Luminex Corp Valuation – October 2018 $LMNX

Company Profile (excerpt from Reuters): Luminex Corporation, incorporated on June 19, 1998, develops, manufactures and sells biological testing technologies with applications throughout the diagnostics, pharmaceutical and life sciences industries. The Company’s products are focused on the molecular diagnostic testing market, which includes human genetics, personalized medicine and infectious disease segments. The Company has a range of instruments using its xMAP technology, which includes its LUMINEX 100/200 systems offer 100-plex testing; the Company’s FLEXMAP 3D system is its high-throughput, 500-plex testing system, and its MAGPIX system provides 50-plex testing using imaging rather than flow cytometry. By using its xMAP technology, the end users are able to generate multiple simultaneous results per sample. The Company primarily serves the diagnostics, pharmaceutical and life sciences industries by marketing products, including its testing equipment and assays, to a range of testing laboratories.


Downloadable PDF version of this valuation:

ModernGraham Valuation of LMNX – October 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 $1,281,599,628 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.76 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 67.42% Pass
6. Moderate PEmg Ratio PEmg < 20 49.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.73 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 6.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $0.59
MG Growth Estimate 3.76%
MG Value $9.38
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $8.50
MG Value based on 0% Growth $4.98
Market Implied Growth Rate 20.26%
Current Price $28.73
% of Intrinsic Value 306.22%

Luminex Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. 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 $0.47 in 2014 to an estimated $0.59 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 20.26% 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 Luminex Corporation revealed the company was trading above its Graham Number of $10.65. The company pays a dividend of $0.24 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 49.03, which was below the industry average of 54.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.55.

Luminex Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.55
Graham Number $10.65
PEmg 49.03
Current Ratio 6.76
PB Ratio 2.73
Current Dividend $0.24
Dividend Yield 0.84%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $245,843,000
Total Current Liabilities $36,381,000
Long-Term Debt $0
Total Assets $510,228,000
Intangible Assets $163,990,000
Total Liabilities $44,699,000
Shares Outstanding (Diluted Average) 44,246,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.50
Dec2017 $0.67
Dec2016 $0.32
Dec2015 $0.86
Dec2014 $0.93
Dec2013 $0.17
Dec2012 $0.30
Dec2011 $0.34
Dec2010 $0.12
Dec2009 $0.43
Dec2008 $0.08
Dec2007 -$0.08
Dec2006 $0.05
Dec2005 -$0.09
Dec2004 -$0.12
Dec2003 -$0.14
Dec2002 -$0.85
Dec2001 -$0.55
Dec2000 -$0.52
Dec1999 -$0.96
Dec1998 -$0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.59
Dec2017 $0.62
Dec2016 $0.56
Dec2015 $0.63
Dec2014 $0.47
Dec2013 $0.25
Dec2012 $0.28
Dec2011 $0.24
Dec2010 $0.16
Dec2009 $0.15
Dec2008 $0.00
Dec2007 -$0.06
Dec2006 -$0.11
Dec2005 -$0.24
Dec2004 -$0.36
Dec2003 -$0.52
Dec2002 -$0.69

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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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