Intrinsic value of Cross Country Healthcare - CCRN

Previous Close

$11.83

  Intrinsic Value

$14.39

stock screener

  Rating & Target

buy

+22%

Previous close

$11.83

 
Intrinsic value

$14.39

 
Up/down potential

+22%

 
Rating

buy

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  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
Revenue, $m
  834
  898
  933
  971
  1,011
  1,053
  1,098
  1,146
  1,197
  1,251
  1,308
  1,367
  1,431
  1,497
  1,568
  1,642
  1,720
  1,802
  1,888
  1,979
  2,075
  2,176
  2,282
  2,393
  2,510
  2,633
  2,763
  2,899
  3,042
  3,192
  3,350
Variable operating expenses, $m
 
  738
  766
  796
  828
  862
  899
  937
  977
  1,020
  1,066
  1,093
  1,144
  1,197
  1,253
  1,312
  1,375
  1,440
  1,509
  1,582
  1,659
  1,739
  1,824
  1,913
  2,007
  2,105
  2,208
  2,317
  2,431
  2,551
  2,677
Fixed operating expenses, $m
 
  147
  150
  154
  157
  161
  164
  168
  171
  175
  179
  183
  187
  191
  195
  200
  204
  208
  213
  218
  223
  227
  232
  238
  243
  248
  254
  259
  265
  271
  277
Total operating expenses, $m
  829
  885
  916
  950
  985
  1,023
  1,063
  1,105
  1,148
  1,195
  1,245
  1,276
  1,331
  1,388
  1,448
  1,512
  1,579
  1,648
  1,722
  1,800
  1,882
  1,966
  2,056
  2,151
  2,250
  2,353
  2,462
  2,576
  2,696
  2,822
  2,954
Operating income, $m
  5
  13
  16
  21
  25
  30
  36
  42
  48
  55
  63
  91
  100
  109
  119
  130
  141
  153
  166
  180
  194
  209
  226
  243
  261
  280
  301
  323
  346
  370
  396
EBITDA, $m
  14
  53
  58
  63
  68
  74
  81
  88
  95
  104
  112
  122
  132
  143
  154
  166
  179
  193
  208
  223
  240
  258
  276
  296
  317
  339
  362
  387
  413
  441
  470
Interest expense (income), $m
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
Earnings before tax, $m
  5
  7
  11
  14
  18
  23
  28
  33
  39
  45
  52
  80
  88
  96
  105
  114
  125
  136
  147
  159
  173
  187
  201
  217
  234
  251
  270
  290
  311
  333
  357
Tax expense, $m
  -4
  2
  3
  4
  5
  6
  8
  9
  11
  12
  14
  22
  24
  26
  28
  31
  34
  37
  40
  43
  47
  50
  54
  59
  63
  68
  73
  78
  84
  90
  96
Net income, $m
  8
  5
  8
  10
  13
  17
  20
  24
  28
  33
  38
  58
  64
  70
  77
  84
  91
  99
  107
  116
  126
  136
  147
  158
  171
  184
  197
  212
  227
  243
  260

