Intrinsic value of Alliance HealthCare Services - AIQ

Previous Close

$13.00

  Intrinsic Value

$5.40

stock screener

  Rating & Target

str. sell

-58%

  Value-price divergence*

+25%

Previous close

$13.00

 
Intrinsic value

$5.40

 
Up/down potential

-58%

 
Rating

str. sell

 
Value-price divergence*

+25%

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

We calculate the intrinsic value of AIQ 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 0.1

 

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, %
  6.98
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  506
  530
  556
  583
  611
  641
  672
  705
  740
  776
  814
  854
  896
  941
  987
  1,036
  1,088
  1,141
  1,198
  1,258
  1,320
  1,386
  1,455
  1,527
  1,604
  1,683
  1,767
  1,856
  1,948
  2,045
  2,147
Variable operating expenses, $m
 
  467
  489
  512
  536
  561
  588
  616
  646
  677
  710
  732
  769
  807
  847
  888
  933
  979
  1,027
  1,078
  1,132
  1,188
  1,248
  1,310
  1,375
  1,444
  1,515
  1,591
  1,670
  1,754
  1,841
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
  452
  467
  489
  512
  536
  561
  588
  616
  646
  677
  710
  732
  769
  807
  847
  888
  933
  979
  1,027
  1,078
  1,132
  1,188
  1,248
  1,310
  1,375
  1,444
  1,515
  1,591
  1,670
  1,754
  1,841
Operating income, $m
  54
  64
  67
  71
  75
  79
  84
  89
  93
  99
  104
  122
  128
  134
  141
  148
  155
  163
  171
  179
  188
  198
  207
  218
  229
  240
  252
  264
  278
  291
  306
EBITDA, $m
  120
  115
  120
  126
  132
  138
  145
  152
  160
  168
  176
  185
  194
  203
  213
  224
  235
  247
  259
  272
  285
  299
  314
  330
  346
  364
  382
  401
  421
  442
  464
Interest expense (income), $m
  25
  25
  17
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  66
  69
  73
  78
  82
  87
  92
  97
Earnings before tax, $m
  19
  39
  51
  53
  56
  58
  61
  64
  68
  71
  74
  90
  94
  98
  102
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  167
  174
  182
  191
  200
  209
Tax expense, $m
  3
  11
  14
  14
  15
  16
  17
  17
  18
  19
  20
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
Net income, $m
  0
  28
  37
  39
  41
  43
  45
  47
  49
  52
  54
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  106
  111
  116
  122
  127
  133
  139
  146
  153

