Intrinsic value of OSI Systems - OSIS

Previous Close

$76.01

  Intrinsic Value

$26.54

stock screener

  Rating & Target

str. sell

-65%

Previous close

$76.01

 
Intrinsic value

$26.54

 
Up/down potential

-65%

 
Rating

str. sell

We calculate the intrinsic value of OSIS 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 1.4

 

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, %
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  1,047
  1,138
  1,231
  1,329
  1,430
  1,535
  1,645
  1,758
  1,877
  2,000
  2,127
  2,260
  2,399
  2,543
  2,694
  2,851
  3,014
  3,185
  3,364
  3,550
  3,745
  3,948
  4,161
  4,384
  4,617
  4,861
  5,117
  5,385
  5,665
  5,959
Variable operating expenses, $m
  996
  1,079
  1,164
  1,254
  1,347
  1,443
  1,543
  1,648
  1,756
  1,869
  1,950
  2,072
  2,199
  2,331
  2,469
  2,613
  2,763
  2,919
  3,083
  3,253
  3,432
  3,618
  3,814
  4,018
  4,232
  4,455
  4,690
  4,935
  5,192
  5,461
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
  996
  1,079
  1,164
  1,254
  1,347
  1,443
  1,543
  1,648
  1,756
  1,869
  1,950
  2,072
  2,199
  2,331
  2,469
  2,613
  2,763
  2,919
  3,083
  3,253
  3,432
  3,618
  3,814
  4,018
  4,232
  4,455
  4,690
  4,935
  5,192
  5,461
Operating income, $m
  51
  59
  67
  75
  83
  92
  101
  111
  121
  131
  178
  189
  200
  212
  225
  238
  252
  266
  281
  296
  313
  330
  348
  366
  386
  406
  427
  450
  473
  498
EBITDA, $m
  139
  151
  163
  176
  190
  204
  218
  233
  249
  265
  282
  300
  318
  337
  357
  378
  400
  422
  446
  471
  496
  523
  552
  581
  612
  644
  678
  714
  751
  790
Interest expense (income), $m
  5
  19
  22
  25
  29
  32
  36
  40
  44
  48
  53
  57
  62
  67
  72
  77
  83
  89
  95
  101
  108
  115
  122
  130
  138
  146
  154
  164
  173
  183
  193
Earnings before tax, $m
  33
  37
  41
  46
  51
  56
  61
  67
  72
  78
  120
  127
  133
  140
  148
  155
  163
  171
  180
  189
  198
  208
  218
  229
  240
  252
  264
  277
  290
  304
Tax expense, $m
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  33
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
  75
  78
  82
Net income, $m
  24
  27
  30
  34
  37
  41
  45
  49
  53
  57
  88
  93
  97
  102
  108
  113
  119
  125
  131
  138
  144
  152
  159
  167
  175
  184
  193
  202
  212
  222

