Vylor Inc. (VYLR)

Conclusion

Vylor Inc. is a seed and genetics company based in Johnston, Iowa, that works on elite germplasm, biotechnology and gene editing. The shares are priced at 72.53 USD, giving a market capitalisation of 48.40 billion USD.

The verdict is undervalued. Today's multiples are a P/E of 128.7, a price-to-free-cash-flow of 22.4 and a price-to-sales of 4.81, and no ten-year median is available to compare them with. The DCF gives 92.67 USD per share, and the fair value band runs from 74.14 to 111.20 USD with a midpoint of 92.67 USD, a margin of safety of 27.8% at the current price. The reverse DCF implies growth of 6.9% a year. The company's next-year EPS estimate growth is 12.9%, but that is a forecast, and revenue has grown in both of the two comparable years on record.

Three numbers hold the case up: an operating margin of 16.9% against a median of 13.1%, free cash flow conversion of 5.74 over the last twelve months, and an Altman Z-score of 4.26 in the safe zone. Three numbers weaken it: a net margin of 3.7% against a median of 6.9%, a next-year EPS estimate cut of 36.4% over 90 days, and a current ratio of 1.14, which is rated watch. The valuation also depends heavily on the fixed assumptions behind the DCF.

Financial health

Financial health is grey, because the company is classed as a financial business, so its debt-based tests are not applicable. Interest coverage of 134.2 is rated OK, while the current ratio of 1.14 is rated watch and the quick ratio is 0.64. Net debt to EBITDA and debt to equity are not available, because the company does not report its debt in the data. The Altman Z-score is 4.26, in the safe zone, but the Altman model was designed for manufacturers, so this reading is indicative only. Insolvency risk: the Ohlson model does not apply to a financial business.

Earnings quality

Earnings quality is grey, because too few checks can be completed on the data available. Free cash flow conversion is 5.74 over the last twelve months and rated good, and the accrual ratio of -0.0968 is negative, which points to earnings backed by cash. Five-year free cash flow conversion is not available. Free cash flow after stock-based compensation is 2.16 billion USD, but stock-based compensation as a share of revenue is not available. The five-year change in share count is not available. The Piotroski score is 6 out of 8 evaluable tests, and the Beneish M-score is not available. No earnings surprises are recorded. The next-year EPS estimate has fallen 36.4% over 90 days, with no upward or downward revisions in the last 30 days.

Profitability

Profitability is green, held up by the operating margin and the gross margin. The operating margin is 16.9% against a median of 13.1%, and the gross margin is 52.9% against a median of 48.2%. The net margin of 3.7% sits below its median of 6.9%, and is rated neutral. Operating margin stability is not available. ROIC and the ROIC-minus-WACC spread are not available, so the return cannot be set against the WACC of 8.9%. Return on equity is 2.5%. The DuPont split shows a net margin of 3.73%, an asset turnover of 0.46 and an equity multiplier of 1.66. Leverage is low, so the modest return on equity is not inflated by debt. It reflects a thin net margin and slow use of assets.

Growth

Growth is grey, because the compound growth rates are not available. Revenue grew in both of the two comparable years on record. Revenue compound growth over three, five and ten years, and EPS compound growth, are not available, since the history is not long enough. The next-year EPS estimate growth of 12.9% is rated good, but it is a forecast rather than growth already delivered, and the estimate was cut by 36.4% over the last 90 days.

Valuation

Valuation is green, because the verdict is undervalued with a margin of safety of 27.8%. Today's multiples are a P/E of 128.7, a price-to-free-cash-flow of 22.4, a price-to-sales of 4.81 and a price-to-book of 3.19, with a free cash flow yield of 4.46% and an earnings yield of 0.78%. Ten-year medians are not available because the history is not long enough. The DCF gives 92.67 USD per share at a discount rate of 8.9%, with 12.85% growth in the first stage and 2.5% terminal growth. The reverse DCF implies growth of 6.93%. The fair value from historical multiples is not available. The fair value is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The company pays no dividend, so its forward yield is 0%.

Risks

The weakest numbers would each damage the case in a different way. A net margin of 3.7% against a median of 6.9% means that any further squeeze on profit would reduce the earnings base the valuation rests on. The P/E of 128.7 and earnings yield of 0.78% mean that the price depends on earnings rising substantially. The 36.4% cut to the next-year estimate suggests that analysts' confidence is falling. A current ratio of 1.14, rated watch, leaves little room for short-term obligations. The missing ROIC, debt and stock-based compensation figures mean that some of the main risks cannot be measured. This analysis also has limits: it has no debt maturity schedule and no revenue split by segment.