Why is it so hard to value BNGO?

Company Background: Bionano Genomics is a life sciences instrumentation company founded in 2003 that operates in the genome analysis industry. Bionano provides a platform to analyze genomic DNA and other structural variations. Bionano offers nanochannel chips, automated imaging instruments, integrated software, and application reagents. Bionano sells their products to laboratories and institutions worldwide for researching purposes. Bionano’s key product is their Saphyr system which provides a platform for specific and sensitive structural variation detection. Saphyr helps researchers and clinicians accelerate their search for diagnostic and therapeutic targets. The Saphyr kit includes an instrument, chip consumables, reagents, a suite of data analysis tools, and genome analysis services for researchers to evaluate optical genome mapping data. Bionano has a TTM revenue of $8.5M, a TTM EBITDA of -$38.56M, and a market cap of $1.747B. Since their EBITDA is negative and their P/E is N/A, the only way to evaluate the estimated fair price of Bionano will be through a Discounted Cash Flow Model (which can be found at the end of this report.) Bionano has a very experienced Executive management team and board of directors. All but one person on these teams is very experienced in the health sciences industry, this person is Cristoprher Stewart who is their CFO, who previously headed Tesla’s Ultracapacitor Business. Investment Information: Industry Information:               Bionano Genomics primarily operates in the Genomics industry. The genomics industry is currently valuing at $20.1B, and is expected to grow at a 15.35% CAGR for the next 7 years. At this time (2028), the genomics industry is estimated to be worth $62.9B.               Bionano, themselves are predicting a CAGR of 19%, due to their position in the genomics market and their revolutionary Saphyr product. Bionano is expecting to sell over 9,500 Saphyr systems in 2021, which will translate into $2.1B.               Bionano’s operating target margins is -453% which is far less than that of other companies in the genomic industry, which are around 19-21%. In the DCF model later in this report we will use a 20$ operating margin for the terminal year as it BNGO has plans to increase their operating margins to bring them closer to that of the industry. Financial Information:               Bionano Genomics Revenue has decreased by around 16%/year since 2018. Furthermore, their gross revenue has also fallen during this time by 15.69% over the 2 years. Over this same 2-year period their operating revenue has decreased by 88.84%, and their EBITDA has decreased by 125.49%. These decreases are very worrisome and make investing in Bionano significantly more difficult because they are burning cash so quickly. Investment Plan and Valuation:               There is absolutely no way to value this company. Their negative EBITDA and non-existent P/E ratio do not allow us to use EBITDA or P/E multiples to value this company. Furthermore, when constructing the DCF model, Bionano’s Present Value (PV) of Future Cash Flows is negative. This means that the company has no value, and the estimated share price is $0.               Because of the lack of ability to value this company there is no way that I can recommend buying this stock. However, I cannot recommend on shorting the stock either, this is because Bionano is incredibly hyped right now and they have some products that show future potential, so shorting this stock could be very risky. For these reasons, my recommendation is neutral, and I recommend selling your shares if the stock has another massive run up.

back
photo-url-https://api.utradea.com/profile_pictures/60bad28424731e30f5a86832.jpeg

jacksondalton18

May 3, 2021
· POSITION CLOSED

14.82%

Position Return %

6.04

Price When Posted

0.90

Position Return

BNGO

Bionano Genomics Inc

5.57

0.28
5.29%
Current Price

Why is it so hard to value BNGO?

bearish

Company Background:

Bionano Genomics is a life sciences instrumentation company founded in 2003 that operates in the genome analysis industry. Bionano provides a platform to analyze genomic DNA and other structural variations. Bionano offers nanochannel chips, automated imaging instruments, integrated software, and application reagents. Bionano sells their products to laboratories and institutions worldwide for researching purposes.

Bionano’s key product is their Saphyr system which provides a platform for specific and sensitive structural variation detection. Saphyr helps researchers and clinicians accelerate their search for diagnostic and therapeutic targets. The Saphyr kit includes an instrument, chip consumables, reagents, a suite of data analysis tools, and genome analysis services for researchers to evaluate optical genome mapping data.

Bionano has a TTM revenue of $8.5M, a TTM EBITDA of -$38.56M, and a market cap of $1.747B. Since their EBITDA is negative and their P/E is N/A, the only way to evaluate the estimated fair price of Bionano will be through a Discounted Cash Flow Model (which can be found at the end of this report.)

Bionano has a very experienced Executive management team and board of directors. All but one person on these teams is very experienced in the health sciences industry, this person is Cristoprher Stewart who is their CFO, who previously headed Tesla’s Ultracapacitor Business.

Investment Information:

Industry Information:

              Bionano Genomics primarily operates in the Genomics industry. The genomics industry is currently valuing at $20.1B, and is expected to grow at a 15.35% CAGR for the next 7 years. At this time (2028), the genomics industry is estimated to be worth $62.9B.

              Bionano, themselves are predicting a CAGR of 19%, due to their position in the genomics market and their revolutionary Saphyr product. Bionano is expecting to sell over 9,500 Saphyr systems in 2021, which will translate into $2.1B.

              Bionano’s operating target margins is -453% which is far less than that of other companies in the genomic industry, which are around 19-21%. In the DCF model later in this report we will use a 20$ operating margin for the terminal year as it BNGO has plans to increase their operating margins to bring them closer to that of the industry.

Financial Information:

              Bionano Genomics Revenue has decreased by around 16%/year since 2018. Furthermore, their gross revenue has also fallen during this time by 15.69% over the 2 years. Over this same 2-year period their operating revenue has decreased by 88.84%, and their EBITDA has decreased by 125.49%.

These decreases are very worrisome and make investing in Bionano significantly more difficult because they are burning cash so quickly.

Investment Plan and Valuation:

              There is absolutely no way to value this company. Their negative EBITDA and non-existent P/E ratio do not allow us to use EBITDA or P/E multiples to value this company. Furthermore, when constructing the DCF model, Bionano’s

Present Value (PV) of Future Cash Flows is negative. This means that the company has no value, and the estimated share price is $0.

              Because of the lack of ability to value this company there is no way that I can recommend buying this stock. However, I cannot recommend on shorting the stock either, this is because Bionano is incredibly hyped right now and they have some products that show future potential, so shorting this stock could be very risky. For these reasons, my recommendation is neutral, and I recommend selling your shares if the stock has another massive run up.

update-select
update-select
Comments

Write your comment....

Sign in to comment

read-time
3 min

5.15

Target Price

7/ 10

Confidence

1-2 Months

Timeframe
catalyst icon
Earnings Release
catalyst icon
News
catalyst icon
SEC Filing
catalyst icon
Sentiment
catalyst icon
Other Catalyst

BNGO Channel

Start new chat
next