Intrinsic value of Adeptus Health - ADPT

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$2.88

  Intrinsic Value

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  Value-price divergence*

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ADPT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in ), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
(a)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -100.00
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  0
  381
  390
  400
  412
  424
  438
  453
  469
  486
  505
  525
  546
  569
  593
  618
  645
  674
  705
  737
  770
  806
  844
  883
  925
  969
  1,016
  1,065
  1,116
  1,170
  1,227
Variable operating expenses, $m
 
  296
  302
  310
  318
  328
  338
  349
  362
  375
  389
  398
  414
  431
  450
  469
  490
  511
  535
  559
  585
  612
  640
  670
  702
  735
  771
  808
  847
  888
  931
Fixed operating expenses, $m
 
  55
  57
  58
  60
  61
  63
  64
  66
  67
  69
  71
  73
  74
  76
  78
  80
  82
  84
  86
  88
  91
  93
  95
  98
  100
  103
  105
  108
  111
  113
Total operating expenses, $m
  0
  351
  359
  368
  378
  389
  401
  413
  428
  442
  458
  469
  487
  505
  526
  547
  570
  593
  619
  645
  673
  703
  733
  765
  800
  835
  874
  913
  955
  999
  1,044
Operating income, $m
  0
  31
  31
  32
  34
  35
  37
  39
  41
  44
  47
  56
  59
  63
  67
  71
  76
  81
  86
  91
  97
  104
  111
  118
  126
  134
  142
  152
  161
  172
  183
EBITDA, $m
  0
  48
  49
  50
  52
  54
  56
  59
  61
  64
  68
  72
  76
  80
  85
  90
  95
  101
  107
  114
  121
  128
  136
  144
  153
  163
  173
  184
  195
  207
  220
Interest expense (income), $m
  0
  12
  13
  14
  15
  16
  18
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  50
  54
  58
  62
  66
  71
  75
  80
  86
  91
  97
  104
Earnings before tax, $m
  0
  19
  19
  19
  19
  19
  19
  20
  20
  21
  22
  29
  30
  31
  32
  34
  36
  37
  39
  41
  44
  46
  49
  52
  55
  58
  62
  66
  70
  74
  79
Tax expense, $m
  0
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
Net income, $m
  0
  14
  14
  14
  14
  14
  14
  14
  15
  15
  16
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  54
  58

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  0
  516
  528
  542
  557
  574
  592
  612
  634
  658
  683
  710
  739
  770
  802
  837
  873
  912
  953
  997
  1,043
  1,091
  1,142
  1,196
  1,252
  1,312
  1,374
  1,441
  1,510
  1,583
  1,660
Adjusted assets (=assets-cash), $m
  0
  516
  528
  542
  557
  574
  592
  612
  634
  658
  683
  710
  739
  770
  802
  837
  873
  912
  953
  997
  1,043
  1,091
  1,142
  1,196
  1,252
  1,312
  1,374
  1,441
  1,510
  1,583
  1,660
Revenue / Adjusted assets
  0.000
  0.738
  0.739
  0.738
  0.740
  0.739
  0.740
  0.740
  0.740
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.738
  0.739
  0.739
  0.740
  0.739
  0.738
  0.739
  0.739
  0.738
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
Average production assets, $m
  0
  103
  105
  108
  111
  114
  118
  122
  127
  131
  136
  142
  147
  154
  160
  167
  174
  182
  190
  199
  208
  218
  228
  239
  250
  262
  274
  287
  301
  316
  331
Working capital, $m
  0
  53
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Total debt, $m
  0
  126
  135
  147
  159
  174
  189
  206
  224
  244
  265
  287
  311
  337
  364
  393
  423
  456
  490
  526
  564
  605
  647
  692
  739
  789
  841
  896
  954
  1,015
  1,080
Total liabilities, $m
  0
  431
  440
  452
  464
  479
  494
  511
  529
  549
  570
  592
  616
  642
  669
  698
  728
  761
  795
  831
  869
  910
  952
  997
  1,044
  1,094
  1,146
  1,201
  1,259
  1,320
  1,385
Total equity, $m
  0
  86
  88
  90
  92
  95
  98
  102
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  181
  190
  198
  208
  218
  228
  239
  251
  263
  276
Total liabilities and equity, $m
  0
  517
  528
  542
  556
  574
  592
  613
  634
  658
  683
  710
  739
  770
  802
  837
  873
  912
  953
  996
  1,042
  1,091
  1,142
  1,195
  1,252
  1,312
  1,374
  1,440
  1,510
  1,583
  1,661
Debt-to-equity ratio
  0.000
  1.460
  1.540
  1.630
  1.720
  1.820
  1.920
  2.020
  2.130
  2.230
  2.330
  2.440
  2.540
  2.640
  2.730
  2.830
  2.920
  3.010
  3.100
  3.180
  3.260
  3.340
  3.410
  3.490
  3.560
  3.620
  3.690
  3.750
  3.810
  3.860
  3.920
Adjusted equity ratio
  0.000
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166
  0.166

