
  5,748
  6,090
  6,446
  6,817
  7,205
  7,609
Total liabilities and equity, $m
  987
  1,152
  1,333
  1,526
  1,734
  1,955
  2,189
  2,436
  2,694
  2,966
  3,250
  3,546
  3,854
  4,175
  4,510
  4,857
  5,217
  5,591
  5,982
  6,386
  6,807
  7,246
  7,701
  8,175
  8,670
  9,185
  9,722
  10,282
  10,867
  11,477
Debt-to-equity ratio
  0.210
  0.260
  0.290
  0.320
  0.340
  0.360
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.470
  0.470
  0.480
  0.480
  0.480
  0.480
  0.480
Adjusted equity ratio
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663
  0.663

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  64
  76
  89
  103
  118
  134
  150
  168
  186
  206
  244
  265
  287
  310
  334
  359
  384
  411
  439
  468
  498
  529
  561
  595
  630
  667
  705
  745
  787
  831
Depreciation, amort., depletion, $m
  53
  58
  63
  69
  75
  81
  88
  95
  102
  110
  94
  102
  111
  120
  130
  140
  150
  161
  172
  184
  196
  209
  222
  236
  250
  265
  280
  296
  313
  331
Funds from operations, $m
  117
  134
  152
  171
  192
  215
  238
  263
  289
  316
  338
  367
  398
  430
  464
  499
  535
  572
  611
  652
  694
  738
  783
  831
  880
  932
  986
  1,042
  1,100
  1,162
Change in working capital, $m
  8
  9
  9
  10
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
Cash from operations, $m
  109
  125
  143
  161
  181
  203
  226
  250
  275
  302
  323
  352
  382
  414
  446
  480
  516
  553
  591
  631
  672
  715
  759
  806
  854
  905
  958
  1,012
  1,070
  1,129
Maintenance CAPEX, $m
  -24
  -28
  -33
  -38
  -44
  -50
  -56
  -63
  -70
  -78
  -86
  -94
  -102
  -111
  -120
  -130
  -140
  -150
  -161
  -172
  -184
  -196
  -209
  -222
  -236
  -250
  -265
  -280
  -296
  -313
New CAPEX, $m
  -31
  -34
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -110
  -115
  -120
  -125
Cash from investing activities, $m
  -55
  -62
  -70
  -78
  -86
  -95
  -104
  -113
  -123
  -134
  -144
  -155
  -165
  -177
  -188
  -201
  -214
  -227
  -241
  -255
  -270
  -286
  -302
  -319
  -337
  -355
  -375
  -395
  -416
  -438
Free cash flow, $m
  54
  63
  72
  83
  95
  108
  122
  136
  152
  168
  179
  198
  217
  237
  258
  279
  302
  325
  350
  375
  401
  429
  457
  487
  518
  550
  583
  617
  654
  691
Issuance/(repayment) of debt, $m
  51
  56
  61
  65
  70
  74
  79
  83
  87
  91
  96
  100
  104
  108
  113
  117
  122
  126
  131
  136
  142
  148
  154
  160
  167
  174
  181
  189
  197
  206
Issuance/(repurchase) of shares, $m
  36
  34
  30
  26
  20
  13
  5
  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  
  87
  90
  91
  91
  90
  87
  84
  83
  87
  91
  96
  100
  104
  108
  113
  117
  122
  126
  131
  136
  142
  148
  154
  160
  167
  174
  181
  189
  197
  206
Total cash flow (excl. dividends), $m
  141
  152
  163
  174
  185
  195
  205
  219
  239
  260
  275
  297
  321
  345
  370
  396
  423
  452
  481
  512
  543
  576
  611
  647
  684
  723
  764
  806
  851
  897
Retained Cash Flow (-), $m
  -100
  -110
  -119
  -129
  -138
  -146
  -155
  -163
  -172
  -180
  -188
  -196
  -205
  -213
  -221
  -230
  -239
  -249
  -258
  -268
  -279
  -290
  -302
  -315
  -328
  -341
  -356
  -371
  -388
  -405
Prev. year cash balance distribution, $m
  77
  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
  118
  43
  44
  46
  47
  49
  50
  56
  67
  80
  87
  101
  116
  132
  149
  166
  184
  203
  223
  243
  264
  286
  309
  332
  356
  382
  408
  435
  463
  492
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
  113
  39
  38
  38
  37
  35
  34
  35
  39
  42
  41
  43
  44
  44
  44
  42
  40
  37
  34
  31
  27
  24
  20
  17
  14
  11
  9
  7
  5
  4
Current shareholders' claim on cash, %
  99.3
  98.7
  98.3
  98.0
  97.8
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6
  97.6

Medidata Solutions Inc. (Medidata) is a provider of cloud-based solutions for life sciences. The Company provides cloud-based solutions for clinical research in life sciences, offering platform technology that focuses on the clinical development. The Company's plan study addresses three areas to ensure optimal study design, grant development and negotiation, and investigator payments. Study Design Optimization enables customers to gain visibility into the impact of protocol elements on resource and trial endpoints. Grants Manager compares specific industry benchmarks and analytics, using industry's database of negotiated procedure costs, to support appropriate grants to investigator sites and automated negotiations with multiple investigator sites. Payments enables customers to establish a global investigator payment strategy and process to automate payment calculation, distribution and reporting, including tax and currency exchange calculations.

FINANCIAL RATIOS  of  Medidata Solutions, Inc. (MDSO)

Valuation Ratios
P/E Ratio 182.1
Price to Sales 11.4
Price to Book 13.1
Price to Tangible Book
Price to Cash Flow 59.4
Price to Free Cash Flow 83.8
Growth Rates
Sales Growth Rate 17.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 36.8%
Cap. Spend. - 3 Yr. Gr. Rate -3.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 65.4%
Total Debt to Equity 65.4%
Interest Coverage 13
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 5.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 75.8%
Gross Margin - 3 Yr. Avg. 75.8%
EBITDA Margin 11.9%
EBITDA Margin - 3 Yr. Avg. 8.5%
Operating Margin 10.8%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 4.7%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 3.8%
Effective Tax Rate 21.6%
Eff/ Tax Rate - 3 Yr. Avg. 18.2%
Payout Ratio 0%

MDSO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MDSO stock intrinsic value calculation we used $636 million for the last fiscal year's total revenue generated by Medidata Solutions, Inc.. The default revenue input number comes from 0001 income statement of Medidata Solutions, 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 MDSO stock valuation model: a) initial revenue growth rate of 18.1% 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 MDSO is calculated based on our internal credit rating of Medidata Solutions, 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 Medidata Solutions, 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 MDSO stock the variable cost ratio is equal to 88.1%.

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 MDSO 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 6.9% for Medidata Solutions, Inc..

Corporate tax rate of 27% is the nominal tax rate for Medidata Solutions, 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 MDSO 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 MDSO are equal to 26.9%.

Life of production assets of 7.1 years is the average useful life of capital assets used in Medidata Solutions, 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 MDSO is equal to 6.9%. 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 - $631.448 million for Medidata Solutions, 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 62.328 million for Medidata Solutions, 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 Medidata Solutions, Inc. at the current share price and the inputted number of shares is $5.7 billion.

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