Intrinsic value of Surmodics, Inc. - SRDX

Previous Close

$41.77

  Intrinsic Value

$21.13

stock screener

  Rating & Target

sell

-49%

Previous close

$41.77

 
Intrinsic value

$21.13

 
Up/down potential

-49%

 
Rating

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 0.6

 

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, %
  30.70
  28.13
  25.82
  23.74
  21.86
  20.18
  18.66
  17.29
  16.06
  14.96
  13.96
  13.06
  12.26
  11.53
  10.88
  10.29
  9.76
  9.29
  8.86
  8.47
  8.12
  7.81
  7.53
  7.28
  7.05
  6.84
  6.66
  6.49
  6.35
  6.21
Revenue, $m
  106
  136
  171
  211
  257
  309
  367
  430
  500
  574
  654
  740
  831
  926
  1,027
  1,133
  1,244
  1,359
  1,479
  1,605
  1,735
  1,871
  2,012
  2,158
  2,310
  2,468
  2,633
  2,804
  2,982
  3,167
Variable operating expenses, $m
  94
  119
  149
  183
  222
  266
  315
  368
  427
  490
  553
  626
  702
  783
  868
  958
  1,051
  1,149
  1,251
  1,357
  1,467
  1,582
  1,701
  1,824
  1,953
  2,087
  2,226
  2,370
  2,521
  2,677
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
  94
  119
  149
  183
  222
  266
  315
  368
  427
  490
  553
  626
  702
  783
  868
  958
  1,051
  1,149
  1,251
  1,357
  1,467
  1,582
  1,701
  1,824
  1,953
  2,087
  2,226
  2,370
  2,521
  2,677
Operating income, $m
  12
  16
  22
  28
  35
  43
  52
  62
  73
  84
  101
  114
  128
  143
  159
  175
  192
  210
  229
  248
  268
  289
  311
  334
  357
  381
  407
  433
  461
  489
EBITDA, $m
  22
  28
  36
  44
  54
  65
  77
  90
  104
  120
  137
  155
  173
  193
  214
  237
  260
  284
  309
  335
  362
  391
  420
  451
  482
  515
  550
  585
  623
  661
Interest expense (income), $m
  0
  0
  1
  2
  3
  5
  7
  8
  11
  13
  16
  18
  21
  24
  28
  31
  35
  39
  43
  47
  52
  56
  61
  66
  72
  77
  83
  89
  95
  101
  108
Earnings before tax, $m
  12
  16
  20
  25
  30
  37
  44
  51
  60
  69
  83
  93
  104
  115
  127
  140
  153
  167
  181
  196
  212
  228
  245
  262
  280
  299
  318
  339
  360
  382
Tax expense, $m
  3
  4
  5
  7
  8
  10
  12
  14
  16
  19
  22
  25
  28
  31
  34
  38
  41
  45
  49
  53
  57
  62
  66
  71
  76
  81
  86
  91
  97
  103
Net income, $m
  9
  11
  14
  18
  22
  27
  32
  38
  44
  50
  60
  68
  76
  84
  93
  102
  112
  122
  132
  143
  155
  166
  179
  191
  204
  218
  232
  247
  263
  279

