Intrinsic value of Addus HomeCare - ADUS

Previous Close

$35.15

  Intrinsic Value

$7.98

stock screener

  Rating & Target

str. sell

-77%

  Value-price divergence*

-183%

Previous close

$35.15

 
Intrinsic value

$7.98

 
Up/down potential

-77%

 
Rating

str. sell

 
Value-price divergence*

-183%

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

We calculate the intrinsic value of ADUS 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 2016), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.99
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  401
  440
  480
  523
  567
  613
  660
  710
  761
  815
  870
  928
  988
  1,051
  1,116
  1,184
  1,254
  1,328
  1,405
  1,485
  1,569
  1,656
  1,747
  1,843
  1,942
  2,047
  2,156
  2,270
  2,390
  2,516
  2,647
Variable operating expenses, $m
 
  419
  456
  496
  537
  580
  625
  671
  719
  769
  821
  867
  924
  982
  1,043
  1,106
  1,172
  1,241
  1,313
  1,388
  1,466
  1,548
  1,633
  1,722
  1,815
  1,913
  2,015
  2,122
  2,234
  2,351
  2,474
Fixed operating expenses, $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
Total operating expenses, $m
  385
  419
  456
  496
  537
  580
  625
  671
  719
  769
  821
  867
  924
  982
  1,043
  1,106
  1,172
  1,241
  1,313
  1,388
  1,466
  1,548
  1,633
  1,722
  1,815
  1,913
  2,015
  2,122
  2,234
  2,351
  2,474
Operating income, $m
  15
  21
  24
  27
  30
  33
  36
  39
  42
  46
  50
  61
  65
  69
  73
  77
  82
  87
  92
  97
  103
  108
  114
  121
  127
  134
  141
  149
  156
  165
  173
EBITDA, $m
  22
  31
  33
  36
  39
  42
  46
  49
  53
  57
  60
  64
  69
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
  128
  135
  142
  150
  157
  166
  174
  184
Interest expense (income), $m
  2
  3
  4
  5
  6
  7
  8
  10
  11
  12
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
Earnings before tax, $m
  16
  18
  20
  22
  24
  25
  27
  30
  32
  34
  36
  46
  49
  51
  54
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  102
  107
  113
  118
Tax expense, $m
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
Net income, $m
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  26
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  231
  245
  267
  291
  315
  341
  367
  395
  423
  453
  484
  516
  550
  584
  621
  658
  698
  739
  781
  826
  872
  921
  972
  1,025
  1,080
  1,138
  1,199
  1,263
  1,329
  1,399
  1,472
Adjusted assets (=assets-cash), $m
  223
  245
  267
  291
  315
  341
  367
  395
  423
  453
  484
  516
  550
  584
  621
  658
  698
  739
  781
  826
  872
  921
  972
  1,025
  1,080
  1,138
  1,199
  1,263
  1,329
  1,399
  1,472
Revenue / Adjusted assets
  1.798
  1.796
  1.798
  1.797
  1.800
  1.798
  1.798
  1.797
  1.799
  1.799
  1.798
  1.798
  1.796
  1.800
  1.797
  1.799
  1.797
  1.797
  1.799
  1.798
  1.799
  1.798
  1.797
  1.798
  1.798
  1.799
  1.798
  1.797
  1.798
  1.798
  1.798
Average production assets, $m
  21
  22
  25
  27
  29
  31
  34
  36
  39
  42
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
  128
  135
Working capital, $m
  81
  84
  91
  99
  108
  116
  125
  135
  145
  155
  165
  176
  188
  200
  212
  225
  238
  252
  267
  282
  298
  315
  332
  350
  369
  389
  410
  431
  454
  478
  503
Total debt, $m
  25
  29
  36
  43
  50
  58
  66
  75
  84
  93
  103
  113
  123
  134
  145
  156
  169
  181
  194
  208
  223
  238
  253
  270
  287
  305
  324
  343
  364
  385
  408
Total liabilities, $m
  72
  76
  83
  90
  97
  105
  113
  122
  131
  140
  150
  160
  170
  181
  192
  203
  216
  228
  241
  255
  270
  285
  300
  317
  334
  352
  371
  390
  411
  432
  455
Total equity, $m
  159
  169
  185
  201
  218
  235
  254
  273
  293
  313
  334
  357
  380
  404
  429
  455
  482
  510
  540
  571
  603
  636
  671
  708
  747
  787
  829
  873
  919
  967
  1,017
Total liabilities and equity, $m
  231
  245
  268
  291
  315
  340
  367
  395
  424
  453
  484
  517
  550
  585
  621
  658
  698
  738
  781
  826
  873
  921
  971
  1,025
  1,081
  1,139
  1,200
  1,263
  1,330
  1,399
  1,472
Debt-to-equity ratio
  0.157
  0.170
  0.190
  0.210
  0.230
  0.250
  0.260
  0.270
  0.290
  0.300
  0.310
  0.320
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
Adjusted equity ratio
  0.677
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  26
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
Depreciation, amort., depletion, $m
  7
  9
  9
  9
  10
  10
  10
  10
  10
  11
  11
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
Funds from operations, $m
  -30
  22
  24
  25
  27
  28
  30
  32
  34
  35
  37
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  92
  97
Change in working capital, $m
  -29
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  -1
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
Cash from investing activities, $m
  -22
  -4
  -4
  -4
  -4
  -4
  -4
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -17
Free cash flow, $m
  -23
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  52
  55
Issuance/(repayment) of debt, $m
  23
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
Issuance/(repurchase) of shares, $m
  0
  2
  1
  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  
  26
  9
  8
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
Total cash flow (excl. dividends), $m
  4
  20
  20
  21
  22
  23
  24
  26
  27
  29
  30
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
Retained Cash Flow (-), $m
  -17
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
Prev. year cash balance distribution, $m
 
