Intrinsic value of Pacific Biosciences of California - PACB

Previous Close

$7.61

  Intrinsic Value

$0.16

stock screener

  Rating & Target

str. sell

-98%

Previous close

$7.61

 
Intrinsic value

$0.16

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of PACB 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 1.0

 

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, %
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.78
  5.71
  5.64
  5.57
  5.51
  5.46
  5.42
  5.38
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
Revenue, $m
  100
  108
  115
  123
  131
  140
  149
  158
  168
  178
  188
  199
  210
  222
  234
  247
  261
  275
  290
  305
  321
  338
  356
  375
  394
  415
  436
  458
  482
  507
Variable operating expenses, $m
  179
  192
  206
  220
  235
  250
  266
  282
  299
  317
  336
  355
  375
  396
  418
  442
  466
  491
  517
  545
  574
  604
  636
  669
  704
  740
  778
  818
  860
  904
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
  179
  192
  206
  220
  235
  250
  266
  282
  299
  317
  336
  355
  375
  396
  418
  442
  466
  491
  517
  545
  574
  604
  636
  669
  704
  740
  778
  818
  860
  904
Operating income, $m
  -79
  -85
  -91
  -97
  -103
  -110
  -117
  -124
  -132
  -139
  -148
  -156
  -165
  -174
  -184
  -194
  -205
  -216
  -227
  -240
  -252
  -266
  -280
  -294
  -309
  -325
  -342
  -360
  -378
  -398
EBITDA, $m
  -73
  -79
  -84
  -90
  -96
  -102
  -108
  -115
  -122
  -129
  -137
  -145
  -153
  -162
  -171
  -180
  -190
  -200
  -211
  -222
  -234
  -247
  -259
  -273
  -287
  -302
  -318
  -334
  -351
  -369
Interest expense (income), $m
  2
  3
  4
  4
  5
  6
  7
  8
  9
  11
  12
  13
  14
  16
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  45
  47
  50
Earnings before tax, $m
  -82
  -88
  -95
  -102
  -109
  -117
  -125
  -133
  -142
  -151
  -161
  -170
  -181
  -191
  -202
  -214
  -226
  -239
  -252
  -266
  -281
  -296
  -312
  -329
  -347
  -365
  -384
  -404
  -426
  -448
Tax expense, $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
Net income, $m
  -82
  -88
  -95
  -102
  -109
  -117
  -125
  -133
  -142
  -151
  -161
  -170
  -181
  -191
  -202
  -214
  -226
  -239
  -252
  -266
  -281
  -296
  -312
  -329
  -347
  -365
  -384
  -404
  -426
  -448

