Illumina Inc Valuation – April 2018 $ILMN

Company Profile (excerpt from Reuters): Illumina, Inc. (Illumina), incorporated on May 16, 2000, is a provider of sequencing- and array-based solutions for genetic analysis. The Company operates through two segments: Core Illumina and the consolidated variable interest entities (VIEs), which include the activities of GRAIL, Inc. (GRAIL) and Helix Holdings I, LLC (Helix). Core Illumina consists of its core operations. Core Illumina’s products and services serve customers in the research, clinical and applied markets, and enable the adoption of a range of genomic solutions. GRAIL is engaged in developing a blood test for early-stage cancer detection. Helix was established to enable individuals to explore their genetic information by providing sequencing and database services for consumers through third-party partners.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ILMN – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $36,075,937,767 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.95 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 519.31% Pass
6. Moderate PEmg Ratio PEmg < 20 61.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.24 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.95 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.50 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $4.00
MG Growth Estimate 15.00%
MG Value $154.15
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $58.06
MG Value based on 0% Growth $34.03
Market Implied Growth Rate 26.45%
Current Price $245.84
% of Intrinsic Value 159.48%

Illumina, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.4 in 2014 to an estimated $4 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 26.45% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Illumina, Inc. revealed the company was trading above its Graham Number of $43.61. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 61.4, which was above the industry average of 44.81. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.19.

Illumina, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.19
Graham Number $43.61
PEmg 61.40
Current Ratio 4.95
PB Ratio 13.24
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,980,000,000
Total Current Liabilities $602,000,000
Long-Term Debt $1,182,000,000
Total Assets $5,257,000,000
Intangible Assets $946,000,000
Total Liabilities $2,508,000,000
Shares Outstanding (Diluted Average) 148,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.52
Dec2017 $4.92
Dec2016 $3.07
Dec2015 $3.10
Dec2014 $2.37
Dec2013 $0.90
Dec2012 $1.13
Dec2011 $0.62
Dec2010 $0.87
Dec2009 $0.53
Dec2008 $0.30
Dec2007 -$2.57
Dec2006 $0.41
Dec2005 -$0.26
Dec2004 -$0.09
Dec2003 -$0.43
Dec2002 -$0.66
Dec2001 -$0.42
Dec2000 -$0.69
Dec1999 -$1.96

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.00
Dec2017 $3.45
Dec2016 $2.52
Dec2015 $2.04
Dec2014 $1.40
Dec2013 $0.88
Dec2012 $0.81
Dec2011 $0.41
Dec2010 $0.18
Dec2009 -$0.22
Dec2008 -$0.54
Dec2007 -$0.84
Dec2006 -$0.05
Dec2005 -$0.31
Dec2004 -$0.37
Dec2003 -$0.62
Dec2002 -$0.73

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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