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
  176
  225
  283
  350
  427
  513
  609
  714
  828
  952
  1,085
  1,227
  1,378
  1,536
  1,704
  1,879
  2,062
  2,254
  2,453
  2,661
  2,878
  3,102
  3,336
  3,579
  3,831
  4,093
  4,366
  4,649
  4,944
  5,252
Adjusted assets (=assets-cash), $m
  176
  225
  283
  350
  427
  513
  609
  714
  828
  952
  1,085
  1,227
  1,378
  1,536
  1,704
  1,879
  2,062
  2,254
  2,453
  2,661
  2,878
  3,102
  3,336
  3,579
  3,831
  4,093
  4,366
  4,649
  4,944
  5,252
Revenue / Adjusted assets
  0.602
  0.604
  0.604
  0.603
  0.602
  0.602
  0.603
  0.602
  0.604
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
Average production assets, $m
  65
  83
  105
  129
  158
  190
  225
  264
  306
  352
  401
  454
  509
  568
  630
  695
  762
  833
  907
  984
  1,064
  1,147
  1,233
  1,323
  1,416
  1,513
  1,614
  1,719
  1,828
  1,941
Working capital, $m
  -24
  -31
  -39
  -49
  -59
  -71
  -84
  -99
  -115
  -132
  -151
  -170
  -191
  -213
  -236
  -261
  -286
  -313
  -340
  -369
  -399
  -430
  -463
  -496
  -531
  -568
  -606
  -645
  -686
  -728
Total debt, $m
  17
  38
  62
  89
  121
  157
  196
  240
  287
  339
  394
  453
  515
  581
  650
  722
  798
  878
  960
  1,046
  1,136
  1,229
  1,326
  1,426
  1,531
  1,639
  1,752
  1,869
  1,991
  2,119
Total liabilities, $m
  73
  93
  117
  145
  177
  212
  252
  296
  343
  394
  449
  508
  570
  636
  705
  778
  854
  933
  1,016
  1,102
  1,191
  1,284
  1,381
  1,482
  1,586
  1,695
  1,807
  1,925
  2,047
  2,174
Total equity, $m
  103
  132
  166
  205
  250
  301
  357
  418
  485
  558
  636
  719
  807
  900
  998
  1,101
  1,209
  1,321
  1,438
  1,560
  1,686
  1,818
  1,955
  2,097
  2,245
  2,399
  2,558
  2,725
  2,897
  3,077
Total liabilities and equity, $m
  176
  225
  283
  350
  427
  513
  609
  714
  828
  952
  1,085
  1,227
  1,377
  1,536
  1,703
  1,879
  2,063
  2,254
  2,454
  2,662
  2,877
  3,102
  3,336
  3,579
  3,831
  4,094
  4,365
  4,650
  4,944
  5,251
Debt-to-equity ratio
  0.170
  0.290
  0.370
  0.440
  0.480
  0.520
  0.550
  0.570
  0.590
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  11
  14
  18
  22
  27
  32
  38
  44
  50
  60
  68
  76
  84
  93
  102
  112
  122
  132
  143
  155
  166
  179
  191
  204
  218
  232
  247
  263
  279
Depreciation, amort., depletion, $m
  10
  12
  14
  16
  18
  21
  24
  28
  32
  36
  36
  40
  45
  50
  56
  61
  67
  74
  80
  87
  94
  101
  109
  117
  125
  134
  143
  152
  162
  172
Funds from operations, $m
  19
  23
  28
  34
  41
  48
  56
  65
  75
  86
  96
  108
  121
  134
  149
  164
  179
  196
  213
  230
  249
  268
  288
  308
  330
  352
  375
  399
  424
  451
Change in working capital, $m
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
Cash from operations, $m
  25
  30
  36
  43
  51
  60
  70
  80
  91
  103
  114
  128
  142
  157
  172
  188
  205
  222
  240
  259
  279
  299
  320
  342
  365
  388
  413
  439
  465
  493
Maintenance CAPEX, $m
  -4
  -6
  -7
  -9
  -11
  -14
  -17
  -20
  -23
  -27
  -31
  -36
  -40
  -45
  -50
  -56
  -61
  -67
  -74
  -80
  -87
  -94
  -101
  -109
  -117
  -125
  -134
  -143
  -152
  -162
New CAPEX, $m
  -15
  -18
  -21
  -25
  -28
  -32
  -35
  -39
  -42
  -46
  -49
  -52
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
Cash from investing activities, $m
  -19
  -24
  -28
  -34
  -39
  -46
  -52
  -59
  -65
  -73
  -80
  -88
  -96
  -104
  -112
  -121
  -129
  -138
  -148
  -157
  -167
  -177
  -187
  -199
  -210
  -222
  -235
  -248
  -261
  -276
Free cash flow, $m
  5
  6
  7
  9
  12
  14
  17
  21
  25
  30
  34
  40
  46
  53
  60
  67
  75
  84
  93
  102
  112
  122
  132
  143
  154
  166
  178
  191
  204
  218
Issuance/(repayment) of debt, $m
  17
  20
  24
  28
  32
  36
  40
  44
  47
  51
  55
  59
  62
  66
  69
  73
  76
  79
  83
  86
  90
  93
  97
  101
  104
  109
  113
  117
  122
  127
Issuance/(repurchase) of shares, $m
  15
  18
  20
  21
  23
  24
  24
  24
  24
  22
  17
  15
  12
  9
  5
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  32
  38
  44
  49
  55
  60
  64
  68
  71
  73
  72
  74
  74
  75
  74
  74
  76
  79
  83
  86
  90
  93
  97
  101
  104
  109
  113
  117
  122
  127
Total cash flow (excl. dividends), $m
  38
  44
  51
  58
  66
  74
  81
  89
  96
  104
  107
  114
  121
  127
  134
  141
  151
  163
  175
  188
  201
  215
  229
  244
  259
  275
  291
  308
  326
  345
Retained Cash Flow (-), $m
  -24
  -29
  -34
  -39
  -45
  -50
  -56
  -62
  -67
  -73
  -78
  -83
  -88
  -93
  -98
  -103
  -107
  -112
  -117
  -122
  -127
  -132
  -137
  -142
  -148
  -154
  -160
  -166
  -173
  -180
Prev. year cash balance distribution, $m
  30
  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
  43
  15
  17
  19
  21
  23
  25
  27
  29
  31
  29
  31
  32
  34
  36
  38
  44
  51
  58
  66
  74
  83
  92
  101
  111
  121
  131
  142
  153
  165
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
  42
  14
  15
  16
  16
  17
  17
  17
  17
  16
  14
  13
  12
  12
  11
  10
  10
  9
  9
  8
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  96.3
  93.3
  90.7
  88.5
  86.6
  85.1
  83.8
  82.7
  81.8
  81.1
  80.6
  80.2
  80.0
  79.8
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7
  79.7

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, Inc. (SRDX)

Valuation Ratios
P/E Ratio 136.7
Price to Sales 7.5
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 39.1
Price to Free Cash Flow 68.3
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 $81 million for the last fiscal year's total revenue generated by Surmodics, Inc.. The default revenue input number comes from 0001 income statement of Surmodics, Inc.. 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 30.7% 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, Inc., 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, Inc..
    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 90.1%.

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 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Surmodics, Inc.. 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 61.3%.

Life of production assets of 11.3 years is the average useful life of capital assets used in Surmodics, Inc. 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 -23%. 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 - $108.61 million for Surmodics, Inc. - 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 13.482 million for Surmodics, Inc. 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, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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