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
  119
  127
  136
  145
  155
  165
  176
  186
  198
  210
  222
  235
  248
  262
  277
  292
  308
  325
  342
  360
  379
  400
  420
  442
  465
  490
  515
  541
  569
  598
Adjusted assets (=assets-cash), $m
  119
  127
  136
  145
  155
  165
  176
  186
  198
  210
  222
  235
  248
  262
  277
  292
  308
  325
  342
  360
  379
  400
  420
  442
  465
  490
  515
  541
  569
  598
Revenue / Adjusted assets
  0.840
  0.850
  0.846
  0.848
  0.845
  0.848
  0.847
  0.849
  0.848
  0.848
  0.847
  0.847
  0.847
  0.847
  0.845
  0.846
  0.847
  0.846
  0.848
  0.847
  0.847
  0.845
  0.848
  0.848
  0.847
  0.847
  0.847
  0.847
  0.847
  0.848
Average production assets, $m
  28
  30
  33
  35
  37
  39
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  86
  91
  95
  100
  106
  111
  117
  123
  129
  136
  143
Working capital, $m
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
Total debt, $m
  18
  23
  28
  32
  38
  43
  48
  54
  60
  66
  73
  80
  87
  94
  102
  110
  118
  127
  136
  146
  156
  167
  178
  189
  201
  214
  227
  241
  256
  271
Total liabilities, $m
  63
  67
  72
  77
  82
  87
  93
  98
  104
  111
  117
  124
  131
  138
  146
  154
  163
  171
  181
  190
  200
  211
  222
  234
  246
  258
  272
  286
  300
  316
Total equity, $m
  56
  60
  64
  69
  73
  78
  83
  88
  93
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  189
  198
  209
  220
  231
  243
  255
  269
  282
Total liabilities and equity, $m
  119
  127
  136
  146
  155
  165
  176
  186
  197
  210
  222
  235
  248
  262
  277
  292
  308
  324
  342
  360
  379
  400
  420
  443
  466
  489
  515
  541
  569
  598
Debt-to-equity ratio
  0.330
  0.380
  0.430
  0.470
  0.510
  0.550
  0.580
  0.610
  0.640
  0.670
  0.700
  0.720
  0.740
  0.760
  0.780
  0.800
  0.810
  0.830
  0.840
  0.860
  0.870
  0.880
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.950
  0.960
Adjusted equity ratio
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -82
  -88
  -95
  -102
  -109
  -117
  -125
  -133
  -142
  -151
  -161
  -170
  -181
  -191
  -202
  -214
  -226
  -239
  -252
  -266
  -281
  -296
  -312
  -329
  -347
  -365
  -384
  -404
  -426
  -448
Depreciation, amort., depletion, $m
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
Funds from operations, $m
  -76
  -82
  -89
  -95
  -102
  -109
  -117
  -125
  -133
  -141
  -150
  -159
  -169
  -179
  -189
  -200
  -212
  -224
  -236
  -249
  -263
  -277
  -292
  -308
  -324
  -342
  -360
  -379
  -399
  -419
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
Cash from operations, $m
  -77
  -83
  -89
  -96
  -103
  -110
  -118
  -126
  -134
  -142
  -151
  -160
  -170
  -180
  -191
  -202
  -213
  -225
  -238
  -251
  -265
  -279
  -294
  -310
  -326
  -344
  -362
  -381
  -401
  -422
Maintenance CAPEX, $m
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from investing activities, $m
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
Free cash flow, $m
  -84
  -91
  -98
  -105
  -112
  -120
  -128
  -137
  -145
  -155
  -164
  -174
  -184
  -195
  -207
  -218
  -231
  -244
  -257
  -272
  -286
  -302
  -318
  -335
  -353
  -372
  -391
  -412
  -434
  -456
Issuance/(repayment) of debt, $m
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  86
  92
  99
  106
  114
  122
  130
  139
  147
  157
  166
  176
  187
  198
  209
  221
  234
  247
  261
  275
  290
  306
  322
  339
  357
  376
  396
  417
  439
  462
Cash from financing (excl. dividends), $m  
  91
  97
  104
  111
  119
  127
  136
  145
  153
  163
  172
  183
  194
  205
  217
  229
  242
  256
  270
  285
  300
  317
  333
  351
  369
  389
  409
  431
  454
  477
Total cash flow (excl. dividends), $m
  7
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
Retained Cash Flow (-), $m
  -86
  -92
  -99
  -106
  -114
  -122
  -130
  -139
  -147
  -157
  -166
  -176
  -187
  -198
  -209
  -221
  -234
  -247
  -261
  -275
  -290
  -306
  -322
  -339
  -357
  -376
  -396
  -417
  -439
  -462
Prev. year cash balance distribution, $m
  34
  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
  -45
  -86
  -93
  -100
  -107
  -115
  -123
  -131
  -139
  -148
  -158
  -167
  -177
  -188
  -199
  -210
  -222
  -235
  -248
  -262
  -276
  -291
  -307
  -324
  -341
  -359
  -378
  -398
  -419
  -441
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
  -43
  -79
  -81
  -82
  -83
  -83
  -83
  -82
  -80
  -78
  -75
  -71
  -67
  -63
  -58
  -53
  -48
  -43
  -38
  -33
  -29
  -24
  -20
  -16
  -13
  -10
  -8
  -6
  -5
  -3
Current shareholders' claim on cash, %
  85.8
  73.7
  63.2
  54.2
  46.5
  39.9
  34.2
  29.3
  25.1
  21.5
  18.4
  15.7
  13.5
  11.5
  9.8
  8.4
  7.2
  6.2
  5.3
  4.5
  3.8
  3.3
  2.8
  2.4
  2.0
  1.7
  1.5
  1.3
  1.1
  0.9

