Latest news with #VarexImaging
Yahoo
3 days ago
- Business
- Yahoo
Calculating The Fair Value Of Varex Imaging Corporation (NASDAQ:VREX)
Using the 2 Stage Free Cash Flow to Equity, Varex Imaging fair value estimate is US$8.11 Varex Imaging's US$7.67 share price indicates it is trading at similar levels as its fair value estimate The US$16.60 analyst price target for VREX is 105% more than our estimate of fair value How far off is Varex Imaging Corporation (NASDAQ:VREX) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the forecast future cash flows of the company and discounting them back to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. Believe it or not, it's not too difficult to follow, as you'll see from our example! We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) US$24.9m US$46.8m US$39.5m US$35.5m US$33.3m US$32.1m US$31.6m US$31.6m US$31.8m US$32.3m Growth Rate Estimate Source Analyst x1 Analyst x1 Est @ -15.68% Est @ -10.10% Est @ -6.19% Est @ -3.45% Est @ -1.53% Est @ -0.19% Est @ 0.75% Est @ 1.41% Present Value ($, Millions) Discounted @ 11% US$22.4 US$37.8 US$28.6 US$23.1 US$19.5 US$16.9 US$15.0 US$13.4 US$12.2 US$11.1 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$200m The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 11%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$32m× (1 + 2.9%) ÷ (11%– 2.9%) = US$398m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$398m÷ ( 1 + 11%)10= US$137m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$337m. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$7.7, the company appears about fair value at a 5.5% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Varex Imaging as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 11%, which is based on a levered beta of 1.925. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. View our latest analysis for Varex Imaging Strength No major strengths identified for VREX. Weakness Interest payments on debt are not well covered. Opportunity Expected to breakeven next year. Has sufficient cash runway for more than 3 years based on current free cash flows. Good value based on P/S ratio and estimated fair value. Threat Debt is not well covered by operating cash flow. Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Varex Imaging, we've compiled three important items you should consider: Risks: Every company has them, and we've spotted 2 warning signs for Varex Imaging (of which 1 is potentially serious!) you should know about. Future Earnings: How does VREX's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
3 days ago
- Business
- Yahoo
Varex Imaging Corporation (VREX) Downgraded by S&P as Regulatory Outlook Remains Cloudy
S&P Global Ratings has downgraded its ratings on Varex Imaging Corporation (NASDAQ:VREX) because it believes the stock is surrounded by high levels of unpredictability and weaker credit metrics. Tariff drama has been lingering for quite some time now, and with uncertainty around policy implementation by the U.S. administration, the firm believes Varex's profitability and sales are under serious threat. A technician in a lab coat inspecting an X-ray imaging component. The slashing of the rating from 'B+' to 'BB-' also considers the refinancing risk of the company stemming from near-term maturities. With short-term capital structure, external factors, including capital market conditions and geopolitical risk, push the company into a vulnerable state. This isn't the first time the company has exhibited such performance. The credit assessor now expects a leverage above the downside threshold of 3.5x, with a free operating cash flow (FOCF) to debt below 12% for FY2025, much in line with last year's benchmark. No relief from the medical segment either, as the demand remains subdued. Despite the approval of a $1.4 trillion government stimulus package, the Chinese government is taking initiatives to support local vendors, putting further pressure on Varex Imaging Corporation (NASDAQ:VREX)'s sales. However, due to the company's competitive position and new contracts, S&P has extended a stable rating outlook. While we acknowledge the potential of VREX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than VREX and that has 100x upside potential, check out our report about the READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure. None.
Yahoo
16-04-2025
- Business
- Yahoo
Varex Imaging (NASDAQ:VREX) shareholders have endured a 67% loss from investing in the stock five years ago
Generally speaking long term investing is the way to go. But unfortunately, some companies simply don't succeed. To wit, the Varex Imaging Corporation (NASDAQ:VREX) share price managed to fall 67% over five long years. That's an unpleasant experience for long term holders. And it's not just long term holders hurting, because the stock is down 56% in the last year. Shareholders have had an even rougher run lately, with the share price down 44% in the last 90 days. So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress. We've discovered 2 warning signs about Varex Imaging. View them for free. There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. Over five years Varex Imaging's earnings per share dropped significantly, falling to a loss, with the share price also lower. The recent extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario. You can see below how EPS has changed over time (discover the exact values by clicking on the image). We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Varex Imaging's earnings, revenue and cash flow. Varex Imaging shareholders are down 56% for the year, but the market itself is up 7.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Varex Imaging (of which 1 is a bit unpleasant!) you should know about. Varex Imaging is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
07-03-2025
- Business
- Yahoo
Varex Imaging (NASDAQ:VREX) Could Be Struggling To Allocate Capital
There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Varex Imaging (NASDAQ:VREX) has the makings of a multi-bagger going forward, but let's have a look at why that may be. For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Varex Imaging: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.033 = US$39m ÷ (US$1.3b - US$151m) (Based on the trailing twelve months to January 2025). Thus, Varex Imaging has an ROCE of 3.3%. Ultimately, that's a low return and it under-performs the Medical Equipment industry average of 10%. Check out our latest analysis for Varex Imaging Above you can see how the current ROCE for Varex Imaging compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Varex Imaging for free. In terms of Varex Imaging's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 6.2% over the last five years. However it looks like Varex Imaging might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line. Bringing it all together, while we're somewhat encouraged by Varex Imaging's reinvestment in its own business, we're aware that returns are shrinking. And investors appear hesitant that the trends will pick up because the stock has fallen 38% in the last five years. Therefore based on the analysis done in this article, we don't think Varex Imaging has the makings of a multi-bagger. One more thing to note, we've identified 1 warning sign with Varex Imaging and understanding this should be part of your investment process. While Varex Imaging may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
27-01-2025
- Business
- Yahoo
This Varex Imaging Insider Increased Their Holding By 22% Last Year
From what we can see, insiders were net buyers in Varex Imaging Corporation's (NASDAQ:VREX ) during the past 12 months. That is, insiders acquired the stock in greater numbers than they sold it. While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing. See our latest analysis for Varex Imaging Over the last year, we can see that the biggest insider purchase was by CFO & Principal Accounting Officer Shubham Maheshwari for US$108k worth of shares, at about US$10.82 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$14.23. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices. Shubham Maheshwari bought a total of 19.01k shares over the year at an average price of US$10.90. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date! There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them). Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 1.0% of Varex Imaging shares, worth about US$6.1m, according to our data. Whilst better than nothing, we're not overly impressed by these holdings. The fact that there have been no Varex Imaging insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Varex Imaging stock. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. You'd be interested to know, that we found 1 warning sign for Varex Imaging and we suggest you have a look. Of course Varex Imaging may not be the best stock to buy. So you may wish to see this free collection of high quality companies. For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