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
  1,341
  1,456
  1,577
  1,701
  1,831
  1,966
  2,106
  2,251
  2,403
  2,560
  2,724
  2,894
  3,072
  3,257
  3,449
  3,650
  3,860
  4,078
  4,307
  4,545
  4,795
  5,055
  5,328
  5,613
  5,912
  6,225
  6,552
  6,895
  7,254
  7,630
Adjusted assets (=assets-cash), $m
  1,341
  1,456
  1,577
  1,701
  1,831
  1,966
  2,106
  2,251
  2,403
  2,560
  2,724
  2,894
  3,072
  3,257
  3,449
  3,650
  3,860
  4,078
  4,307
  4,545
  4,795
  5,055
  5,328
  5,613
  5,912
  6,225
  6,552
  6,895
  7,254
  7,630
Revenue / Adjusted assets
  0.781
  0.782
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
Average production assets, $m
  324
  351
  380
  411
  442
  474
  508
  543
  580
  618
  657
  698
  741
  786
  832
  881
  931
  984
  1,039
  1,097
  1,157
  1,220
  1,286
  1,355
  1,427
  1,502
  1,581
  1,664
  1,751
  1,841
Working capital, $m
  264
  287
  310
  335
  360
  387
  414
  443
  473
  504
  536
  570
  605
  641
  679
  718
  760
  803
  848
  895
  944
  995
  1,049
  1,105
  1,164
  1,225
  1,289
  1,357
  1,428
  1,502
Total debt, $m
  406
  468
  533
  600
  670
  742
  817
  895
  977
  1,061
  1,149
  1,241
  1,336
  1,435
  1,538
  1,646
  1,759
  1,876
  1,999
  2,127
  2,261
  2,401
  2,547
  2,701
  2,861
  3,029
  3,205
  3,389
  3,582
  3,784
Total liabilities, $m
  720
  782
  847
  914
  983
  1,056
  1,131
  1,209
  1,290
  1,375
  1,463
  1,554
  1,650
  1,749
  1,852
  1,960
  2,073
  2,190
  2,313
  2,441
  2,575
  2,715
  2,861
  3,014
  3,175
  3,343
  3,518
  3,702
  3,895
  4,097
Total equity, $m
  621
  674
  730
  788
  848
  910
  975
  1,042
  1,113
  1,185
  1,261
  1,340
  1,422
  1,508
  1,597
  1,690
  1,787
  1,888
  1,994
  2,104
  2,220
  2,341
  2,467
  2,599
  2,737
  2,882
  3,033
  3,192
  3,359
  3,533
Total liabilities and equity, $m
  1,341
  1,456
  1,577
  1,702
  1,831
  1,966
  2,106
  2,251
  2,403
  2,560
  2,724
  2,894
  3,072
  3,257
  3,449
  3,650
  3,860
  4,078
  4,307
  4,545
  4,795
  5,056
  5,328
  5,613
  5,912
  6,225
  6,551
  6,894
  7,254
  7,630
Debt-to-equity ratio
  0.650
  0.690
  0.730
  0.760
  0.790
  0.820
  0.840
  0.860
  0.880
  0.900
  0.910
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.030
  1.040
  1.050
  1.050
  1.060
  1.060
  1.070
  1.070
Adjusted equity ratio
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  27
  30
  34
  37
  41
  45
  49
  53
  57
  88
  93
  97
  102
  108
  113
  119
  125
  131
  138
  144
  152
  159
  167
  175
  184
  193
  202
  212
  222
Depreciation, amort., depletion, $m
  87
  92
  96
  101
  106
  111
  117
  122
  128
  134
  104
  111
  118
  125
  132
  140
  148
  156
  165
  174
  184
  194
  204
  215
  226
  238
  251
  264
  278
  292
Funds from operations, $m
  111
  119
  127
  135
  143
  152
  161
  171
  181
  191
  192
  203
  215
  227
  240
  253
  267
  281
  296
  312
  328
  345
  363
  382
  402
  422
  444
  466
  490
  514
Change in working capital, $m
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  64
  67
  71
  74
Cash from operations, $m
  89
  96
  103
  110
  118
  126
  134
  142
  151
  160
  160
  170
  180
  191
  202
  213
  225
  238
  251
  265
  279
  294
  310
  326
  343
  361
  379
  399
  419
  440
Maintenance CAPEX, $m
  -47
  -51
  -56
  -60
  -65
  -70
  -75
  -81
  -86
  -92
  -98
  -104
  -111
  -118
  -125
  -132
  -140
  -148
  -156
  -165
  -174
  -184
  -194
  -204
  -215
  -226
  -238
  -251
  -264
  -278
New CAPEX, $m
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
Cash from investing activities, $m
  -73
  -79
  -85
  -90
  -96
  -103
  -109
  -116
  -123
  -130
  -138
  -145
  -154
  -163
  -171
  -180
  -191
  -201
  -211
  -223
  -234
  -247
  -260
  -273
  -287
  -301
  -317
  -334
  -351
  -369
Free cash flow, $m
  16
  17
  18
  20
  21
  23
  25
  27
  28
  30
  22
  24
  26
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  68
  72
Issuance/(repayment) of debt, $m
  59
  62
  64
  67
  70
  72
  75
  78
  81
  85
  88
  91
  95
  99
  103
  108
  113
  117
  123
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
Issuance/(repurchase) of shares, $m
  28
  26
  25
  24
  23
  22
  20
  19
  17
  16
  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
  88
  89
  91
  93
  94
  95
  97
  98
  101
  88
  91
  95
  99
  103
  108
  113
  117
  123
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
Total cash flow (excl. dividends), $m
  103
  105
  108
  111
  114
  117
  120
  123
  127
  131
  110
  116
  122
  128
  134
  141
  148
  155
  162
  170
  179
  187
  196
  206
  216
  226
  237
  249
  261
  274
Retained Cash Flow (-), $m
  -52
  -53
  -56
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -101
  -106
  -110
  -115
  -121
  -126
  -132
  -138
  -145
  -152
  -159
  -166
  -174
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
  51
  52
  53
  53
  54
  55
  55
  56
  57
  58
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  90
  95
  100
Discount rate, %
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
  49
  47
  45
  43
  41
  38
  36
  33
  31
  28
  15
  14
  14
  13
  12
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  98.0
  96.3
  94.8
  93.6
  92.5
  91.5
  90.7
  89.9
  89.3
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8
  88.8

