Intrinsic value of NeoGenomics - NEO

Previous Close

$16.00

  Intrinsic Value

$2.19

stock screener

  Rating & Target

str. sell

-86%

Previous close

$16.00

 
Intrinsic value

$2.19

 
Up/down potential

-86%

 
Rating

str. sell

We calculate the intrinsic value of NEO 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 1.3

 

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, %
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
Revenue, $m
  281
  305
  330
  355
  382
  410
  438
  468
  499
  532
  565
  600
  637
  675
  714
  756
  799
  844
  891
  940
  991
  1,045
  1,101
  1,160
  1,221
  1,286
  1,353
  1,424
  1,498
  1,575
Variable operating expenses, $m
  257
  276
  297
  318
  340
  364
  387
  412
  438
  465
  471
  500
  531
  562
  595
  630
  666
  703
  742
  783
  826
  871
  918
  967
  1,018
  1,072
  1,128
  1,187
  1,248
  1,313
Fixed operating expenses, $m
  18
  19
  19
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
Total operating expenses, $m
  275
  295
  316
  338
  360
  385
  408
  433
  460
  487
  494
  523
  555
  586
  620
  655
  692
  730
  769
  811
  854
  900
  948
  997
  1,049
  1,104
  1,160
  1,220
  1,282
  1,348
Operating income, $m
  6
  10
  14
  17
  21
  26
  30
  34
  39
  44
  71
  77
  82
  88
  94
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  193
  204
  216
  228
EBITDA, $m
  42
  47
  52
  57
  62
  68
  74
  80
  86
  93
  99
  106
  114
  121
  129
  138
  147
  156
  165
  175
  186
  197
  208
  220
  233
  246
  260
  275
  290
  306
Interest expense (income), $m
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
Earnings before tax, $m
  1
  3
  6
  9
  12
  15
  19
  22
  26
  30
  56
  60
  64
  69
  73
  78
  83
  89
  94
  100
  106
  113
  120
  127
  134
  142
  150
  159
  168
  177
Tax expense, $m
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
  36
  38
  41
  43
  45
  48
Net income, $m
  0
  2
  5
  7
  9
  11
  14
  16
  19
  22
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  78
  82
  87
  93
  98
  104
  110
  116
  123
  130

