Intrinsic value of Veracyte - VCYT

Previous Close

$13.33

  Intrinsic Value

$2.86

stock screener

  Rating & Target

str. sell

-79%

Previous close

$13.33

 
Intrinsic value

$2.86

 
Up/down potential

-79%

 
Rating

str. sell

We calculate the intrinsic value of VCYT 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 0.5

 

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, %
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.88
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
  6.48
  6.34
  6.20
  6.08
  5.97
  5.88
Revenue, $m
  89
  108
  130
  154
  181
  210
  241
  274
  310
  348
  388
  430
  474
  520
  568
  618
  670
  724
  781
  839
  900
  964
  1,030
  1,098
  1,169
  1,243
  1,320
  1,401
  1,484
  1,572
Variable operating expenses, $m
  59
  72
  86
  101
  118
  137
  157
  179
  202
  226
  251
  278
  307
  336
  368
  400
  434
  469
  505
  543
  583
  624
  667
  711
  757
  805
  855
  907
  961
  1,017
Fixed operating expenses, $m
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
  71
  72
  74
  75
  77
  79
  80
  82
  84
  86
  88
  90
  92
  94
  96
  98
  100
Total operating expenses, $m
  112
  126
  142
  158
  176
  196
  218
  241
  265
  291
  317
  346
  376
  407
  440
  474
  509
  546
  584
  623
  665
  708
  753
  799
  847
  897
  949
  1,003
  1,059
  1,117
Operating income, $m
  -23
  -18
  -11
  -4
  4
  13
  23
  33
  45
  57
  71
  84
  98
  113
  128
  144
  161
  178
  197
  216
  235
  256
  277
  300
  323
  347
  372
  398
  426
  454
EBITDA, $m
  -18
  -12
  -5
  3
  13
  23
  33
  45
  58
  71
  85
  100
  116
  132
  150
  168
  186
  206
  226
  247
  269
  292
  316
  341
  367
  394
  422
  451
  482
  514
Interest expense (income), $m
  2
  5
  7
  9
  11
  14
  17
  20
  24
  28
  32
  36
  40
  45
  50
  55
  61
  66
  72
  78
  84
  91
  98
  105
  112
  120
  128
  136
  145
  154
  163
Earnings before tax, $m
  -28
  -24
  -20
  -15
  -10
  -4
  3
  10
  17
  25
  35
  44
  53
  63
  73
  84
  95
  106
  119
  131
  144
  158
  172
  187
  203
  219
  236
  253
  272
  291
Tax expense, $m
  0
  0
  0
  0
  0
  0
  1
  3
  5
  7
  9
  12
  14
  17
  20
  23
  26
  29
  32
  35
  39
  43
  47
  51
  55
  59
  64
  68
  73
  79
Net income, $m
  -28
  -24
  -20
  -15
  -10
  -4
  2
  7
  12
  18
  25
  32
  39
  46
  53
  61
  69
  78
  87
  96
  105
  115
  126
  137
  148
  160
  172
  185
  198
  212

