Intrinsic value of Cross Country Healthcare - CCRN

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$14.65

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$14.65

 
Intrinsic value

$22.32

 
Up/down potential

+52%

 
Rating

str. buy

 
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
  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
  834
  841
  919
  1,000
  1,084
  1,172
  1,263
  1,358
  1,456
  1,558
  1,665
  1,775
  1,890
  2,010
  2,134
  2,264
  2,399
  2,540
  2,687
  2,840
  3,000
  3,167
  3,342
  3,524
  3,715
  3,915
  4,124
  4,343
  4,572
  4,812
  5,063
Variable operating expenses, $m
 
  671
  732
  796
  862
  931
  1,003
  1,078
  1,155
  1,235
  1,319
  1,396
  1,487
  1,581
  1,679
  1,781
  1,887
  1,998
  2,113
  2,234
  2,360
  2,491
  2,629
  2,772
  2,923
  3,080
  3,244
  3,416
  3,596
  3,785
  3,982
Fixed operating expenses, $m
 
  140
  144
  148
  151
  155
  159
  163
  167
  171
  175
  180
  184
  189
  194
  198
  203
  208
  214
  219
  224
  230
  236
  242
  248
  254
  260
  267
  274
  280
  287
Total operating expenses, $m
  829
  811
  876
  944
  1,013
  1,086
  1,162
  1,241
  1,322
  1,406
  1,494
  1,576
  1,671
  1,770
  1,873
  1,979
  2,090
  2,206
  2,327
  2,453
  2,584
  2,721
  2,865
  3,014
  3,171
  3,334
  3,504
  3,683
  3,870
  4,065
  4,269
Operating income, $m
  5
  30
  43
  56
  71
  86
  101
  117
  134
  152
  170
  199
  219
  240
  262
  285
  309
  334
  360
  387
  416
  446
  477
  510
  545
  581
  620
  660
  702
  746
  793
EBITDA, $m
  14
  43
  57
  71
  86
  101
  117
  134
  151
  169
  188
  208
  229
  250
  273
  296
  321
  346
  373
  401
  431
  462
  494
  528
  564
  601
  641
  682
  725
  771
  819
Interest expense (income), $m
  4
  5
  7
  8
  9
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
Earnings before tax, $m
  5
  24
  36
  48
  61
  75
  89
  103
  118
  134
  151
  178
  196
  215
  234
  255
  277
  299
  323
  348
  374
  401
  429
  459
  491
  524
  558
  595
  633
  674
  716
Tax expense, $m
  -4
  7
  10
  13
  17
  20
  24
  28
  32
  36
  41
  48
  53
  58
  63
  69
  75
  81
  87
  94
  101
  108
  116
  124
  133
  141
  151
  161
  171
  182
  193
Net income, $m
  8
  18
  26
  35
  45
  54
  65
  75
  87
  98
  110
  130
  143
  157
  171
  186
  202
  218
  236
  254
  273
  293
  313
  335
  358
  382
  408
  434
  462
  492
  523

