What is GNMK's Intrinsic value?

Genmark Diagnostics Inc (GNMK) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, Genmark Diagnostics Inc's estimated intrinsic value ranges from $0.12 to $5.86 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $5.86 -75.6%
Discounted Cash Flow (5Y) $0.12 -99.5%
Dividend Discount Model (Multi-Stage) $0.38 -98.4%

Is Genmark Diagnostics Inc (GNMK) undervalued or overvalued?

With the current market price at $24.04, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Genmark Diagnostics Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 0.8 0.89
Cost of equity 6.6% 8.8%
Cost of debt 7.0% 8.7%
Tax rate 0.2% 0.2%
Debt/Equity ratio 0.04 0.04
After-tax WACC 6.6% 8.8%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $172 (FY12-2020) to $515 (FY12-2030)
  • Net profit margin expansion from -11% to 5%
  • Capital expenditures maintained at approximately 9% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $0 $39M 163.7%
10-Year Growth $6 $452M 90.1%
5-Year EBITDA $5 $365M 106.8%
10-Year EBITDA $9 $692M 93.5%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.7%
  • Long-term growth rate: 4.0%
  • Fair value: $0.38 (-98.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.8% (Low) to 6.6% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(3) to $(15)
  • Selected fair value: $-8.95 (-137.2% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $1730M
Enterprise Value $1761M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 17.50
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.04

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 40% $1.76
Discounted Cash Flow (5Y) 33% $0.03
Dividend Discount Model (Multi-Stage) 27% $0.08
Weighted Average 100% $2.48

Investment Conclusion

Based on our comprehensive valuation analysis, Genmark Diagnostics Inc's weighted average intrinsic value is $2.48, which is approximately 89.7% below the current market price of $24.04.

Key investment considerations:

  • Strong projected earnings growth (-11% to 5% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.04)

Given these factors, we believe Genmark Diagnostics Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.