What is LMNX's Intrinsic value?

Luminex Corp (LMNX) Intrinsic Value Analysis

Executive Summary

As of July 16, 2025, Luminex Corp's estimated intrinsic value ranges from $7.97 to $12.89 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $12.89 -65.1%
Discounted Cash Flow (5Y) $8.74 -76.4%
Dividend Discount Model (Multi-Stage) $8.29 -77.6%
Dividend Discount Model (Stable) $7.97 -78.4%
Earnings Power Value $8.55 -76.9%

Is Luminex Corp (LMNX) undervalued or overvalued?

With the current market price at $36.99, 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 Luminex Corp'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
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

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 0.86 1.01
Cost of equity 6.8% 9.5%
Cost of debt 4.0% 4.5%
Tax rate 23.0% 36.9%
Debt/Equity ratio 0.12 0.12
After-tax WACC 6.4% 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: 7.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $417 (FY12-2020) to $1,002 (FY12-2030)
  • Net profit margin expansion from 4% to 5%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $9 $396M 75.9%
10-Year Growth $13 $592M 64.4%
5-Year EBITDA $23 $1,084M 91.2%
10-Year EBITDA $27 $1,263M 83.3%

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: 72.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.1%
  • Long-term growth rate: 2.0%
  • Fair value: $8.29 (-77.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.5% (Low) to 6.8% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $4 to $12
  • Selected fair value: $7.97 (-78.4% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $29M
Discount Rate (WACC) 8.8% - 6.4%
Enterprise Value $326M - $447M
Net Debt $(18)M
Equity Value $344M - $465M
Outstanding Shares 47M
Fair Value $7 - $10
Selected Fair Value $8.55

Key Financial Metrics

Metric Value
Market Capitalization $1750M
Enterprise Value $1732M
Trailing P/E 74.16
Forward P/E 76.98
Trailing EV/EBITDA 15.60
Current Dividend Yield 97.65%
Dividend Growth Rate (5Y) 15.52%
Debt-to-Equity Ratio 0.12

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) 30% $3.87
Discounted Cash Flow (5Y) 25% $2.19
Dividend Discount Model (Multi-Stage) 20% $1.66
Dividend Discount Model (Stable) 15% $1.20
Earnings Power Value 10% $0.86
Weighted Average 100% $9.76

Investment Conclusion

Based on our comprehensive valuation analysis, Luminex Corp's intrinsic value is $9.76, which is approximately 73.6% below the current market price of $36.99.

Key investment considerations:

  • Strong projected earnings growth (4% to 5% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.12)
  • Historical dividend growth of 15.52%

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