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  22
  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
  660
  691
  725
  760
  797
  835
  876
  919
  964
  1,012
  1,061
  1,114
  1,169
  1,226
  1,287
  1,351
  1,418
  1,488
  1,562
  1,640
  1,721
  1,807
  1,897
  1,991
  2,091
  2,195
  2,304
  2,419
  2,540
  2,667
  2,800
Adjusted assets (=assets-cash), $m
  638
  691
  725
  760
  797
  835
  876
  919
  964
  1,012
  1,061
  1,114
  1,169
  1,226
  1,287
  1,351
  1,418
  1,488
  1,562
  1,640
  1,721
  1,807
  1,897
  1,991
  2,091
  2,195
  2,304
  2,419
  2,540
  2,667
  2,800
Revenue / Adjusted assets
  0.793
  0.767
  0.767
  0.767
  0.767
  0.768
  0.767
  0.767
  0.768
  0.767
  0.767
  0.767
  0.766
  0.768
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
Average production assets, $m
  372
  390
  409
  428
  449
  471
  494
  518
  544
  570
  598
  628
  659
  691
  726
  762
  799
  839
  881
  924
  970
  1,019
  1,069
  1,123
  1,179
  1,237
  1,299
  1,364
  1,432
  1,503
  1,578
Working capital, $m
  7
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
Total debt, $m
  549
  371
  401
  433
  466
  501
  538
  576
  617
  659
  704
  751
  801
  853
  907
  965
  1,025
  1,088
  1,155
  1,225
  1,298
  1,375
  1,456
  1,541
  1,631
  1,724
  1,823
  1,926
  2,035
  2,149
  2,269
Total liabilities, $m
  799
  622
  652
  684
  717
  752
  789
  827
  868
  910
  955
  1,002
  1,052
  1,104
  1,158
  1,216
  1,276
  1,339
  1,406
  1,476
  1,549
  1,626
  1,707
  1,792
  1,882
  1,975
  2,074
  2,177
  2,286
  2,400
  2,520
Total equity, $m
  -140
  69
  72
  76
  80
  84
  88
  92
  96
  101
  106
  111
  117
  123
  129
  135
  142
  149
  156
  164
  172
  181
  190
  199
  209
  219
  230
  242
  254
  267
  280
Total liabilities and equity, $m
  659
  691
  724
  760
  797
  836
  877
  919
  964
  1,011
  1,061
  1,113
  1,169
  1,227
  1,287
  1,351
  1,418
  1,488
  1,562
  1,640
  1,721
  1,807
  1,897
  1,991
  2,091
  2,194
  2,304
  2,419
  2,540
  2,667
  2,800
Debt-to-equity ratio
  -3.921
  5.370
  5.540
  5.700
  5.850
  6.000
  6.140
  6.270
  6.400
  6.520
  6.640
  6.750
  6.850
  6.950
  7.050
  7.140
  7.230
  7.310
  7.390
  7.470
  7.540
  7.610
  7.680
  7.740
  7.800
  7.860
  7.910
  7.960
  8.010
  8.060
  8.100
Adjusted equity ratio
  -0.254
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  28
  37
  39
  41
  43
  45
  47
  49
  52
  54
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  106
  111
  116
  122
  127
  133
  139
  146
  153
Depreciation, amort., depletion, $m
  66
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  63
  66
  69
  73
  76
  80
  84
  88
  92
  97
  102
  107
  112
  118
  124
  130
  136
  143
  150
  158
Funds from operations, $m
  124
  79
  90
  93
  97
  102
  106
  111
  116
  121
  126
  129
  134
  141
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  270
  283
  296
  311
Change in working capital, $m
  15
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  109
  79
  89
  93
  97
  101
  106
  110
  115
  120
  126
  128
  134
  140
  147
  154
  161
  168
  176
  185
  193
  203
  212
  222
  233
  244
  256
  268
  281
  295
  309
Maintenance CAPEX, $m
  0
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -136
  -143
  -150
New CAPEX, $m
  -68
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
Cash from investing activities, $m
  -92
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -103
  -109
  -114
  -120
  -126
  -132
  -138
  -145
  -153
  -160
  -168
  -177
  -186
  -195
  -204
  -214
  -225
Free cash flow, $m
  17
  24
  32
  33
  34
  35
  36
  37
  38
  39
  41
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
Issuance/(repayment) of debt, $m
  -13
  -178
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  57
  60
  63
  67
  70
  73
  77
  81
  85
  89
  94
  98
  103
  109
  114
  120
Issuance/(repurchase) of shares, $m
  0
  181
  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  
  -32
  3
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  57
  60
  63
  67
  70
  73
  77
  81
  85
  89
  94
  98
  103
  109
  114
  120
Total cash flow (excl. dividends), $m
  -16
  27
  62
  64
  67
  69
  72
  75
  79
  82
  85
  86
  90
  94
  98
  102
  107
  112
  117
  123
  128
  134
  141
  147
  154
  162
  169
  177
  186
  195
  204
Retained Cash Flow (-), $m
  -33
  -209
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
Prev. year cash balance distribution, $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 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
 
  -182
  58
  61
  63
  66
  68
  71
  74
  77
  80
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
Discount rate, %
 
  13.60
  14.28
  14.99
  15.74
  16.53
  17.36
  18.23
  19.14
  20.09
  21.10
  22.15
  23.26
  24.42
  25.64
  26.93
  28.27
  29.69
  31.17
  32.73
  34.37
  36.08
  37.89
  39.78
  41.77
  43.86
  46.05
  48.36
  50.78
  53.31
  55.98
PV of cash for distribution, $m
 
