Illumina Inc Valuation – February 2019 $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.
Downloadable PDF version of this valuation:
ModernGraham Valuation of ILMN – February 2019
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 | $44,073,541,076 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 2.49 | 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 | 543.51% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 57.55 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 11.85 | 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 | 2.49 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 0.33 | 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 | $5.21 |
| MG Growth Estimate | 15.00% |
| MG Value | $200.56 |
| Opinion | Overvalued |
| MG Grade | C- |
| MG Value based on 3% Growth | $75.54 |
| MG Value based on 0% Growth | $44.28 |
| Market Implied Growth Rate | 24.53% |
| Current Price | $299.82 |
| % of Intrinsic Value | 149.49% |
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 $2.04 in 2015 to an estimated $5.21 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.53% 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 $60.58. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 57.55, which was above the industry average of 51.18. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.05.
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) | $9.05 |
| Graham Number | $60.58 |
| PEmg | 57.55 |
| Current Ratio | 2.49 |
| PB Ratio | 11.85 |
| Current Dividend | $0.00 |
| Dividend Yield | 0.00% |
| Number of Consecutive Years of Dividend Growth | 0 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2018 |
| Total Current Assets | $4,490,000,000 |
| Total Current Liabilities | $1,804,000,000 |
| Long-Term Debt | $890,000,000 |
| Total Assets | $6,959,000,000 |
| Intangible Assets | $1,016,000,000 |
| Total Liabilities | $3,114,000,000 |
| Shares Outstanding (Diluted Average) | 152,000,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $6.38 |
| Dec2018 | $5.56 |
| 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 | $5.21 |
| Dec2018 | $4.35 |
| 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 |
Recommended Reading:
Other ModernGraham posts about the company
| Illumina Inc Valuation – April 2018 $ILMN | |
| Illumina Inc Valuation – Initial Coverage $ILMN |
Other ModernGraham posts about related companies
Disclaimer:
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.
