Intrinsic value of Cross Country Healthcare - CCRN

Previous Close

$13.44

  Intrinsic Value

$7.41

stock screener

  Rating & Target

sell

-45%

Previous close

$13.44

 
Intrinsic value

$7.41

 
Up/down potential

-45%

 
Rating

sell

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
  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
  834
  876
  919
  965
  1,014
  1,064
  1,118
  1,174
  1,232
  1,294
  1,358
  1,426
  1,498
  1,573
  1,651
  1,734
  1,821
  1,912
  2,007
  2,107
  2,213
  2,323
  2,440
  2,562
  2,690
  2,824
  2,965
  3,114
  3,269
  3,433
  3,604
Variable operating expenses, $m
 
  853
  895
  939
  986
  1,035
  1,086
  1,140
  1,196
  1,256
  1,318
  1,376
  1,444
  1,517
  1,592
  1,672
  1,756
  1,844
  1,936
  2,032
  2,134
  2,241
  2,353
  2,470
  2,594
  2,724
  2,860
  3,003
  3,153
  3,311
  3,476
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
  853
  895
  939
  986
  1,035
  1,086
  1,140
  1,196
  1,256
  1,318
  1,376
  1,444
  1,517
  1,592
  1,672
  1,756
  1,844
  1,936
  2,032
  2,134
  2,241
  2,353
  2,470
  2,594
  2,724
  2,860
  3,003
  3,153
  3,311
  3,476
Operating income, $m
  5
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  51
  53
  56
  59
  62
  65
  68
  71
  75
  79
  83
  87
  91
  96
  101
  106
  111
  116
  122
  128
EBITDA, $m
  14
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  61
  65
  68
  71
  75
  78
  82
  86
  91
  95
  100
  105
  110
  116
  122
  128
  134
  141
  148
Interest expense (income), $m
  4
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
Earnings before tax, $m
  5
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  87
  92
Tax expense, $m
  -4
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
Net income, $m
  8
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67

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
  385
  405
  425
  446
  468
  492
  517
  542
  569
  598
  628
  659
  692
  727
  763
  801
  841
  883
  928
  974
  1,023
  1,074
  1,127
  1,184
  1,243
  1,305
  1,370
  1,439
  1,511
  1,586
Adjusted assets (=assets-cash), $m
  367
  385
  405
  425
  446
  468
  492
  517
  542
  569
  598
  628
  659
  692
  727
  763
  801
  841
  883
  928
  974
  1,023
  1,074
  1,127
  1,184
  1,243
  1,305
  1,370
  1,439
  1,511
  1,586
Revenue / Adjusted assets
  2.272
  2.275
  2.269
  2.271
  2.274
  2.274
  2.272
  2.271
  2.273
  2.274
  2.271
  2.271
  2.273
  2.273
  2.271
  2.273
  2.273
  2.273
  2.273
  2.270
  2.272
  2.271
  2.272
  2.273
  2.272
  2.272
  2.272
  2.273
  2.272
  2.272
  2.272
Average production assets, $m
  90
  94
  98
  103
  108
  114
  120
  126
  132
  138
  145
  153
  160
  168
  177
  186
  195
  205
  215
  225
  237
  249
  261
  274
  288
  302
  317
  333
  350
  367
  386
Working capital, $m
  109
  95
  99
  104
  109
  115
  121
  127
  133
  140
  147
  154
  162
  170
  178
  187
  197
  206
  217
  228
  239
  251
  263
  277
  290
  305
  320
  336
  353
  371
  389
Total debt, $m
  87
  97
  109
  122
  136
  150
  165
  181
  197
  214
  233
  252
  272
  293
  315
  338
  363
  388
  415
  444
  473
  505
  537
  572
  608
  646
  685
  727
  771
  817
  865
Total liabilities, $m
  237
  247
  259
  272
  286
  300
  315
  331
  347
  364
  383
  402
  422
  443
  465
  488
  513
  538
  565
  594
  623
  655
  687
  722
  758
  796
  835
  877
  921
  967
  1,015
Total equity, $m
  151
  139
  146
  153
  161
  169
  177
  186
  195
  205
  215
  226
  237
  249
  262
  275
  288
  303
  318
  334
  351
  368
  387
  406
  426
  447
  470
  493
  518
  544
  571
Total liabilities and equity, $m
  388
  386
  405
  425
  447
  469
  492
  517
  542
  569
  598
  628
  659
  692
  727
  763
  801
  841
  883
  928
  974
  1,023
  1,074
  1,128
  1,184
  1,243
  1,305
  1,370
  1,439
  1,511
  1,586
Debt-to-equity ratio
  0.576
  0.700
  0.750
  0.800
  0.840
  0.890
  0.930
  0.970
  1.010
  1.050
  1.080
  1.110
  1.150
  1.180
  1.200
  1.230
  1.260
  1.280
  1.310
  1.330
  1.350
  1.370
  1.390
  1.410
  1.430
  1.440
  1.460
  1.470
  1.490
  1.500
  1.520
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
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
Depreciation, amort., depletion, $m
  9
  13
  13
  13
  14
  14
  14
  14
  15
  15
  15
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
Funds from operations, $m
  18
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  86
Change in working capital, $m
  -12
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
Cash from operations, $m
  30
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  45
  48
  50
  52
  54
  57
  59
  62
  65
  68
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -8
  -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
  -18
Cash from investing activities, $m
  -10
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -14
  -14
  -14
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
  -35
  -37
Free cash flow, $m
  20
  14
  14
  14
  14
  15
  15
  16
  16
  16
  17
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
Issuance/(repayment) of debt, $m
  1
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
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
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
Total cash flow (excl. dividends), $m
  18
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
Retained Cash Flow (-), $m
  -10
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
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
 
  38
  19
  20
  20
  21
  22
  22
  23
  24
  25
  24
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
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
 
  36
  17
  17
  17
  16
  16
  15
  14
  14
  13
  11
  10
  10
  9
  8
  7
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
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. is engaged in providing healthcare recruiting, staffing, recruiting and workforce solutions. The Company operates in 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. The Physician Staffing segment provides physicians in various specialties, certified registered nurse anesthetists, nurse practitioners and physician assistants under its Medical Doctor Associates brand. The Other Human Capital Management Services is engaged in providing retained and contingent search services for physicians, healthcare executives, nurses, advanced practice and allied health professionals. It provides multi-specialty locum tenens services, as well as other human capital management services focused on healthcare.

FINANCIAL RATIOS  of  Cross Country Healthcare (CCRN)

Valuation Ratios
P/E Ratio 54.3
Price to Sales 0.5
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 14.5
Price to Free Cash Flow 19.8
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 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 36.494 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.

RELATED COMPANIES Price Int.Val. Rating
MAN ManpowerGroup 127.55 387.71  str.buy

COMPANY NEWS

▶ CROSS COUNTRY HEALTHCARE INC to Host Earnings Call   [Nov-02-17 07:50AM  ACCESSWIRE]
▶ Cross Country posts 3Q profit   [Nov-01-17 06:47PM  Associated Press]
▶ Cross Country misses 2Q revenue forecasts   [12:47AM  Associated Press]
▶ Cross Country Healthcare To Acquire Assets of Advantage RN   [Jun-13-17 04:15PM  Business Wire]
▶ Cross Country reports 1Q loss   [05:02AM  Associated Press]
▶ Cross Country reports 4Q loss   [Mar-01-17 06:18PM  Associated Press]
Financial statements of CCRN
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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