Intrinsic value of Surmodics - SRDX

Previous Close

$58.96

  Intrinsic Value

$23.95

stock screener

  Rating & Target

str. sell

-59%

Previous close

$58.96

 
Intrinsic value

$23.95

 
Up/down potential

-59%

 
Rating

str. sell

We calculate the intrinsic value of SRDX 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 0.8

 

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, %
  24.90
  22.91
  21.12
  19.51
  18.06
  16.75
  15.58
  14.52
  13.57
  12.71
  11.94
  11.24
  10.62
  10.06
  9.55
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
Revenue, $m
  91
  112
  136
  162
  192
  224
  259
  296
  337
  379
  425
  472
  523
  575
  630
  687
  747
  809
  874
  941
  1,011
  1,083
  1,159
  1,237
  1,319
  1,404
  1,492
  1,584
  1,679
  1,779
Variable operating expenses, $m
  69
  84
  100
  119
  139
  162
  186
  213
  241
  271
  298
  331
  367
  403
  442
  482
  524
  568
  613
  660
  709
  760
  813
  868
  925
  985
  1,047
  1,111
  1,178
  1,248
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
  69
  84
  100
  119
  139
  162
  186
  213
  241
  271
  298
  331
  367
  403
  442
  482
  524
  568
  613
  660
  709
  760
  813
  868
  925
  985
  1,047
  1,111
  1,178
  1,248
Operating income, $m
  22
  29
  36
  44
  52
  62
  72
  84
  96
  108
  127
  141
  156
  172
  188
  205
  223
  242
  261
  281
  302
  323
  346
  369
  394
  419
  445
  473
  501
  531
EBITDA, $m
  32
  39
  47
  57
  67
  78
  90
  103
  117
  132
  148
  164
  182
  200
  219
  239
  260
  282
  304
  327
  352
  377
  403
  430
  459
  488
  519
  551
  584
  619
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  26
  28
  30
Earnings before tax, $m
  22
  28
  35
  43
  51
  60
  70
  80
  92
  104
  121
  134
  149
  163
  179
  195
  212
  229
  247
  266
  286
  306
  327
  349
  372
  396
  421
  446
  473
  501
Tax expense, $m
  6
  8
  9
  11
  14
  16
  19
  22
  25
  28
  33
  36
  40
  44
  48
  53
  57
  62
  67
  72
  77
  83
  88
  94
  100
  107
  114
  121
  128
  135
Net income, $m
  16
  21
  26
  31
  37
  44
  51
  59
  67
  76
  88
  98
  108
  119
  130
  142
  154
  167
  180
  194
  209
  223
  239
  255
  272
  289
  307
  326
  345
  366