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
  485
  504
  525
  546
  569
  594
  620
  647
  676
  707
  739
  773
  809
  847
  887
  930
  974
  1,021
  1,070
  1,122
  1,176
  1,233
  1,294
  1,357
  1,423
  1,493
  1,567
  1,644
  1,725
  1,811
Adjusted assets (=assets-cash), $m
  367
  485
  504
  525
  546
  569
  594
  620
  647
  676
  707
  739
  773
  809
  847
  887
  930
  974
  1,021
  1,070
  1,122
  1,176
  1,233
  1,294
  1,357
  1,423
  1,493
  1,567
  1,644
  1,725
  1,811
Revenue / Adjusted assets
  2.272
  1.852
  1.851
  1.850
  1.852
  1.851
  1.848
  1.848
  1.850
  1.851
  1.850
  1.850
  1.851
  1.850
  1.851
  1.851
  1.849
  1.850
  1.849
  1.850
  1.849
  1.850
  1.851
  1.849
  1.850
  1.850
  1.851
  1.850
  1.850
  1.850
  1.850
Average production assets, $m
  90
  199
  207
  215
  224
  234
  244
  254
  266
  278
  290
  304
  318
  332
  348
  364
  382
  400
  419
  439
  461
  483
  507
  531
  557
  585
  613
  644
  675
  709
  744
Working capital, $m
  109
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -139
  -146
  -153
  -160
  -168
  -176
  -185
  -194
Total debt, $m
  87
  108
  117
  127
  138
  149
  161
  174
  187
  202
  217
  233
  250
  267
  286
  306
  327
  349
  372
  396
  421
  448
  477
  506
  537
  570
  605
  641
  679
  719
  761
Total liabilities, $m
  237
  239
  249
  259
  269
  281
  293
  305
  319
  333
  348
  364
  381
  399
  418
  437
  458
  480
  503
  527
  553
  580
  608
  638
  669
  702
  736
  773
  811
  851
  893
Total equity, $m
  151
  246
  256
  266
  277
  289
  301
  314
  328
  343
  358
  375
  392
  410
  430
  450
  471
  494
  518
  542
  569
  596
  625
  656
  688
  722
  757
  794
  834
  875
  918
Total liabilities and equity, $m
  388
  485
  505
  525
  546
  570
  594
  619
  647
  676
  706
  739
  773
  809
  848
  887
  929
  974
  1,021
  1,069
  1,122
  1,176
  1,233
  1,294
  1,357
  1,424
  1,493
  1,567
  1,645
  1,726
  1,811
Debt-to-equity ratio
  0.576
  0.440
  0.460
  0.480
  0.500
  0.520
  0.540
  0.550
  0.570
  0.590
  0.610
  0.620
  0.640
  0.650
  0.670
  0.680
  0.690
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.830
Adjusted equity ratio
  0.354
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  5
  8
  10
  13
  17
  20
  24
  28
  33
  38
  58
  64
  70
  77
  84
  91
  99
  107
  116
  126
  136
  147
  158
  171
  184
  197
  212
  227
  243
  260
Depreciation, amort., depletion, $m
  9
  40
  41
  42
  43
  44
  45
  46
  47
  48
  50
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  68
  71
  74
Funds from operations, $m
  18
  46
  49
  52
  56
  61
  65
  70
  76
  81
  87
  89
  96
  103
  111
  120
  129
  139
  149
  160
  172
  184
  198
  212
  226
  242
  259
  276
  295
  314
  335
Change in working capital, $m
  -12
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from operations, $m
  30
  48
  51
  55
  59
  63
  68
  73
  78
  84
  91
  92
  99
  107
  115
  124
  134
  144
  154
  166
  178
  190
  204
  218
  233
  249
  266
  284
  303
  323
  344
Maintenance CAPEX, $m
  0
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -68
  -71
New CAPEX, $m
  -8
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
Cash from investing activities, $m
  -10
  -26
  -28
  -29
  -31
  -31
  -33
  -35
  -36
  -39
  -41
  -42
  -44
  -47
  -49
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -101
  -106
Free cash flow, $m
  20
  21
  23
  26
  28
  31
  34
  38
  42
  46
  50
  50
  55
  61
  67
  73
  80
  87
  95
  104
  112
  122
  132
  143
  154
  166
  179
  192
  207
  222
  238
Issuance/(repayment) of debt, $m
  1
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
Issuance/(repurchase) of shares, $m
  0
  4
  2
  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
  13
  11
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
Total cash flow (excl. dividends), $m
  18
  33
  35
  36
  39
  43
  46
  51
  55
  60
  66
  66
  72
  78
  85
  93
  101
  109
  118
  128
  138
  149
  160
  172
  185
  199
  213
  229
  245
  262
  280
Retained Cash Flow (-), $m
  -10
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
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
 
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
Cash available for distribution, $m
 
  24
  25
  25
  28
  31
  34
  38
  41
  46
  50
  49
  54
  60
  66
  72
  79
  87
  94
  103
  112
  121
  131
  142
  153
  165
  178
  191
  206
  221
  237
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
 
  23
  23
  22
  23
  24
  25
  25
  26
  26
  26
  23
  23
  23
  22
  21
  20
  19
  17
  16
  14
  13
  11
  9
  8
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  99.1
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6

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 47.8
Price to Sales 0.5
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 17.4
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 $865 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 3.8% 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 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 82.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $144 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 5.4% 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 0.5%.

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 22.2%.

Life of production assets of 10 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 -5.8%. 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 - $237 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 35 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 $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Cross Country: 1Q Earnings Snapshot   [May-02-18 05:34PM  Associated Press]
▶ Flavor Of The Month: Innoviva And More   [Mar-29-18 10:02AM  Simply Wall St.]
▶ Cross Country Healthcare, Inc. to Host Earnings Call   [Mar-01-18 07:40AM  ACCESSWIRE]
▶ Cross Country misses Street 4Q forecasts   [Feb-28-18 06:12PM  Associated Press]
▶ Cross Country Healthcare names new CFO amid organizational shakeup   [Jan-26-18 02:34PM  American City Business Journals]
▶ 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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