Intrinsic value of Meridian Bioscience - VIVO

Previous Close

$19.41

  Intrinsic Value

$13.78

stock screener

  Rating & Target

sell

-29%

Previous close

$19.41

 
Intrinsic value

$13.78

 
Up/down potential

-29%

 
Rating

sell

We calculate the intrinsic value of VIVO 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, %
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  207
  214
  222
  230
  239
  248
  258
  269
  280
  292
  305
  319
  333
  348
  364
  381
  399
  417
  437
  458
  480
  503
  527
  553
  579
  608
  637
  669
  701
  736
Variable operating expenses, $m
  152
  157
  162
  168
  174
  181
  188
  195
  203
  211
  212
  222
  231
  242
  253
  265
  277
  290
  304
  318
  334
  350
  366
  384
  403
  423
  443
  465
  488
  512
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
  152
  157
  162
  168
  174
  181
  188
  195
  203
  211
  212
  222
  231
  242
  253
  265
  277
  290
  304
  318
  334
  350
  366
  384
  403
  423
  443
  465
  488
  512
Operating income, $m
  55
  57
  59
  62
  65
  67
  70
  74
  77
  81
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  161
  168
  177
  185
  194
  204
  214
  224
EBITDA, $m
  68
  71
  73
  76
  79
  82
  85
  89
  93
  96
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  201
  210
  221
  232
  243
Interest expense (income), $m
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Earnings before tax, $m
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  151
  159
  166
  174
  183
  192
  201
  211
Tax expense, $m
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
Net income, $m
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  121
  127
  134
  140
  147
  154

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
  217
  224
  232
  240
  249
  259
  270
  281
  293
  305
  319
  333
  348
  364
  380
  398
  417
  436
  457
  478
  501
  525
  551
  577
  605
  635
  666
  699
  733
  769
Adjusted assets (=assets-cash), $m
  217
  224
  232
  240
  249
  259
  270
  281
  293
  305
  319
  333
  348
  364
  380
  398
  417
  436
  457
  478
  501
  525
  551
  577
  605
  635
  666
  699
  733
  769
Revenue / Adjusted assets
  0.954
  0.955
  0.957
  0.958
  0.960
  0.958
  0.956
  0.957
  0.956
  0.957
  0.956
  0.958
  0.957
  0.956
  0.958
  0.957
  0.957
  0.956
  0.956
  0.958
  0.958
  0.958
  0.956
  0.958
  0.957
  0.957
  0.956
  0.957
  0.956
  0.957
Average production assets, $m
  76
  79
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  160
  168
  176
  185
  193
  203
  213
  223
  234
  245
  257
  270
Working capital, $m
  59
  61
  63
  66
  68
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
  201
  210
Total debt, $m
  57
  60
  62
  65
  69
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
  129
  136
  143
  151
  159
  168
  177
  187
  197
  208
  219
  230
  243
  256
Total liabilities, $m
  78
  81
  83
  87
  90
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
  208
  218
  229
  240
  251
  264
  277
Total equity, $m
  139
  143
  148
  154
  160
  166
  173
  180
  187
  195
  204
  213
  223
  233
  243
  255
  267
  279
  292
  306
  321
  336
  352
  370
  387
  406
  426
  447
  469
  492
Total liabilities and equity, $m
  217
  224
  231
  241
  250
  259
  270
  281
  292
  305
  319
  333
  348
  364
  380
  398
  417
  436
  456
  478
  501
  525
  550
  578
  605
  635
  666
  698
  733
  769
Debt-to-equity ratio
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.520
  0.520
  0.520
Adjusted equity ratio
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  121
  127
  134
  140
  147
  154
Depreciation, amort., depletion, $m
  13
  14
  14
  14
  14
  14
  15
  15
  15
  16
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
Funds from operations, $m
  51
  53
  55
  57
  59
  61
  63
  66
  69
  71
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
  157
  165
  173
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Cash from operations, $m
  50
  51
  53
  54
  56
  58
  60
  63
  65
  68
  68
  71
  75
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
Maintenance CAPEX, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
New CAPEX, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
Cash from investing activities, $m
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -27
  -29
  -31
Free cash flow, $m
  42
  43
  44
  46
  47
  49
  50
  52
  54
  56
  56
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  120
  126
  132
Issuance/(repayment) of debt, $m
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Total cash flow (excl. dividends), $m
  45
  46
  47
  49
  51
  52
  54
  56
  59
  61
  61
  64
  67
  69
  73
  76
  79
  83
  87
  91
  95
  100
  104
  109
  115
  120
  126
  132
  139
  145
Retained Cash Flow (-), $m
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Prev. year cash balance distribution, $m
  35
  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
  76
  41
  42
  43
  45
  46
  48
  49
  51
  53
  53
  55
  57
  59
  62
  65
  67
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  117
  122
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
  72
  38
  37
  36
  35
  33
  32
  31
  29
  28
  25
  23
  22
  20
  18
  16
  15
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Meridian Bioscience, Inc. is a life science company engaged in the development, manufacture, sale and distribution of diagnostic test kits for gastrointestinal, viral, respiratory and parasitic infectious diseases, and elevated blood lead levels, and the manufacture and distribution of bulk antigens, antibodies, polymerase chain reaction (PCR)/quantitative PCR (qPCR) reagents, nucleotides, competent cells and bioresearch reagents used by researchers and other diagnostic manufacturers. Its segments include Diagnostics and Life Science. The Diagnostics segment includes manufacturing operations in Cincinnati, and the sale and distribution of diagnostic test kits in the countries consisting of North, Central and South America; Europe, the Middle East and Africa (EMEA), and other countries outside of the Americas and EMEA. The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; Luckenwalde, Germany, and Sydney, Australia.