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
  123
  151
  183
  218
  258
  301
  348
  398
  452
  510
  571
  635
  702
  773
  847
  924
  1,004
  1,088
  1,175
  1,265
  1,359
  1,456
  1,558
  1,663
  1,772
  1,886
  2,005
  2,128
  2,257
  2,391
Adjusted assets (=assets-cash), $m
  123
  151
  183
  218
  258
  301
  348
  398
  452
  510
  571
  635
  702
  773
  847
  924
  1,004
  1,088
  1,175
  1,265
  1,359
  1,456
  1,558
  1,663
  1,772
  1,886
  2,005
  2,128
  2,257
  2,391
Revenue / Adjusted assets
  0.740
  0.742
  0.743
  0.743
  0.744
  0.744
  0.744
  0.744
  0.746
  0.743
  0.744
  0.743
  0.745
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
Average production assets, $m
  57
  70
  85
  101
  119
  140
  161
  185
  210
  236
  265
  294
  326
  358
  393
  428
  465
  504
  544
  586
  630
  675
  722
  771
  822
  874
  929
  987
  1,046
  1,108
Working capital, $m
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
Total debt, $m
  6
  13
  22
  31
  41
  52
  64
  77
  90
  105
  121
  137
  154
  172
  191
  211
  231
  252
  274
  298
  321
  346
  372
  399
  427
  456
  486
  518
  551
  585
Total liabilities, $m
  31
  38
  47
  56
  66
  77
  89
  102
  115
  130
  146
  162
  179
  197
  216
  236
  256
  277
  300
  323
  346
  371
  397
  424
  452
  481
  511
  543
  576
  610
Total equity, $m
  91
  112
  136
  163
  192
  224
  259
  297
  337
  380
  425
  473
  523
  576
  631
  688
  748
  810
  875
  942
  1,012
  1,085
  1,160
  1,239
  1,321
  1,405
  1,494
  1,586
  1,682
  1,781
Total liabilities and equity, $m
  122
  150
  183
  219
  258
  301
  348
  399
  452
  510
  571
  635
  702
  773
  847
  924
  1,004
  1,087
  1,175
  1,265
  1,358
  1,456
  1,557
  1,663
  1,773
  1,886
  2,005
  2,129
  2,258
  2,391
Debt-to-equity ratio
  0.070
  0.120
  0.160
  0.190
  0.210
  0.230
  0.250
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  21
  26
  31
  37
  44
  51
  59
  67
  76
  88
  98
  108
  119
  130
  142
  154
  167
  180
  194
  209
  223
  239
  255
  272
  289
  307
  326
  345
  366
Depreciation, amort., depletion, $m
  9
  10
  12
  13
  14
  16
  18
  19
  21
  24
  21
  23
  26
  28
  31
  34
  37
  40
  43
  47
  50
  54
  57
  61
  65
  69
  74
  78
  83
  88
Funds from operations, $m
  26
  31
  37
  44
  51
  60
  68
  78
  88
  99
  109
  122
  134
  148
  162
  176
  191
  207
  224
  241
  258
  277
  296
  316
  337
  358
  381
  404
  428
  454
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
Cash from operations, $m
  25
  30
  36
  43
  50
  58
  67
  77
  87
  98
  108
  120
  132
  146
  160
  174
  189
  205
  221
  238
  256
  274
  293
  313
  334
  355
  377
  401
  425
  450
Maintenance CAPEX, $m
  -4
  -5
  -6
  -7
  -8
  -9
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -74
  -78
  -83
New CAPEX, $m
  -11
  -13
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
Cash from investing activities, $m
  -15
  -18
  -21
  -24
  -26
  -29
  -33
  -36
  -40
  -44
  -47
  -51
  -54
  -59
  -62
  -67
  -71
  -76
  -80
  -85
  -90
  -95
  -101
  -106
  -112
  -118
  -124
  -131
  -138
  -145
Free cash flow, $m
  10
  13
  16
  20
  24
  29
  34
  40
  47
  54
  61
  69
  78
  87
  97
  107
  118
  129
  141
  153
  166
  179
  193
  207
  222
  237
  253
  270
  287
  305
Issuance/(repayment) of debt, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
Issuance/(repurchase) of shares, $m
  2
  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  
  8
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
Total cash flow (excl. dividends), $m
  18
  20
  24
  29
  34
  40
  46
  53
  61
  69
  76
  85
  95
  105
  116
  127
  138
  150
  163
  176
  190
  204
  219
  234
  250
  266
  283
  301
  320
  339
Retained Cash Flow (-), $m
  -18
  -21
  -24
  -27
  -29
  -32
  -35
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -78
  -82
  -85
  -88
  -92
  -96
  -100
Prev. year cash balance distribution, $m
  39
  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
  38
  -1
  0
  2
  5
  8
  11
  16
  21
  26
  31
  38
  45
  52
  61
  69
  79
  88
  98
  109
  120
  131
  143
  155
  168
  181
  195
  209
  224
  239
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
  37
  -1
  0
  2
  4
  6
  8
  10
  12
  14
  15
  16
  17
  18
  18
  18
  17
  16
  15
  14
  12
  11
  9
  8
  7
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6

Surmodics, Inc. is a provider of medical device and in vitro diagnostic technologies to the healthcare industry. The Company operates through two segments: Medical Device and In Vitro Diagnostics. The Company's Medical Device segment consists of surface modification coating technologies to improve access, deliverability and predictable deployment of medical devices; international cardiology and peripheral balloon design, development and manufacturing, as well as drug delivery coating technologies to provide site-specific drug delivery from the surface of a medical device. The Company's In Vitro Diagnostics segment manufactures or sells components for in vitro diagnostic immunoassay and molecular tests. The In Vitro Diagnostics segment manufactures and sells surface coatings to the diagnostic, biomedical research and life science markets. In Vitro Diagnostics segment offers protein stabilization reagents, substrates, antigens and surface coatings.

