Intrinsic value of Neogen Corporation - NEOG

Previous Close

$63.00

  Intrinsic Value

$14.55

stock screener

  Rating & Target

str. sell

-77%

Previous close

$63.00

 
Intrinsic value

$14.55

 
Up/down potential

-77%

 
Rating

str. sell

We calculate the intrinsic value of NEOG 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 3.3

 

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, %
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  428
  455
  482
  511
  542
  573
  606
  641
  676
  714
  753
  794
  837
  882
  929
  978
  1,029
  1,083
  1,139
  1,199
  1,261
  1,326
  1,394
  1,465
  1,540
  1,618
  1,701
  1,787
  1,878
  1,973
Variable operating expenses, $m
  350
  371
  393
  416
  440
  464
  490
  517
  545
  575
  591
  623
  657
  692
  729
  767
  808
  850
  894
  941
  989
  1,040
  1,094
  1,150
  1,208
  1,270
  1,335
  1,402
  1,474
  1,548
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
  350
  371
  393
  416
  440
  464
  490
  517
  545
  575
  591
  623
  657
  692
  729
  767
  808
  850
  894
  941
  989
  1,040
  1,094
  1,150
  1,208
  1,270
  1,335
  1,402
  1,474
  1,548
Operating income, $m
  77
  83
  89
  96
  102
  109
  116
  123
  131
  139
  162
  171
  180
  190
  200
  211
  222
  233
  245
  258
  271
  285
  300
  315
  332
  348
  366
  385
  404
  425
EBITDA, $m
  104
  110
  117
  124
  132
  139
  147
  156
  164
  174
  183
  193
  203
  214
  226
  238
  250
  263
  277
  291
  306
  322
  339
  356
  374
  393
  413
  434
  456
  480
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
Earnings before tax, $m
  77
  83
  89
  95
  101
  108
  115
  122
  129
  137
  160
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
  279
  293
  308
  323
  340
  357
  375
  394
  413
Tax expense, $m
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
  96
  101
  106
  112
Net income, $m
  57
  61
  65
  69
  74
  79
  84
  89
  94
  100
  117
  123
  129
  136
  143
  151
  158
  167
  175
  184
  194
  203
  214
  225
  236
  248
  260
  274
  287
  302

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
  474
  504
  535
  567
  601
  636
  672
  710
  750
  791
  835
  880
  928
  978
  1,030
  1,084
  1,141
  1,201
  1,263
  1,329
  1,398
  1,470
  1,545
  1,624
  1,707
  1,794
  1,886
  1,981
  2,082
  2,188
Adjusted assets (=assets-cash), $m
  474
  504
  535
  567
  601
  636
  672
  710
  750
  791
  835
  880
  928
  978
  1,030
  1,084
  1,141
  1,201
  1,263
  1,329
  1,398
  1,470
  1,545
  1,624
  1,707
  1,794
  1,886
  1,981
  2,082
  2,188
Revenue / Adjusted assets
  0.903
  0.903
  0.901
  0.901
  0.902
  0.901
  0.902
  0.903
  0.901
  0.903
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
  0.902
Average production assets, $m
  152
  161
  171
  182
  192
  204
  215
  227
  240
  253
  267
  282
  297
  313
  330
  347
  365
  384
  405
  426
  448
  471
  495
  520
  547
  575
  604
  634
  667
  700
Working capital, $m
  134
  143
  151
  161
  170
  180
  190
  201
  212
  224
  236
  249
  263
  277
  292
  307
  323
  340
  358
  376
  396
  416
  438
  460
  484
  508
  534
  561
  590
  620
Total debt, $m
  4
  8
  12
  16
  20
  25
  30
  34
  40
  45
  51
  57
  63
  69
  76
  83
  90
  98
  106
  115
  124
  133
  143
  153
  164
  175
  187
  200
  213
  227
Total liabilities, $m
  62
  66
  70
  74
  78
  83
  87
  92
  97
  103
  109
  114
  121
  127
  134
  141
  148
  156
  164
  173
  182
  191
  201
  211
  222
  233
  245
  258
  271
  284
Total equity, $m
  413
  438
  465
  493
  522
  553
  585
  618
  652
  689
  726
  766
  807
  850
  896
  943
  993
  1,045
  1,099
  1,156
  1,216
  1,279
  1,344
  1,413
  1,485
  1,561
  1,641
  1,724
  1,811
  1,903
Total liabilities and equity, $m
  475
  504
  535
  567
  600
  636
  672
  710
  749
  792
  835
  880
  928
  977
  1,030
  1,084
  1,141
  1,201
  1,263
  1,329
  1,398
  1,470
  1,545
  1,624
  1,707
  1,794
  1,886
  1,982
  2,082
  2,187
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.030
  0.040
  0.040
  0.050
  0.060
  0.060
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.090
  0.090
  0.090
  0.100
  0.100
  0.100
  0.100
  0.110
  0.110
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
Adjusted equity ratio
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  57
  61
  65
  69
  74
  79
  84
  89
  94
  100
  117
  123
  129
  136
  143
  151
  158
  167
  175
  184
  194
  203
  214
  225
  236
  248
  260
  274
  287
  302
Depreciation, amort., depletion, $m
  26
  27
  28
  29
  30
  30
  31
  32
  33
  34
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
Funds from operations, $m
  83
  88
  93
  98
  103
  109
  115
  121
  128
  134
  137
  145
  153
  161
  169
  178
  187
  197
  207
  217
  229
  240
  252
  265
  279
  293
  308
  323
  339
  356
Change in working capital, $m
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  24
  25
  26
  27
  28
  30
Cash from operations, $m
  75
  79
  84
  89
  94
  99
  105
  110
  116
  123
  125
  132
  139
  146
  154
  162
  171
  180
  189
  199
  209
  220
  231
  243
  255
  268
  282
  296
  311
  327
Maintenance CAPEX, $m
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
New CAPEX, $m
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
Cash from investing activities, $m
  -20
  -22
  -23
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -68
  -71
  -74
  -78
  -82
  -86
Free cash flow, $m
  55
  58
  62
  65
  69
  73
  77
  81
  86
  91
  91
  97
  102
  107
  113
  119
  126
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
  218
  229
  241
Issuance/(repayment) of debt, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
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  
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Total cash flow (excl. dividends), $m
  59
  62
  66
  69
  73
  78
  82
  86
  91
  96
  97
  102
  108
  114
  120
  126
  133
  140
  147
  155
  163
  171
  180
  189
  199
  209
  219
  231
  242
  254
Retained Cash Flow (-), $m
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -92
Prev. year cash balance distribution, $m
  172
  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
  206
  36
  39
  41
  44
  47
  50
  53
  56
  60
  59
  63
  67
  71
  75
  79
  83
  88
  93
  98
  103
  109
  114
  120
  127
  133
  140
  147
  155
  163
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
  198
  33
  34
  34
  34
  34
  34
  33
  32
  31
  28
  27
  25
  24
  22
  20
  18
  16
  14
  12
  11
  9
  7
  6
  5
  4
  3
  2
  2
  1
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