OSI Systems, Inc., through its subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. The Company sells its products and provides related services in diversified markets, including homeland security, healthcare, defense and aerospace. The Company operates in three segments, which include Security, which provides security and inspection systems, turnkey security screening solutions and related services; Healthcare, which provides patient monitoring, diagnostic cardiology, anesthesia delivery and ventilation systems and defibrillators, and Optoelectronics and Manufacturing, which provides electronic components and electronic manufacturing services for the Security and Healthcare divisions, as well as to external original equipment manufacturer (OEM) customers and end users for applications in the defense, aerospace, medical and industrial markets, among others.

FINANCIAL RATIOS  of  OSI Systems (OSIS)

Valuation Ratios
P/E Ratio 67.6
Price to Sales 1.5
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 22.5
Price to Free Cash Flow 34.6
Growth Rates
Sales Growth Rate 15.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.3%
Cap. Spend. - 3 Yr. Gr. Rate -18.2%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 42.5%
Total Debt to Equity 61%
Interest Coverage 6
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 2.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6%
Return On Equity 3.8%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 33.7%
Gross Margin - 3 Yr. Avg. 33.7%
EBITDA Margin 10.3%
EBITDA Margin - 3 Yr. Avg. 12.5%
Operating Margin 3.4%
Oper. Margin - 3 Yr. Avg. 5.9%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 5.4%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 4%
Effective Tax Rate 19.2%
Eff/ Tax Rate - 3 Yr. Avg. 24%
Payout Ratio 0%

OSIS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OSIS stock intrinsic value calculation we used $960.951 million for the last fiscal year's total revenue generated by OSI Systems. The default revenue input number comes from 0001 income statement of OSI Systems. 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 OSIS stock valuation model: a) initial revenue growth rate of 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 4.8%, whose default value for OSIS is calculated based on our internal credit rating of OSI Systems, 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 OSI Systems.
    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 OSIS stock the variable cost ratio is equal to 95.4%.

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 OSIS 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 OSI Systems.

Corporate tax rate of 27% is the nominal tax rate for OSI Systems. 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 OSIS 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 OSIS are equal to 30.9%.

Life of production assets of 6.3 years is the average useful life of capital assets used in OSI Systems 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 OSIS is equal to 25.2%. 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 - $569.213 million for OSI Systems - 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 18.073 million for OSI Systems 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 OSI Systems at the current share price and the inputted number of shares is $1.4 billion.

RELATED COMPANIES Price Int.Val. Rating
LLL L3 Technologie 216.79 259.41  buy

COMPANY NEWS

▶ OSI: Fiscal 4Q Earnings Snapshot   [04:30PM  Associated Press]
▶ OSI: Fiscal 3Q Earnings Snapshot   [06:21PM  Associated Press]
▶ OSI Systems Announces Third Quarter Conference Call   [Apr-18-18 08:30AM  Business Wire]
▶ OSI Systems to Present at the 30th Annual Roth Conference   [Mar-12-18 08:30AM  Business Wire]
▶ OSI Systems Facilitates Significant Drug Seizure in Albania   [Mar-08-18 07:30PM  Business Wire]
▶ Bribery Probe Follows Muddy Waters Report on Security Firm   [12:45PM  The Wall Street Journal]
▶ OSI reports 2Q loss   [04:11PM  Associated Press]
▶ OSI Systems Announces Second Quarter Conference Call   [Jan-22-18 05:45PM  Business Wire]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.