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
  399
  436
  475
  515
  556
  599
  644
  691
  740
  790
  843
  897
  954
  1,013
  1,074
  1,139
  1,205
  1,275
  1,348
  1,424
  1,503
  1,586
  1,673
  1,763
  1,858
  1,957
  2,061
  2,170
  2,284
  2,403
Adjusted assets (=assets-cash), $m
  367
  399
  436
  475
  515
  556
  599
  644
  691
  740
  790
  843
  897
  954
  1,013
  1,074
  1,139
  1,205
  1,275
  1,348
  1,424
  1,503
  1,586
  1,673
  1,763
  1,858
  1,957
  2,061
  2,170
  2,284
  2,403
Revenue / Adjusted assets
  2.272
  2.108
  2.108
  2.105
  2.105
  2.108
  2.109
  2.109
  2.107
  2.105
  2.108
  2.106
  2.107
  2.107
  2.107
  2.108
  2.106
  2.108
  2.107
  2.107
  2.107
  2.107
  2.107
  2.106
  2.107
  2.107
  2.107
  2.107
  2.107
  2.107
  2.107
Average production assets, $m
  90
  98
  107
  116
  126
  136
  147
  157
  169
  181
  193
  206
  219
  233
  248
  263
  278
  295
  312
  329
  348
  367
  388
  409
  431
  454
  478
  504
  530
  558
  587
Working capital, $m
  109
  87
  95
  103
  112
  121
  130
  140
  150
  161
  171
  183
  195
  207
  220
  233
  247
  262
  277
  293
  309
  326
  344
  363
  383
  403
  425
  447
  471
  496
  521
Total debt, $m
  87
  109
  131
  155
  179
  205
  231
  259
  288
  317
  348
  380
  414
  449
  485
  523
  562
  603
  646
  690
  737
  785
  836
  889
  945
  1,003
  1,064
  1,127
  1,194
  1,264
  1,337
Total liabilities, $m
  237
  245
  267
  291
  315
  341
  367
  395
  424
  453
  484
  516
  550
  585
  621
  659
  698
  739
  782
  826
  873
  921
  972
  1,025
  1,081
  1,139
  1,200
  1,263
  1,330
  1,400
  1,473
Total equity, $m
  151
  155
  169
  184
  199
  215
  232
  249
  267
  286
  306
  326
  347
  369
  392
  416
  441
  467
  493
  522
  551
  582
  614
  647
  682
  719
  757
  798
  840
  884
  930
Total liabilities and equity, $m
  388
  400
  436
  475
  514
  556
  599
  644
  691
  739
  790
  842
  897
  954
  1,013
  1,075
  1,139
  1,206
  1,275
  1,348
  1,424
  1,503
  1,586
  1,672
  1,763
  1,858
  1,957
  2,061
  2,170
  2,284
  2,403
Debt-to-equity ratio
  0.576
  0.700
  0.780
  0.840
  0.900
  0.950
  1.000
  1.040
  1.080
  1.110
  1.140
  1.170
  1.190
  1.220
  1.240
  1.260
  1.280
  1.290
  1.310
  1.320
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
Adjusted equity ratio
  0.354
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  18
  26
  35
  45
  54
  65
  75
  87
  98
  110
  130
  143
  157
  171
  186
  202
  218
  236
  254
  273
  293
  313
  335
  358
  382
  408
  434
  462
  492
  523
Depreciation, amort., depletion, $m
  9
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
Funds from operations, $m
  18
  32
  40
  50
  60
  70
  81
  92
  103
  116
  128
  139
  153
  167
  182
  198
  214
  231
  249
  268
  288
  309
  330
  353
  377
  402
  429
  456
  486
  516
  548
Change in working capital, $m
  -12
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Cash from operations, $m
  30
  29
  32
  42
  51
  61
  71
  82
  93
  105
  117
  127
  141
  155
  169
  184
  200
  217
  234
  252
  271
  291
  312
  334
  357
  382
  407
  434
  462
  491
  522
Maintenance CAPEX, $m
  0
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
New CAPEX, $m
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
Cash from investing activities, $m
  -10
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -24
  -26
  -28
  -28
  -30
  -32
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
Free cash flow, $m
  20
  16
  19
  27
  36
  45
  55
  65
  75
  86
  97
  106
  118
  131
  145
  158
  173
  188
  204
  221
  238
  257
  276
  296
  317
  340
  363
  388
  413
  440
  469
Issuance/(repayment) of debt, $m
  1
  22
  23
  24
  25
  25
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
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
  22
  23
  24
  25
  25
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
Total cash flow (excl. dividends), $m
  18
  38
  42
  51
  61
  71
  81
  92
  104
  115
  128
  138
  152
  166
  181
  196
  212
  229
  247
  266
  285
  305
  327
  349
  373
  398
  424
  451
  480
  510
  542
Retained Cash Flow (-), $m
  -10
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
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
 
  25
  28
  36
  45
  55
  64
  75
  86
  97
  108
  118
  131
  144
  158
  172
  188
  203
  220
  237
  256
  275
  295
  316
  338
  361
  385
  411
  438
  466
  496
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  23
  24
  30
  35
  38
  41
  44
  45
  45
  45
  42
  40
  38
  35
  32
  29
  25
  22
  18
  15
  12
  10
  8
  6
  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 59.2
Price to Sales 0.6
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 15.8
Price to Free Cash Flow 21.5
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 $767 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 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 6%, 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 79.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $137 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 6.1% 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 11.6%.

Life of production assets of 22.8 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 10.3%. 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 - $141 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 32.078 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 1Q loss   [05:02AM  Associated Press]
▶ 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 Annual reports of CCRN
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