Neogen Corporation develops, manufactures and markets a range of products and services dedicated to food and animal safety. The Company operates through two segments: Food Safety and Animal Safety. The Food Safety segment produces and markets diagnostic test kits and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. The Animal Safety segment is primarily engaged in the production and marketing of products dedicated to animal health, including a range of consumable products marketed to veterinarians and animal health product distributors. The Animal Safety segment also provides genetic identification services. Additionally, the Animal Safety segment produces and markets rodenticides, disinfectants and insecticides to assist in the control of rodents and disease in and around agricultural, food production and other facilities.

FINANCIAL RATIOS  of  Neogen Corporation (NEOG)

Valuation Ratios
P/E Ratio 54.7
Price to Sales 6.6
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 40.1
Price to Free Cash Flow 53.5
Growth Rates
Sales Growth Rate 12.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.1%
Cap. Spend. - 3 Yr. Gr. Rate 4.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 9%
Ret/ On Assets - 3 Yr. Avg. 9%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 10%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 47.5%
Gross Margin - 3 Yr. Avg. 48.2%
EBITDA Margin 22.7%
EBITDA Margin - 3 Yr. Avg. 22.1%
Operating Margin 18%
Oper. Margin - 3 Yr. Avg. 18%
Pre-Tax Margin 18.5%
Pre-Tax Margin - 3 Yr. Avg. 18.1%
Net Profit Margin 12.2%
Net Profit Margin - 3 Yr. Avg. 11.9%
Effective Tax Rate 34.3%
Eff/ Tax Rate - 3 Yr. Avg. 34.3%
Payout Ratio 0%

NEOG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEOG stock intrinsic value calculation we used $402 million for the last fiscal year's total revenue generated by Neogen Corporation. The default revenue input number comes from 0001 income statement of Neogen 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 NEOG stock valuation model: a) initial revenue growth rate of 6.4% 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 NEOG is calculated based on our internal credit rating of Neogen 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 Neogen 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 NEOG stock the variable cost ratio is equal to 82.1%.

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 NEOG 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 Neogen Corporation.

Corporate tax rate of 27% is the nominal tax rate for Neogen 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 NEOG 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 NEOG are equal to 35.5%.

Life of production assets of 12.8 years is the average useful life of capital assets used in Neogen 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 NEOG is equal to 31.4%. 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 - $560.175 million for Neogen 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 52.082 million for Neogen 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 Neogen Corporation at the current share price and the inputted number of shares is $3.3 billion.

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