Intrinsic value of Amedisys - AMED

Previous Close

$56.37

  Intrinsic Value

$63.24

stock screener

  Rating & Target

hold

+12%

Previous close

$56.37

 
Intrinsic value

$63.24

 
Up/down potential

+12%

 
Rating

hold

We calculate the intrinsic value of AMED 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 1.9

 

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, %
  12.18
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
  5.00
Revenue, $m
  1,437
  1,509
  1,584
  1,664
  1,747
  1,834
  1,926
  2,022
  2,123
  2,229
  2,341
  2,458
  2,581
  2,710
  2,845
  2,987
  3,137
  3,294
  3,458
  3,631
  3,813
  4,003
  4,204
  4,414
  4,634
  4,866
  5,110
  5,365
  5,633
  5,915
  6,211
Variable operating expenses, $m
 
  869
  911
  955
  1,002
  1,050
  1,101
  1,155
  1,211
  1,270
  1,332
  1,369
  1,437
  1,509
  1,584
  1,664
  1,747
  1,834
  1,926
  2,022
  2,123
  2,229
  2,341
  2,458
  2,581
  2,710
  2,845
  2,988
  3,137
  3,294
  3,459
Fixed operating expenses, $m
 
  579
  594
  608
  624
  639
  655
  672
  688
  706
  723
  741
  760
  779
  798
  818
  839
  860
  881
  903
  926
  949
  973
  997
  1,022
  1,047
  1,074
  1,101
  1,128
  1,156
  1,185
Total operating expenses, $m
  1,380
  1,448
  1,505
  1,563
  1,626
  1,689
  1,756
  1,827
  1,899
  1,976
  2,055
  2,110
  2,197
  2,288
  2,382
  2,482
  2,586
  2,694
  2,807
  2,925
  3,049
  3,178
  3,314
  3,455
  3,603
  3,757
  3,919
  4,089
  4,265
  4,450
  4,644
Operating income, $m
  57
  61
  80
  100
  121
  145
  169
  195
  223
  253
  285
  348
  384
  422
  462
  505
  551
  600
  651
  706
  764
  825
  890
  959
  1,032
  1,109
  1,190
  1,277
  1,368
  1,465
  1,567
EBITDA, $m
  77
  94
  114
  134
  156
  179
  204
  231
  259
  289
  322
  356
  392
  431
  472
  515
  561
  610
  662
  718
  776
  838
  904
  973
  1,047
  1,125
  1,207
  1,294
  1,386
  1,484
  1,587
Interest expense (income), $m
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
Earnings before tax, $m
  62
  57
  76
  96
  117
  139
  164
  189
  217
  246
  277
  339
  374
  411
  451
  493
  538
  586
  636
  689
  746
  806
  870
  938
  1,009
  1,085
  1,165
  1,250
  1,339
  1,434
  1,534
Tax expense, $m
  24
  16
  21
  26
  32
  38
  44
  51
  58
  66
  75
  91
  101
  111
  122
  133
  145
  158
  172
  186
  201
  218
  235
  253
  272
  293
  315
  337
  362
  387
  414
Net income, $m
  37
  42
  55
  70
  85
  102
  119
  138
  158
  179
  202
  247
  273
  300
  329
  360
  393
  427
  464
  503
  545
  589
  635
  684
  737
  792
  850
  912
  978
  1,047
  1,120

