Intrinsic value of Cross Country Healthcare - CCRN

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$14.42

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$14.42

 
Intrinsic value

$10.25

 
Up/down potential

-29%

 
Rating

sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of CCRN 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 0.5

 

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, %
  8.74
  15.50
  14.45
  13.51
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
Revenue, $m
  834
  963
  1,102
  1,251
  1,410
  1,577
  1,754
  1,940
  2,134
  2,337
  2,549
  2,770
  3,000
  3,238
  3,487
  3,745
  4,013
  4,292
  4,582
  4,883
  5,196
  5,522
  5,862
  6,216
  6,584
  6,969
  7,370
  7,788
  8,225
  8,682
  9,159
Variable operating expenses, $m
 
  937
  1,071
  1,215
  1,368
  1,529
  1,700
  1,879
  2,066
  2,262
  2,466
  2,671
  2,893
  3,123
  3,363
  3,612
  3,870
  4,139
  4,418
  4,709
  5,011
  5,326
  5,653
  5,994
  6,350
  6,721
  7,107
  7,511
  7,932
  8,373
  8,833
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
  829
  937
  1,071
  1,215
  1,368
  1,529
  1,700
  1,879
  2,066
  2,262
  2,466
  2,671
  2,893
  3,123
  3,363
  3,612
  3,870
  4,139
  4,418
  4,709
  5,011
  5,326
  5,653
  5,994
  6,350
  6,721
  7,107
  7,511
  7,932
  8,373
  8,833
Operating income, $m
  5
  26
  31
  37
  42
  48
  54
  61
  68
  75
  83
  99
  107
  115
  124
  133
  143
  153
  163
  174
  185
  197
  209
  221
  234
  248
  262
  277
  293
  309
  326
EBITDA, $m
  14
  40
  45
  51
  58
  65
  72
  80
  88
  96
  105
  114
  123
  133
  143
  154
  165
  176
  188
  200
  213
  227
  240
  255
  270
  286
  302
  319
  337
  356
  376
Interest expense (income), $m
  4
  4
  5
  7
  9
  11
  13
  15
  18
  20
  23
  26
  28
  31
  34
  37
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  82
  87
  92
  98
  103
Earnings before tax, $m
  5
  22
  26
  29
  33
  37
  41
  46
  50
  55
  60
  73
  78
  84
  90
  96
  102
  109
  115
  122
  130
  137
  145
  154
  162
  171
  181
  191
  201
  211
  223
Tax expense, $m
  -4
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
Net income, $m
  8
  16
  19
  21
  24
  27
  30
  33
  37
  40
  44
  53
  57
  61
  66
  70
  75
  79
  84
  89
  95
  100
  106
  112
  118
  125
  132
  139
  147
  154
  163