Pacific Biosciences of California, Inc. designs, develops and manufactures sequencing systems to help scientists resolve genetically complex problems. The Company is engaged in the development, manufacturing and marketing of an integrated platform for genetic analysis. Its Single Molecule, Real-Time (SMRT) technology enables single molecule, real-time detection of biological processes. It offers The SMRT Cell, Phospholinked nucleotides and The PacBio RS II and Sequel instruments. Its SMRT technology enables the observation of deoxyribonucleic acid (DNA) synthesis as it occurs in real-time by harnessing the natural process of DNA replication, which is actuated by the DNA polymerase. Its phospholinked nucleotides have a fluorescent dye attached to the phosphate chain of the nucleotide rather than to the base. The PacBio RS II and Sequel instruments include optics, automated liquid handling, a touchscreen control interface and computational hardware and software.

FINANCIAL RATIOS  of  Pacific Biosciences of California (PACB)

Valuation Ratios
P/E Ratio -9.5
Price to Sales 7.8
Price to Book 8.3
Price to Tangible Book
Price to Cash Flow -10.4
Price to Free Cash Flow -9.3
Growth Rates
Sales Growth Rate -2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 166.7%
Cap. Spend. - 3 Yr. Gr. Rate 51.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 18.8%
Total Debt to Equity 18.8%
Interest Coverage -36
Management Effectiveness
Return On Assets -53.5%
Ret/ On Assets - 3 Yr. Avg. -42%
Return On Total Capital -77.9%
Ret/ On T. Cap. - 3 Yr. Avg. -68.6%
Return On Equity -93.1%
Return On Equity - 3 Yr. Avg. -83%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 48.4%
Gross Margin - 3 Yr. Avg. 47.7%
EBITDA Margin -74.7%
EBITDA Margin - 3 Yr. Avg. -67%
Operating Margin -78%
Oper. Margin - 3 Yr. Avg. -70.3%
Pre-Tax Margin -81.3%
Pre-Tax Margin - 3 Yr. Avg. -74.6%
Net Profit Margin -81.3%
Net Profit Margin - 3 Yr. Avg. -74.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PACB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PACB stock intrinsic value calculation we used $93.468 million for the last fiscal year's total revenue generated by Pacific Biosciences of California. The default revenue input number comes from 0001 income statement of Pacific Biosciences of California. 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 PACB stock valuation model: a) initial revenue growth rate of 7.5% 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 PACB is calculated based on our internal credit rating of Pacific Biosciences of California, 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 Pacific Biosciences of California.
    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 PACB stock the variable cost ratio is equal to 178.5%.

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 PACB 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 19.6% for Pacific Biosciences of California.

Corporate tax rate of 27% is the nominal tax rate for Pacific Biosciences of California. 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 PACB 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 PACB are equal to 28.2%.

Life of production assets of 3.1 years is the average useful life of capital assets used in Pacific Biosciences of California 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 PACB is equal to 10.9%. 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 - $86.103 million for Pacific Biosciences of California - 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 131.877 million for Pacific Biosciences of California 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 Pacific Biosciences of California at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

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▶ Pacific Biosciences: 3Q Earnings Snapshot   [05:13AM  Associated Press]
▶ Illumina Inc. to buy Menlo Park-based biotech firm for $1.2 billion   [Nov-01-18 05:49PM  American City Business Journals]
▶ PacBio Long-Read Sequencing Featured at ASHG Annual Meeting   [Oct-15-18 07:30AM  GlobeNewswire]
▶ Why Pacific Biosciences Fell By 10.6% Earlier Today   [Sep-11-18 02:16PM  Motley Fool]
▶ Pacific Biosciences: 2Q Earnings Snapshot   [06:11PM  Associated Press]
▶ Here's Why Pacific Biosciences Tumbled 10% Today   [Jul-27-18 05:57PM  Motley Fool]
▶ Why Pacific Biosciences of California Inc. Plunged Today   [Jun-25-18 04:17PM  Motley Fool]
▶ Pacific Biosciences: 1Q Earnings Snapshot   [May-02-18 05:46PM  Associated Press]
▶ 9 Stocks Moving In Monday's After-Hours Session   [Feb-12-18 06:09PM  Benzinga]

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