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
  69
  85
  101
  120
  141
  164
  188
  214
  242
  271
  303
  335
  370
  406
  443
  482
  523
  565
  609
  655
  703
  752
  804
  857
  913
  971
  1,031
  1,093
  1,159
  1,227
Adjusted assets (=assets-cash), $m
  69
  85
  101
  120
  141
  164
  188
  214
  242
  271
  303
  335
  370
  406
  443
  482
  523
  565
  609
  655
  703
  752
  804
  857
  913
  971
  1,031
  1,093
  1,159
  1,227
Revenue / Adjusted assets
  1.290
  1.271
  1.287
  1.283
  1.284
  1.280
  1.282
  1.280
  1.281
  1.284
  1.281
  1.284
  1.281
  1.281
  1.282
  1.282
  1.281
  1.281
  1.282
  1.281
  1.280
  1.282
  1.281
  1.281
  1.280
  1.280
  1.280
  1.282
  1.280
  1.281
Average production assets, $m
  22
  27
  32
  38
  45
  52
  60
  68
  77
  87
  96
  107
  118
  129
  141
  154
  167
  180
  194
  209
  224
  240
  256
  273
  291
  310
  329
  349
  370
  391
Working capital, $m
  9
  11
  13
  16
  19
  22
  25
  28
  32
  36
  40
  44
  49
  54
  58
  64
  69
  75
  80
  86
  93
  99
  106
  113
  120
  128
  136
  144
  153
  162
Total debt, $m
  35
  46
  59
  72
  88
  104
  122
  142
  162
  184
  207
  231
  256
  283
  310
  339
  369
  401
  433
  467
  502
  538
  576
  616
  656
  699
  743
  790
  838
  888
Total liabilities, $m
  51
  62
  75
  89
  104
  121
  138
  158
  178
  200
  223
  247
  272
  299
  327
  355
  385
  417
  449
  483
  518
  554
  592
  632
  673
  715
  760
  806
  854
  904
Total equity, $m
  18
  22
  27
  32
  37
  43
  49
  56
  64
  71
  80
  88
  97
  107
  117
  127
  138
  149
  160
  172
  185
  198
  211
  225
  240
  255
  271
  288
  305
  323
Total liabilities and equity, $m
  69
  84
  102
  121
  141
  164
  187
  214
  242
  271
  303
  335
  369
  406
  444
  482
  523
  566
  609
  655
  703
  752
  803
  857
  913
  970
  1,031
  1,094
  1,159
  1,227
Debt-to-equity ratio
  1.920
  2.070
  2.200
  2.290
  2.370
  2.430
  2.470
  2.510
  2.550
  2.580
  2.600
  2.620
  2.640
  2.650
  2.660
  2.670
  2.680
  2.690
  2.700
  2.710
  2.710
  2.720
  2.730
  2.730
  2.730
  2.740
  2.740
  2.750
  2.750
  2.750
Adjusted equity ratio
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -28
  -24
  -20
  -15
  -10
  -4
  2
  7
  12
  18
  25
  32
  39
  46
  53
  61
  69
  78
  87
  96
  105
  115
  126
  137
  148
  160
  172
  185
  198
  212
Depreciation, amort., depletion, $m
  5
  5
  6
  7
  8
  9
  10
  12
  13
  15
  15
  16
  18
  20
  21
  23
  25
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
Funds from operations, $m
  -23
  -19
  -14
  -8
  -2
  5
  12
  19
  25
  33
  40
  48
  57
  65
  75
  84
  95
  105
  116
  127
  139
  152
  165
  178
  192
  207
  222
  238
  254
  272
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
Cash from operations, $m
  -25
  -21
  -16
  -10
  -4
  2
  9
  15
  22
  29
  36
  44
  52
  61
  70
  79
  89
  99
  110
  121
  133
  145
  158
  171
  185
  199
  214
  229
  246
  263
Maintenance CAPEX, $m
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -7
  -8
  -9
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -33
  -36
  -39
  -41
  -44
  -47
  -50
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
Free cash flow, $m
  -32
  -29
  -25
  -21
  -17
  -12
  -7
  -2
  3
  8
  13
  19
  25
  31
  38
  45
  53
  61
  69
  77
  86
  95
  105
  115
  126
  136
  148
  160
  172
  185
Issuance/(repayment) of debt, $m
  10
  11
  12
  14
  15
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
Issuance/(repurchase) of shares, $m
  32
  28
  25
  20
  15
  10
  5
  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  
  42
  39
  37
  34
  30
  27
  23
  19
  21
  22
  23
  24
  25
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
Total cash flow (excl. dividends), $m
  10
  10
  12
  13
  14
  15
  16
  17
  23
  29
  36
  43
  50
  58
  66
  74
  83
  92
  101
  111
  121
  132
  143
  155
  167
  179
  192
  206
  220
  235
Retained Cash Flow (-), $m
  -32
  -28
  -25
  -20
  -15
  -10
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
Prev. year cash balance distribution, $m
  22
  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
  0
  -18
  -13
  -8
  -1
  5
  10
  10
  16
  22
  28
  34
  41
  48
  56
  64
  72
  81
  90
  99
  109
  119
  129
  140
  152
  164
  176
  189
  203
  217
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
  0
  -16
  -11
  -6
  -1
  4
  6
  6
  9
  11
  13
  15
  16
  16
  16
  16
  16
  15
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  82.4
  71.3
  64.2
  59.7
  56.9
  55.5
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9
  54.9

Veracyte, Inc. is a genomic diagnostics company. The Company uses genomic technology to resolve diagnostic ambiguity. It targets diseases in which patients undergo invasive diagnostic procedures. Its products combine genomic technology, clinical science and machine learning. The Company commercializes over three genomic tests, which are transforming the diagnosis of thyroid cancer, lung cancer and idiopathic pulmonary fibrosis. The Company’s commercial solution, the Afirma Thyroid fine needle aspiration (FNA) Analysis, centers on the Afirma Gene Expression Classifier (GEC). The Afirma GEC is offered directly or as part of a solution that also includes cytopathology. The Company operates in the pulmonology diagnostics market. It offers Percepta Bronchial Genomic Classifier, a genomic test to resolve ambiguity in lung cancer diagnosis. It also offers the Envisia Genomic Classifier, which is designed to help in the assessment of patients suspected to have idiopathic pulmonary fibrosis.