FINANCIAL RATIOS  of  Surmodics (SRDX)

Valuation Ratios
P/E Ratio 192.9
Price to Sales 10.6
Price to Book 6.9
Price to Tangible Book
Price to Cash Flow 55.1
Price to Free Cash Flow 96.5
Growth Rates
Sales Growth Rate 2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
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 3%
Ret/ On Assets - 3 Yr. Avg. 7.8%
Return On Total Capital 3.7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 3.7%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 41.1%
Gross Margin - 3 Yr. Avg. 53.3%
EBITDA Margin 17.8%
EBITDA Margin - 3 Yr. Avg. 27.6%
Operating Margin 9.6%
Oper. Margin - 3 Yr. Avg. 20.4%
Pre-Tax Margin 9.6%
Pre-Tax Margin - 3 Yr. Avg. 20.9%
Net Profit Margin 5.5%
Net Profit Margin - 3 Yr. Avg. 13%
Effective Tax Rate 42.9%
Eff/ Tax Rate - 3 Yr. Avg. 39.1%
Payout Ratio 0%

SRDX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRDX stock intrinsic value calculation we used $73.112 million for the last fiscal year's total revenue generated by Surmodics. The default revenue input number comes from 0001 income statement of Surmodics. 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 SRDX stock valuation model: a) initial revenue growth rate of 24.9% 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 4.3%, whose default value for SRDX is calculated based on our internal credit rating of Surmodics, 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 Surmodics.
    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 SRDX stock the variable cost ratio is equal to 76.7%.

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 SRDX 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 Surmodics.

Corporate tax rate of 27% is the nominal tax rate for Surmodics. 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 SRDX 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 SRDX are equal to 62.3%.

Life of production assets of 12.6 years is the average useful life of capital assets used in Surmodics 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 SRDX is equal to 3.8%. 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 - $111.557 million for Surmodics - 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 13.352 million for Surmodics 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 Surmodics at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ SurModics: Fiscal 4Q Earnings Snapshot   [08:16AM  Associated Press]
▶ Surmodics Names Teri Sides as Chief Marketing Officer   [Nov-01-18 08:30AM  Business Wire]
▶ 4 Winning Stocks With Solid Efficiency Level   [Aug-17-18 09:44AM  Zacks]
▶ SurModics: Fiscal 3Q Earnings Snapshot   [07:41AM  Associated Press]
▶ Surmodics IVD Launches Breakthrough MatrixGuard Diluent   [Jul-31-18 08:30AM  Business Wire]
▶ 4 of the Best Efficient Stocks to Buy for Superb Returns   [Jun-21-18 11:20AM  InvestorPlace]
▶ 5 Top Efficient Stocks to Keep on Your Radar   [May-25-18 09:57AM  Zacks]
▶ SurModics: Fiscal 2Q Earnings Snapshot   [08:51AM  Associated Press]
▶ Edited Transcript of SRDX presentation 27-Mar-18 6:30pm GMT   [Apr-10-18 01:30PM  Thomson Reuters StreetEvents]
▶ Surmodics, Abbott ink licensing deal worth up to $92M   [Feb-27-18 01:40PM  American City Business Journals]
▶ Surmodics to Host Virtual Annual Meeting of Shareholders   [Feb-13-18 08:30AM  Business Wire]
▶ SurModics reports 1Q loss   [Feb-08-18 08:35AM  Associated Press]
▶ New Strong Sell Stocks for January 8th   [Jan-08-18 08:30AM  Zacks]
▶ Surmodics Inc (SRDX): What Can We Expect In The Future?   [Nov-13-17 07:48PM  Simply Wall St.]
▶ SurModics posts 4Q profit   [Nov-08-17 08:03AM  Associated Press]
▶ ETFs with exposure to SurModics, Inc. : October 23, 2017   [Oct-23-17 11:06AM  Capital Cube]

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