FINANCIAL RATIOS  of  Meridian Bioscience (VIVO)

Valuation Ratios
P/E Ratio 37.2
Price to Sales 4.1
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 20
Price to Free Cash Flow 22.1
Growth Rates
Sales Growth Rate 2.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -10.6%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 29.4%
Total Debt to Equity 32.4%
Interest Coverage 19
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 14.8%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 16.1%
Return On Equity 13.1%
Return On Equity - 3 Yr. Avg. 18.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 62.2%
Gross Margin - 3 Yr. Avg. 63.4%
EBITDA Margin 22.9%
EBITDA Margin - 3 Yr. Avg. 27.9%
Operating Margin 18.9%
Oper. Margin - 3 Yr. Avg. 24.5%
Pre-Tax Margin 17.9%
Pre-Tax Margin - 3 Yr. Avg. 24%
Net Profit Margin 10.9%
Net Profit Margin - 3 Yr. Avg. 15.2%
Effective Tax Rate 38.9%
Eff/ Tax Rate - 3 Yr. Avg. 36.9%
Payout Ratio 109.1%

VIVO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VIVO stock intrinsic value calculation we used $200.771 million for the last fiscal year's total revenue generated by Meridian Bioscience. The default revenue input number comes from 0001 income statement of Meridian Bioscience. 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 VIVO stock valuation model: a) initial revenue growth rate of 3.2% 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 VIVO is calculated based on our internal credit rating of Meridian Bioscience, 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 Meridian Bioscience.
    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 VIVO stock the variable cost ratio is equal to 73.6%.

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 VIVO 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 Meridian Bioscience.

Corporate tax rate of 27% is the nominal tax rate for Meridian Bioscience. 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 VIVO 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 VIVO are equal to 36.7%.

Life of production assets of 14.4 years is the average useful life of capital assets used in Meridian Bioscience 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 VIVO is equal to 28.6%. 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 - $169.585 million for Meridian Bioscience - 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 42.395 million for Meridian Bioscience 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 Meridian Bioscience at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Meridian Bioscience: Fiscal 4Q Earnings Snapshot   [08:43AM  Associated Press]
▶ Meridian Bioscience: Fiscal 3Q Earnings Snapshot   [07:42AM  Associated Press]
▶ Meridian's new CEO is reshaping culture to lay groundwork for growth   [May-30-18 02:12PM  American City Business Journals]
▶ Meridian Bioscience: Fiscal 2Q Earnings Snapshot   [Apr-26-18 10:14AM  Associated Press]
▶ Meridian Bioscience Realigns Organizational Structure   [Mar-21-18 07:30AM  GlobeNewswire]
▶ Top NasdaqGS Healthcare Dividend Paying Companies   [Feb-09-18 05:02AM  Simply Wall St.]
▶ Meridian Bioscience beats 1Q profit forecasts   [Jan-25-18 07:30AM  Associated Press]
▶ Greater Cincinnati firm faces lawsuits linked to FDA warning, stock dip   [Jan-11-18 04:00PM  American City Business Journals]

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