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  14
  14
  14
  14
  14
  14
  14
  15
  15
  16
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  54
  58
Depreciation, amort., depletion, $m
  0
  18
  18
  18
  18
  19
  19
  20
  20
  21
  21
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
Funds from operations, $m
  0
  31
  31
  32
  32
  33
  33
  34
  35
  36
  37
  37
  38
  40
  41
  43
  45
  47
  50
  52
  55
  58
  61
  64
  68
  72
  76
  80
  85
  89
  95
Change in working capital, $m
  0
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
Cash from operations, $m
  0
  17
  30
  30
  30
  31
  31
  32
  33
  34
  35
  34
  35
  37
  38
  40
  42
  43
  46
  48
  50
  53
  56
  59
  62
  66
  69
  73
  77
  82
  87
Maintenance CAPEX, $m
  0
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
New CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
Cash from investing activities, $m
  0
  -13
  -13
  -15
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -43
  -46
  -48
  -50
Free cash flow, $m
  0
  4
  16
  16
  15
  15
  15
  15
  15
  15
  15
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
Issuance/(repayment) of debt, $m
  0
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
  61
  64
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  0
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
  61
  64
Total cash flow (excl. dividends), $m
  0
  12
  26
  27
  28
  29
  30
  32
  33
  34
  36
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  61
  64
  68
  72
  76
  80
  85
  90
  95
  100
Retained Cash Flow (-), $m
  0
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
Prev. year cash balance distribution, $m
 
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  19
  24
  25
  26
  26
  27
  28
  29
  30
  32
  31
  33
  35
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  70
  74
  78
  83
  88
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  18
  22
  22
  21
  20
  20
  19
  18
  18
  17
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Adeptus Health Inc. owns and operates a network of independent freestanding emergency rooms in the United States. As of December 31, 2015, it operated 81 facilities located in the Houston, Dallas/Fort Worth, San Antonio, Austin, Colorado Springs, Denver, and Phoenix. The company was founded in 2002 and is based in Lewisville, Texas.

FINANCIAL RATIOS  of  Adeptus Health (ADPT)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

ADPT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADPT stock intrinsic value calculation we used $374 million for the last fiscal year's total revenue generated by Adeptus Health. The default revenue input number comes from income statement of Adeptus Health. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ADPT stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ADPT is calculated based on our internal credit rating of Adeptus Health, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Adeptus Health.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ADPT stock the variable cost ratio is equal to 77.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $54 million in the base year in the intrinsic value calculation for ADPT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 10.2% for Adeptus Health.

Corporate tax rate of 27% is the nominal tax rate for Adeptus Health. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ADPT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ADPT are equal to 27%.

Life of production assets of 9 years is the average useful life of capital assets used in Adeptus Health operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ADPT is equal to 13.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $92 million for Adeptus Health - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 19.008 million for Adeptus Health is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Adeptus Health at the current share price and the inputted number of shares is $0.1 billion.


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Stock chart of ADPT Financial statements of ADPT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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