  5
  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
 
  10
  5
  5
  5
  5
  6
  7
  7
  8
  9
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
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
 
  9
  4
  4
  4
  4
  4
  5
  5
  5
  5
  4
  4
  4
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.5
  99.3
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2

Addus HomeCare Corporation provides home and community based personal services to older adults and younger disabled persons in the United States. The company’s personal care services provide adult day care and assistance with activities of daily living. Its home and community based services include assistance with bathing, grooming, dressing, personal hygiene and medication reminders, and other activities of daily living. The company’s adult day centers offer skilled and support services, and designated medical services for adults. Its services include social activities; transportation; and provision of meals and snacks, as well as personal care and therapeutic activities, such as exercise and cognitive interaction. The company serves individuals who are at risk of hospitalization or institutionalization, such as the elderly, chronically ill, and disabled. Its payor clients include federal, state, and local governmental agencies; managed care organizations; commercial insurers; and private individuals. The company offers its services through 119 individual agencies located in 22 states; and 5 adult day centers in Illinois. The company through its partnership with CellTrak Technologies develops a CellTrak solution that enables home care providers to manage service delivery while meeting electronic visit verification mandates. Addus HomeCare Corporation was founded in 1979 and is based in Downers Grove, Illinois.

FINANCIAL RATIOS  of  Addus HomeCare (ADUS)

Valuation Ratios
P/E Ratio 33.8
Price to Sales 1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow -405.3
Price to Free Cash Flow -135.1
Growth Rates
Sales Growth Rate 19%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 13.8%
Total Debt to Equity 15.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 8.6%
Return On Equity 8%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 26.4%
Gross Margin - 3 Yr. Avg. 26.8%
EBITDA Margin 6.2%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 27%
Payout Ratio 0%

ADUS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADUS stock intrinsic value calculation we used $401 million for the last fiscal year's total revenue generated by Addus HomeCare. The default revenue input number comes from 2016 income statement of Addus HomeCare. 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 ADUS stock valuation model: a) initial revenue growth rate of 9.7% 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 ADUS is calculated based on our internal credit rating of Addus HomeCare, 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 Addus HomeCare.
    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 ADUS stock the variable cost ratio is equal to 95.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ADUS 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 14.3% for Addus HomeCare.

Corporate tax rate of 27% is the nominal tax rate for Addus HomeCare. 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 ADUS 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 ADUS are equal to 5.1%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Addus HomeCare 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 ADUS is equal to 19%. 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 - $159 million for Addus HomeCare - 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 10.873 million for Addus HomeCare 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 Addus HomeCare at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Addus HomeCare posts 2Q profit   [Aug-07-17 11:57PM  Associated Press]
▶ ETFs with exposure to Addus HomeCare Corp. : July 4, 2017   [Jul-04-17 02:25PM  Capital Cube]
▶ Best Stocks For The Second Half of 2017   [Jul-03-17 11:43AM  Zacks]
▶ New Strong Buy Stocks for June 22nd   [Jun-22-17 10:15AM  Zacks]
▶ ETFs with exposure to Addus HomeCare Corp. : June 8, 2017   [Jun-08-17 01:21PM  Capital Cube]
▶ New Strong Buy Stocks for June 7th   [Jun-07-17 10:10AM  Zacks]
▶ Which Companies Are Now Outperforming 95% Of All Stocks?   [Jun-05-17 11:29AM  Investor's Business Daily]
▶ No. 1-Ranked Home-Care Stock Giving Therapy To New Buy Zone   [Jun-01-17 12:27PM  Investor's Business Daily]
▶ New Strong Buy Stocks for May 25th   [May-25-17 09:20AM  Zacks]
▶ Thinly Traded Health Care Stock Tries To Resuscitate New Breakout   [May-24-17 11:16AM  Investor's Business Daily]
▶ Avoid Market Volatility with 5 Low-Beta Stocks   [May-23-17 09:48AM  Zacks]
▶ New Strong Buy Stocks for May 17th   [May-17-17 10:24AM  Zacks]
▶ Addus HomeCare Bolts Past Buy Zone, Gets IBD Rating Upgrade   [May-12-17 11:01AM  Investor's Business Daily]
▶ Addus HomeCare posts 1Q profit   [May-08-17 04:59PM  Associated Press]
Stock chart of ADUS Financial statements of ADUS
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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