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  21
  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
  388
  424
  485
  551
  620
  694
  772
  854
  939
  1,029
  1,122
  1,219
  1,320
  1,425
  1,535
  1,648
  1,766
  1,889
  2,017
  2,149
  2,287
  2,431
  2,580
  2,736
  2,898
  3,067
  3,244
  3,428
  3,620
  3,821
  4,031
Adjusted assets (=assets-cash), $m
  367
  424
  485
  551
  620
  694
  772
  854
  939
  1,029
  1,122
  1,219
  1,320
  1,425
  1,535
  1,648
  1,766
  1,889
  2,017
  2,149
  2,287
  2,431
  2,580
  2,736
  2,898
  3,067
  3,244
  3,428
  3,620
  3,821
  4,031
Revenue / Adjusted assets
  2.272
  2.271
  2.272
  2.270
  2.274
  2.272
  2.272
  2.272
  2.273
  2.271
  2.272
  2.272
  2.273
  2.272
  2.272
  2.272
  2.272
  2.272
  2.272
  2.272
  2.272
  2.271
  2.272
  2.272
  2.272
  2.272
  2.272
  2.272
  2.272
  2.272
  2.272
Average production assets, $m
  90
  103
  118
  134
  151
  169
  188
  208
  228
  250
  273
  296
  321
  347
  373
  401
  429
  459
  490
  522
  556
  591
  627
  665
  705
  746
  789
  833
  880
  929
  980
Working capital, $m
  109
  104
  119
  135
  152
  170
  189
  209
  230
  252
  275
  299
  324
  350
  377
  404
  433
  464
  495
  527
  561
  596
  633
  671
  711
  753
  796
  841
  888
  938
  989
Total debt, $m
  87
  121
  161
  202
  247
  294
  344
  396
  451
  508
  568
  630
  695
  762
  832
  905
  980
  1,059
  1,141
  1,225
  1,314
  1,406
  1,501
  1,601
  1,705
  1,813
  1,926
  2,044
  2,167
  2,295
  2,430
Total liabilities, $m
  237
  271
  311
  352
  397
  444
  494
  546
  601
  658
  718
  780
  845
  912
  982
  1,055
  1,130
  1,209
  1,291
  1,375
  1,464
  1,556
  1,651
  1,751
  1,855
  1,963
  2,076
  2,194
  2,317
  2,445
  2,580
Total equity, $m
  151
  153
  175
  198
  223
  250
  278
  307
  338
  370
  404
  439
  475
  513
  552
  593
  636
  680
  726
  774
  823
  875
  929
  985
  1,043
  1,104
  1,168
  1,234
  1,303
  1,376
  1,451
Total liabilities and equity, $m
  388
  424
  486
  550
  620
  694
  772
  853
  939
  1,028
  1,122
  1,219
  1,320
  1,425
  1,534
  1,648
  1,766
  1,889
  2,017
  2,149
  2,287
  2,431
  2,580
  2,736
  2,898
  3,067
  3,244
  3,428
  3,620
  3,821
  4,031
Debt-to-equity ratio
  0.576
  0.800
  0.920
  1.020
  1.110
  1.180
  1.240
  1.290
  1.330
  1.370
  1.410
  1.440
  1.460
  1.490
  1.510
  1.520
  1.540
  1.560
  1.570
  1.580
  1.600
  1.610
  1.620
  1.630
  1.630
  1.640
  1.650
  1.660
  1.660
  1.670
  1.670
Adjusted equity ratio
  0.354
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  16
  19
  21
  24
  27
  30
  33
  37
  40
  44
  53
  57
  61
  66
  70
  75
  79
  84
  89
  95
  100
  106
  112
  118
  125
  132
  139
  147
  154
  163
Depreciation, amort., depletion, $m
  9
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
Funds from operations, $m
  18
  30
  33
  36
  40
  44
  48
  52
  56
  61
  66
  68
  74
  79
  84
  90
  96
  103
  109
  116
  123
  130
  138
  146
  154
  163
  172
  181
  191
  202
  212
Change in working capital, $m
  -12
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  52
Cash from operations, $m
  30
  11
  18
  20
  23
  25
  29
  32
  35
  39
  43
  45
  49
  53
  58
  62
  67
  73
  78
  83
  89
  95
  101
  108
  114
  121
  129
  136
  144
  152
  161
Maintenance CAPEX, $m
  0
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
New CAPEX, $m
  -8
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
Cash from investing activities, $m
  -10
  -19
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -57
  -61
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -98
Free cash flow, $m
  20
  -7
  -2
  -2
  -1
  0
  1
  2
  4
  5
  7
  7
  9
  11
  14
  16
  18
  21
  24
  26
  29
  32
  35
  38
  41
  45
  48
  51
  55
  59
  63
Issuance/(repayment) of debt, $m
  1
  36
  39
  42
  45
  47
  50
  52
  55
  57
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  88
  92
  96
  100
  104
  108
  113
  118
  123
  129
  134
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  
  -2
  36
  39
  42
  45
  47
  50
  52
  55
  57
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  88
  92
  96
  100
  104
  108
  113
  118
  123
  129
  134
Total cash flow (excl. dividends), $m
  18
  29
  37
  40
  44
  47
  51
  55
  59
  63
  67
  69
  74
  79
  83
  89
  94
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  169
  178
  187
  197
Retained Cash Flow (-), $m
  -10
  -21
  -22
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -64
  -66
  -69
  -72
  -76
Prev. year cash balance distribution, $m
 