FINANCIAL RATIOS  of  Veracyte (VCYT)

Valuation Ratios
P/E Ratio -14.5
Price to Sales 6.9
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow -16.1
Price to Free Cash Flow -14.1
Growth Rates
Sales Growth Rate 30%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 43.3%
Total Debt to Equity 43.3%
Interest Coverage -15
Management Effectiveness
Return On Assets -33%
Ret/ On Assets - 3 Yr. Avg. -40.5%
Return On Total Capital -43.7%
Ret/ On T. Cap. - 3 Yr. Avg. -54.8%
Return On Equity -55.9%
Return On Equity - 3 Yr. Avg. -63.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 61.5%
Gross Margin - 3 Yr. Avg. 58.5%
EBITDA Margin -38.5%
EBITDA Margin - 3 Yr. Avg. -58.7%
Operating Margin -44.6%
Oper. Margin - 3 Yr. Avg. -62.3%
Pre-Tax Margin -47.7%
Pre-Tax Margin - 3 Yr. Avg. -64%
Net Profit Margin -47.7%
Net Profit Margin - 3 Yr. Avg. -64%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

VCYT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VCYT stock intrinsic value calculation we used $71.953 million for the last fiscal year's total revenue generated by Veracyte. The default revenue input number comes from 0001 income statement of Veracyte. 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 VCYT stock valuation model: a) initial revenue growth rate of 23.6% 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 VCYT is calculated based on our internal credit rating of Veracyte, 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 Veracyte.
    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 VCYT stock the variable cost ratio is equal to 66.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $52 million in the base year in the intrinsic value calculation for VCYT 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 19.5% for Veracyte.

Corporate tax rate of 27% is the nominal tax rate for Veracyte. 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 VCYT 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 VCYT are equal to 24.9%.

Life of production assets of 6.6 years is the average useful life of capital assets used in Veracyte 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 VCYT is equal to 10.3%. 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 - $37.225 million for Veracyte - 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 39.442 million for Veracyte 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 Veracyte at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ 3 Healthcare Stocks Leading New Industry Trends   [Oct-31-18 12:00PM  ACCESSWIRE]
▶ Here's Why Veracyte Jumped 22.5% Higher Today   [Oct-30-18 05:27PM  Motley Fool]
▶ Veracyte: 3Q Earnings Snapshot   [05:07PM  Associated Press]
▶ Q3 Earnings Preview For Veracyte   [07:44AM  Benzinga]
▶ Versant Venture Management, LLC Buys Veracyte Inc   [Oct-05-18 08:38PM  GuruFocus.com]
▶ 5 Breakout Stocks Offering Stellar Returns   [Jul-27-18 08:41AM  Zacks]
▶ Veracyte: 2Q Earnings Snapshot   [Jul-23-18 04:09PM  Associated Press]
▶ Veracyte Inc to Host Earnings Call   [02:30PM  ACCESSWIRE]
▶ Earnings Preview: Veracyte   [08:47AM  Benzinga]
▶ Veracyte Chairman and CEO to Speak at MedCity CONVERGE   [Jul-02-18 08:15AM  Business Wire]
▶ Veracyte: 1Q Earnings Snapshot   [May-01-18 06:03PM  Associated Press]
▶ Veracyte reports 4Q loss   [Feb-27-18 07:41PM  Associated Press]
▶ Veracyte Q4 Earnings Preview   [12:48PM  Benzinga]
▶ Veracyte Inc to Host Earnings Call   [12:40PM  ACCESSWIRE]
▶ ETFs with exposure to Veracyte, Inc. : December 11, 2017   [Dec-11-17 02:14PM  Capital Cube]
▶ ETFs with exposure to Veracyte, Inc. : December 1, 2017   [Dec-01-17 10:49AM  Capital Cube]
▶ Veracyte reports 3Q loss   [05:07PM  Associated Press]
▶ 5 MedTech Stocks to Pick for Stellar Returns   [Sep-18-17 10:07AM  Zacks]
▶ ETFs with exposure to Veracyte, Inc. : August 17, 2017   [Aug-17-17 04:06PM  Capital Cube]

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