  -160
  45
  40
  35
  31
  26
  22
  18
  15
  12
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Alliance Healthcare Services, Inc. provides outsourced healthcare services to hospitals and healthcare providers in the United States. It operates through two segments, Radiology and Oncology. The company offers radiology services, such as magnetic resonance imaging (MRI), positron emission tomography (PET) and computed tomography (CT), nuclear medicine, ultrasound, X-Ray, mammography, and bone density screening services. It also provides oncology services, including conventional beam therapy, 3-D conformal radiation therapy, intensity modulated radiation therapy, image guided radiation therapy, stereotactic radiosurgery and stereotactic body radiotherapy, and low dose rate and high dose rate brachytherapy, as well as initial consultation, preparation for treatment, simulation of treatment, radiation oncology delivery, therapy management, and follow-up care services. In addition, the company offers minimally invasive interventional healthcare and pain management services for a range of conditions and diseases, as well as laboratory testing and other services; and ancillary services, such as marketing support, education, training, scheduling, billing, and cost optimization management. As of December 31, 2015, it operated 563 diagnostic imaging and radiation therapy systems, including 116 fixed-site radiology centers, 32 radiation therapy centers and stereotactic radiosurgery facilities, 276 MRI systems, and 121 PET/CT systems. The company was founded in 1983 and is headquartered in Newport Beach, California.

FINANCIAL RATIOS  of  Alliance HealthCare Services (AIQ)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.3
Price to Book -1
Price to Tangible Book
Price to Cash Flow 1.3
Price to Free Cash Flow 3.4
Growth Rates
Sales Growth Rate 7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.2%
Cap. Spend. - 3 Yr. Gr. Rate 20.3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity -377.1%
Total Debt to Equity -392.1%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -3.3%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 43.7%
Gross Margin - 3 Yr. Avg. 44.3%
EBITDA Margin 21.7%
EBITDA Margin - 3 Yr. Avg. 23.6%
Operating Margin 10.7%
Oper. Margin - 3 Yr. Avg. 11.5%
Pre-Tax Margin 3.8%
Pre-Tax Margin - 3 Yr. Avg. 5.5%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 15.8%
Eff/ Tax Rate - 3 Yr. Avg. 20.3%
Payout Ratio 0%

AIQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AIQ stock intrinsic value calculation we used $506 million for the last fiscal year's total revenue generated by Alliance HealthCare Services. The default revenue input number comes from 2016 income statement of Alliance HealthCare Services. 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 AIQ stock valuation model: a) initial revenue growth rate of 4.8% 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 13.6%, whose default value for AIQ is calculated based on our internal credit rating of Alliance HealthCare Services, 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 Alliance HealthCare Services.
    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 AIQ stock the variable cost ratio is equal to 88.1%.

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 AIQ 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 4.5% for Alliance HealthCare Services.

Corporate tax rate of 27% is the nominal tax rate for Alliance HealthCare Services. 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 AIQ 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 AIQ are equal to 73.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Alliance HealthCare Services 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 AIQ is equal to 1.2%. 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 - $-140 million for Alliance HealthCare Services - 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 10.687 million for Alliance HealthCare Services 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 Alliance HealthCare Services at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Alliance HealthCare reports 2Q loss   [Aug-04-17 01:09AM  Associated Press]
▶ Alliance HealthCare reports 2Q loss   [Aug-03-17 08:03PM  Associated Press]
▶ Alliance HealthCare reports 1Q loss   [05:36PM  Associated Press]
▶ Alliance HealthCare reports 4Q loss   [Mar-09-17 06:48PM  Associated Press]
▶ Is Galena Biopharma Inc (GALE) a Good Stock to Buy?   [Dec-14-16 01:18PM  Insider Monkey]
▶ Why Alliance Healthcare Shares Have Popped   [12:35PM  24/7 Wall St.]
▶ Luther W. Brady, M.D. Awarded Seventh Honorary Degree   [Jun-07-16 07:00AM  Business Wire]
▶ CFO Moves: Hhgregg, Alliance Healthcare Services   [Feb-17-16 11:25PM  at The Wall Street Journal]
Stock chart of AIQ Financial statements of AIQ
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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