  19
  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
 
  28
  15
  17
  18
  21
  23
  25
  28
  31
  33
  34
  37
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  82
  87
  92
  97
  103
  109
  115
  121
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
 
  27
  14
  14
  15
  16
  17
  17
  17
  18
  18
  16
  16
  15
  15
  14
  13
  12
  11
  10
  9
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
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

Cross Country Healthcare, Inc. provides healthcare staffing, recruiting, and workforce solutions in the United States. The company operates through three segments: Nurse and Allied Staffing, Physician Staffing, and Other Human Capital Management Services. The Nurse and Allied Staffing segment provides traditional staffing, including temporary and permanent placement of travel nurses and allied professionals, and branch-based local nurses and allied staffing; and short-term staffing of registered nurses, licensed practical nurses, certified nurse assistants, practitioners, pharmacists, and other allied professionals on per diem and short-term assignments. This segment markets its nurse and allied staffing services under the under the Cross Country Staffing, Mediscan, and DirectEd brands. It serves public and private acute-care and non-acute care hospitals, government owned facilities, public and charter schools, outpatient clinics, ambulatory care facilities, physician practice groups, retailers, and other healthcare providers. The Physician Staffing segment provides physicians in various specialties, certified registered nurse anesthetists, nurse practitioners, and physician assistants under the Medical Doctor Associates and Saber-Salisbury brand as independent contractors on temporary assignments at various healthcare facilities, such as acute and non-acute care facilities, medical group practices, government facilities, and managed care organizations. The Other Human Capital Management Services segment offers retained and contingent search services for physicians and healthcare executives. Cross Country Healthcare, Inc. was founded in 1996 and is headquartered in Boca Raton, Florida.

FINANCIAL RATIOS  of  Cross Country Healthcare (CCRN)

Valuation Ratios
P/E Ratio 58.3
Price to Sales 0.6
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow 21.2
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -74.2%
Cap. Spend. - 3 Yr. Gr. Rate -23.2%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 56.3%
Total Debt to Equity 57.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. -1%
Return On Total Capital 3.4%
Ret/ On T. Cap. - 3 Yr. Avg. -4%
Return On Equity 5.5%
Return On Equity - 3 Yr. Avg. -4.5%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 26.6%
Gross Margin - 3 Yr. Avg. 26%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 0.4%
Operating Margin 0.6%
Oper. Margin - 3 Yr. Avg. 0.5%
Pre-Tax Margin 0.6%
Pre-Tax Margin - 3 Yr. Avg. -1.3%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. -1.2%
Effective Tax Rate -80%
Eff/ Tax Rate - 3 Yr. Avg. -36.1%
Payout Ratio 0%

CCRN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CCRN stock intrinsic value calculation we used $834 million for the last fiscal year's total revenue generated by Cross Country Healthcare. The default revenue input number comes from 2016 income statement of Cross Country Healthcare. 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 CCRN stock valuation model: a) initial revenue growth rate of 15.5% 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 CCRN is calculated based on our internal credit rating of Cross Country Healthcare, 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 Cross Country Healthcare.
    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 CCRN stock the variable cost ratio is equal to 97.4%.

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 CCRN 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 Cross Country Healthcare.

Corporate tax rate of 27% is the nominal tax rate for Cross Country Healthcare. 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 CCRN 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 CCRN are equal to 10.7%.

Life of production assets of 19.7 years is the average useful life of capital assets used in Cross Country Healthcare 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 CCRN is equal to 10.8%. 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 - $151 million for Cross Country Healthcare - 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 33.239 million for Cross Country Healthcare 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 Cross Country Healthcare at the current share price and the inputted number of shares is $0.5 billion.


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COMPANY NEWS

▶ Cross Country reports 4Q loss   [Mar-01-17 06:18PM  Associated Press]
▶ President-elect Trump puts Obamacares future up in the air   [Nov-09-16 04:52PM  at MarketWatch]
Stock chart of CCRN Financial statements of CCRN
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