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
  374
  406
  438
  473
  508
  545
  583
  623
  664
  707
  752
  798
  847
  897
  950
  1,005
  1,062
  1,122
  1,184
  1,250
  1,318
  1,389
  1,464
  1,542
  1,624
  1,710
  1,799
  1,893
  1,992
  2,095
Adjusted assets (=assets-cash), $m
  374
  406
  438
  473
  508
  545
  583
  623
  664
  707
  752
  798
  847
  897
  950
  1,005
  1,062
  1,122
  1,184
  1,250
  1,318
  1,389
  1,464
  1,542
  1,624
  1,710
  1,799
  1,893
  1,992
  2,095
Revenue / Adjusted assets
  0.751
  0.751
  0.753
  0.751
  0.752
  0.752
  0.751
  0.751
  0.752
  0.752
  0.751
  0.752
  0.752
  0.753
  0.752
  0.752
  0.752
  0.752
  0.753
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
Average production assets, $m
  159
  173
  187
  201
  216
  232
  248
  265
  283
  301
  320
  340
  360
  382
  404
  428
  452
  478
  504
  532
  561
  591
  623
  656
  691
  728
  766
  806
  848
  892
Working capital, $m
  50
  54
  58
  63
  67
  72
  77
  82
  88
  94
  99
  106
  112
  119
  126
  133
  141
  148
  157
  165
  174
  184
  194
  204
  215
  226
  238
  251
  264
  277
Total debt, $m
  120
  136
  153
  170
  187
  206
  225
  245
  266
  287
  310
  333
  357
  382
  409
  436
  465
  495
  526
  559
  593
  629
  666
  706
  747
  789
  834
  881
  931
  982
Total liabilities, $m
  187
  203
  220
  237
  254
  273
  292
  312
  333
  354
  377
  400
  424
  450
  476
  503
  532
  562
  593
  626
  660
  696
  734
  773
  814
  857
  901
  949
  998
  1,050
Total equity, $m
  187
  202
  219
  236
  253
  272
  291
  311
  331
  353
  375
  398
  423
  448
  474
  501
  530
  560
  591
  624
  658
  693
  731
  770
  810
  853
  898
  945
  994
  1,045
Total liabilities and equity, $m
  374
  405
  439
  473
  507
  545
  583
  623
  664
  707
  752
  798
  847
  898
  950
  1,004
  1,062
  1,122
  1,184
  1,250
  1,318
  1,389
  1,465
  1,543
  1,624
  1,710
  1,799
  1,894
  1,992
  2,095
Debt-to-equity ratio
  0.640
  0.670
  0.700
  0.720
  0.740
  0.760
  0.770
  0.790
  0.800
  0.810
  0.830
  0.840
  0.850
  0.850
  0.860
  0.870
  0.880
  0.880
  0.890
  0.900
  0.900
  0.910
  0.910
  0.920
  0.920
  0.930
  0.930
  0.930
  0.940
  0.940
Adjusted equity ratio
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  2
  5
  7
  9
  11
  14
  16
  19
  22
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  78
  82
  87
  93
  98
  104
  110
  116
  123
  130
Depreciation, amort., depletion, $m
  36
  37
  38
  40
  41
  42
  44
  45
  47
  49
  28
  30
  32
  33
  35
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
  74
  78
Funds from operations, $m
  37
  40
  43
  46
  50
  54
  58
  62
  66
  70
  69
  74
  78
  84
  89
  95
  101
  107
  113
  120
  127
  134
  142
  150
  159
  168
  177
  187
  197
  208
Change in working capital, $m
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Cash from operations, $m
  33
  36
  39
  42
  45
  49
  53
  56
  60
  65
  63
  67
  72
  77
  82
  87
  93
  99
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  184
  194
Maintenance CAPEX, $m
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -33
  -35
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
New CAPEX, $m
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
Cash from investing activities, $m
  -26
  -27
  -29
  -31
  -33
  -35
  -36
  -39
  -41
  -43
  -45
  -48
  -51
  -54
  -55
  -58
  -62
  -65
  -69
  -72
  -76
  -79
  -84
  -88
  -93
  -97
  -102
  -107
  -113
  -118
Free cash flow, $m
  7
  8
  10
  11
  13
  14
  16
  18
  20
  21
  17
  19
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  52
  55
  59
  63
  67
  71
  76
Issuance/(repayment) of debt, $m
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
Issuance/(repurchase) of shares, $m
  14
  13
  12
  10
  9
  7
  5
  4
  2
  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  
  29
  29
  28
  27
  27
  25
  24
  24
  23
  22
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
Total cash flow (excl. dividends), $m
  36
  37
  38
  38
  39
  40
  40
  41
  42
  43
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  76
  81
  86
  91
  96
  102
  108
  114
  121
  128
Retained Cash Flow (-), $m
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
Prev. year cash balance distribution, $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 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
  22
  21
  21
  21
  21
  21
  21
  21
  21
  22
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  49
  52
  56
  59
  63
  67
  72
  76
Discount rate, %
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
  20
  19
  17
  16
  15
  13
  12
  11
  9
  8
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.9
  98.0
  97.3
  96.7
  96.2
  95.8
  95.6
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4
  95.4

NeoGenomics, Inc. is an operator of a network of cancer-focused genetic testing laboratories. The Company operates in Laboratory Testing Segment. This segment delivers testing services to hospitals, pathologists, oncologists, other clinicians and researchers. It has laboratory locations in Ft. Myers and Tampa, Florida; Aliso Viejo, Fresno, Irvine, and West Sacramento, California; Houston, Texas and Nashville, and Tennessee. It offers testing services, which include Cytogenetics, Fluorescence In-Situ Hybridization (FISH), Flow cytometry, Immunohistochemistry (IHC), Molecular testing and Pathology consultation. Its Pharma Services and Clinical Trials group provides testing services in support of its pharmaceutical clients' oncology programs from discovery to commercialization. It helps its customers develop a biomarker hypothesis by recommending an optimal platform for molecular screening and backing its discovery tools with the informatics to capture meaningful data.