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  30
  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
  734
  739
  776
  815
  856
  899
  944
  991
  1,040
  1,092
  1,147
  1,204
  1,264
  1,328
  1,394
  1,464
  1,537
  1,614
  1,694
  1,779
  1,868
  1,962
  2,060
  2,163
  2,271
  2,384
  2,503
  2,629
  2,760
  2,898
  3,043
Adjusted assets (=assets-cash), $m
  704
  739
  776
  815
  856
  899
  944
  991
  1,040
  1,092
  1,147
  1,204
  1,264
  1,328
  1,394
  1,464
  1,537
  1,614
  1,694
  1,779
  1,868
  1,962
  2,060
  2,163
  2,271
  2,384
  2,503
  2,629
  2,760
  2,898
  3,043
Revenue / Adjusted assets
  2.041
  2.042
  2.041
  2.042
  2.041
  2.040
  2.040
  2.040
  2.041
  2.041
  2.041
  2.042
  2.042
  2.041
  2.041
  2.040
  2.041
  2.041
  2.041
  2.041
  2.041
  2.040
  2.041
  2.041
  2.041
  2.041
  2.042
  2.041
  2.041
  2.041
  2.041
Average production assets, $m
  86
  89
  93
  98
  103
  108
  114
  119
  125
  132
  138
  145
  152
  160
  168
  176
  185
  194
  204
  214
  225
  236
  248
  260
  273
  287
  301
  317
  332
  349
  366
Working capital, $m
  34
  9
  10
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
  37
Total debt, $m
  93
  101
  116
  130
  146
  162
  179
  197
  216
  236
  257
  279
  302
  326
  352
  378
  406
  435
  466
  499
  533
  568
  606
  645
  686
  730
  775
  823
  873
  926
  981
Total liabilities, $m
  274
  282
  297
  311
  327
  343
  360
  378
  397
  417
  438
  460
  483
  507
  533
  559
  587
  616
  647
  680
  714
  749
  787
  826
  867
  911
  956
  1,004
  1,054
  1,107
  1,162
Total equity, $m
  460
  457
  480
  504
  529
  555
  583
  612
  643
  675
  709
  744
  781
  820
  861
  905
  950
  997
  1,047
  1,100
  1,154
  1,212
  1,273
  1,336
  1,403
  1,473
  1,547
  1,624
  1,706
  1,791
  1,881
Total liabilities and equity, $m
  734
  739
  777
  815
  856
  898
  943
  990
  1,040
  1,092
  1,147
  1,204
  1,264
  1,327
  1,394
  1,464
  1,537
  1,613
  1,694
  1,780
  1,868
  1,961
  2,060
  2,162
  2,270
  2,384
  2,503
  2,628
  2,760
  2,898
  3,043
Debt-to-equity ratio
  0.202
  0.220
  0.240
  0.260
  0.280
  0.290
  0.310
  0.320
  0.340
  0.350
  0.360
  0.370
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.450
  0.460
  0.470
  0.480
  0.480
  0.490
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
Adjusted equity ratio
  0.611
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  37
  42
  55
  70
  85
  102
  119
  138
  158
  179
  202
  247
  273
  300
  329
  360
  393
  427
  464
  503
  545
  589
  635
  684
  737
  792
  850
  912
  978
  1,047
  1,120
Depreciation, amort., depletion, $m
  20
  34
  34
  34
  35
  35
  35
  35
  36
  36
  37
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
Funds from operations, $m
  -5
  76
  90
  104
  120
  137
  155
  174
  194
  216
  239
  255
  281
  309
  338
  370
  403
  438
  476
  515
  557
  602
  649
  699
  752
  808
  867
  930
  996
  1,066
  1,140
Change in working capital, $m
  -67
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
Cash from operations, $m
  62
  75
  89
  104
  119
  136
  154
  173
  193
  215
  238
  255
  281
  308
  338
  369
  402
  437
  475
  514
  556
  601
  648
  698
  750
  806
  866
  928
  994
  1,065
  1,139
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
New CAPEX, $m
  -16
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
Cash from investing activities, $m
  -52
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -19
  -21
  -21
  -23
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
Free cash flow, $m
  10
  67
  80
  94
  109
  125
  143
  161
  181
  202
  224
  240
  265
  292
  321
  351
  383
  418
  454
  493
  534
  577
  623
  671
  723
  778
  835
  896
  961
  1,030
  1,102
Issuance/(repayment) of debt, $m
  -5
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
  55
Issuance/(repurchase) of shares, $m
  -10
  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  
  -8
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
  55
Total cash flow (excl. dividends), $m
  3
  81
  94
  109
  125
  142
  160
  179
  200
  222
  245
  262
  288
  316
  346
  378
  411
  447
  485
  525
  568
  613
  660
  711
  764
  821
  881
  944
  1,011
  1,082
  1,157
Retained Cash Flow (-), $m
  -50
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -90
Prev. year cash balance distribution, $m
 
  25
  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
 
  84
  71
  85
  99
  115
  132
  150
  169
  189
  211
  227
  251
  277
  305
  335
  366
  400
  435
  473
  513
  555
  600
  647
  697
  751
  807
  867
  930
  997
  1,068
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
 