FINANCIAL RATIOS  of  NeoGenomics (NEO)

Valuation Ratios
P/E Ratio -209.5
Price to Sales 5.2
Price to Book 6.7
Price to Tangible Book
Price to Cash Flow 59.9
Price to Free Cash Flow 96.7
Growth Rates
Sales Growth Rate 144%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 300%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 51.9%
Total Debt to Equity 56.7%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.5%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital -2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity -2.8%
Return On Equity - 3 Yr. Avg. -0.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 45.1%
Gross Margin - 3 Yr. Avg. 45.4%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 0.8%
Oper. Margin - 3 Yr. Avg. -0.6%
Pre-Tax Margin -2.9%
Pre-Tax Margin - 3 Yr. Avg. -1.9%
Net Profit Margin -2.5%
Net Profit Margin - 3 Yr. Avg. -1.4%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 13.1%
Payout Ratio 0%

NEO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEO stock intrinsic value calculation we used $258.611 million for the last fiscal year's total revenue generated by NeoGenomics. The default revenue input number comes from 0001 income statement of NeoGenomics. 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 NEO stock valuation model: a) initial revenue growth rate of 8.8% 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 6.5%, whose default value for NEO is calculated based on our internal credit rating of NeoGenomics, 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 NeoGenomics.
    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 NEO stock the variable cost ratio is equal to 91.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $18 million in the base year in the intrinsic value calculation for NEO 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 NeoGenomics.

Corporate tax rate of 27% is the nominal tax rate for NeoGenomics. 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 NEO 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 NEO are equal to 56.6%.

Life of production assets of 11.4 years is the average useful life of capital assets used in NeoGenomics 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 NEO is equal to 17.6%. 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 - $171.962 million for NeoGenomics - 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 81.639 million for NeoGenomics 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 NeoGenomics at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Dow Jones Leads Fragile Rebound; Will This Sector Head A Recovery?   [Oct-30-18 03:33PM  Investor's Business Daily]
▶ NeoGenomics: 3Q Earnings Snapshot   [07:31AM  Associated Press]
▶ [$$] NeoGenomics to Buy Genoptix Inc. for $138.7 Million   [Oct-23-18 01:01PM  The Wall Street Journal]
▶ NeoGenomics: 2Q Earnings Snapshot   [07:18AM  Associated Press]
▶ NeoGenomics, Inc. to Host Earnings Call   [06:30AM  ACCESSWIRE]
▶ Earnings Preview For NeoGenomics   [Jul-23-18 04:18PM  Benzinga]
▶ [$$] GE Is Doing Well---in Its Stock Investments   [Jun-29-18 07:30AM  Barrons.com]
▶ NeoGenomics: 1Q Earnings Snapshot   [May-01-18 09:45AM  Associated Press]
▶ NeoGenomics, Inc. to Host Earnings Call   [06:45AM  ACCESSWIRE]
▶ NeoGenomics Announces Executive Appointments   [Mar-20-18 07:00AM  Marketwired]
▶ NeoGenomics beats Street 4Q forecasts   [07:55AM  Associated Press]
▶ NeoGenomics, Inc. to Host Earnings Call   [07:20AM  ACCESSWIRE]
▶ NeoGenomics reports 3Q loss   [07:21AM  Associated Press]
▶ NeoGenomics, Inc. to Host Earnings Call   [07:05AM  ACCESSWIRE]
▶ Company News For Oct 16, 2017   [Oct-16-17 10:11AM  Zacks]
▶ ETFs with exposure to NeoGenomics, Inc. : October 2, 2017   [Oct-02-17 10:58AM  Capital Cube]
▶ NeoGenomics Reports on Impacts from Hurricane Irma   [Sep-11-17 03:04PM  Marketwired]
▶ NeoGenomics reports 2Q loss   [Jul-25-17 04:56PM  Associated Press]
▶ ETFs with exposure to NeoGenomics, Inc. : July 3, 2017   [Jul-03-17 03:29PM  Capital Cube]
▶ ETFs with exposure to NeoGenomics, Inc. : June 22, 2017   [Jun-22-17 04:04PM  Capital Cube]
▶ ETFs with exposure to NeoGenomics, Inc. : June 8, 2017   [Jun-08-17 01:48PM  Capital Cube]
▶ Here's Why NeoGenomics, Inc. Is Dropping Today   [Apr-26-17 12:28PM  Motley Fool]
▶ NeoGenomics reports 1Q loss   [07:54AM  Associated Press]

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