  80
  65
  74
  82
  89
  96
  101
  106
  109
  111
  108
  107
  105
  102
  98
  93
  87
  80
  73
  65
  57
  50
  42
  36
  29
  24
  19
  14
  11
  8
Current shareholders' claim on cash, %
  100
  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
  100.0

Amedisys, Inc. is a healthcare services company. The Company's segments are Home Health, Hospice, Personal Care and Other. The Company is a provider of home health, hospice and personal care services. As of December 31, 2016, the Company owned and operated 327 Medicare-certified home healthcare centers, 79 Medicare-certified hospice care centers and 14 personal-care care centers in 34 states within the United States and the District of Columbia. The Company's Home Health segment provides compassionate healthcare to help its patients recover from surgery or illness, live with chronic diseases, and prevent avoidable hospital readmissions. The Hospice segment provides support for those who are dealing with a terminal illness. The Personal care segment provides patients with assistance with the essential activities of daily living.

FINANCIAL RATIOS  of  Amedisys (AMED)

Valuation Ratios
P/E Ratio 51.2
Price to Sales 1.3
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 30.5
Price to Free Cash Flow 41.2
Growth Rates
Sales Growth Rate 12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.8%
Cap. Spend. - 3 Yr. Gr. Rate -17.6%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 19.1%
Total Debt to Equity 20.2%
Interest Coverage 22
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 3.7%
Asset Turnover 2
Profitability Ratios
Gross Margin 42%
Gross Margin - 3 Yr. Avg. 42.6%
EBITDA Margin 5.9%
EBITDA Margin - 3 Yr. Avg. 4.2%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 38.7%
Eff/ Tax Rate - 3 Yr. Avg. 25.6%
Payout Ratio 0%

AMED stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMED stock intrinsic value calculation we used $1437 million for the last fiscal year's total revenue generated by Amedisys. The default revenue input number comes from 2016 income statement of Amedisys. 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 AMED stock valuation model: a) initial revenue growth rate of 5% 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 AMED is calculated based on our internal credit rating of Amedisys, 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 Amedisys.
    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 AMED stock the variable cost ratio is equal to 57.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $565 million in the base year in the intrinsic value calculation for AMED 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 3.5% for Amedisys.

Corporate tax rate of 27% is the nominal tax rate for Amedisys. 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 AMED 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 AMED are equal to 5.9%.

Life of production assets of 18.1 years is the average useful life of capital assets used in Amedisys 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 AMED is equal to 0.6%. 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 - $460 million for Amedisys - 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 33.817 million for Amedisys 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 Amedisys at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ ETFs with exposure to Amedisys, Inc. : November 14, 2017   [Nov-14-17 01:53PM  Capital Cube]
▶ Amedisys beats 3Q profit forecasts   [Nov-07-17 06:57PM  Associated Press]
▶ Stocks With Rising Relative Strength: Amedisys   [03:00AM  Investor's Business Daily]
▶ Amedisys Previews Strong Third Quarter 2017 Results   [Oct-24-17 05:00PM  GlobeNewswire]
▶ Jax-based health care technology company lands big client   [Oct-12-17 08:15AM  American City Business Journals]
▶ Jax-based health care technology company lands big client   [Oct-11-17 03:00PM  American City Business Journals]
▶ Scott Ginn Promoted to Chief Financial Officer at Amedisys   [Oct-06-17 05:15PM  GlobeNewswire]
▶ 5 MedTech Stocks to Pick for Stellar Returns   [Sep-18-17 10:07AM  Zacks]
▶ Amedisys to Present at September Healthcare Conferences   [Aug-18-17 01:00PM  GlobeNewswire]
▶ Why Amedisys Shares Slumped 24.6% in July   [Aug-08-17 08:15PM  Motley Fool]
▶ Investor Network: Amedisys, Inc. to Host Earnings Call   [Jul-27-17 08:35AM  ACCESSWIRE]
▶ Amedisys beats 2Q profit forecasts   [12:55AM  Associated Press]
▶ Amedisys Reports Second Quarter 2017 Financial Results   [Jul-26-17 05:00PM  GlobeNewswire]
Financial statements of AMED
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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