Intrinsic value of Cerner - CERN

Previous Close

$64.25

  Intrinsic Value

$43.60

stock screener

  Rating & Target

sell

-32%

  Value-price divergence*

-40%

Previous close

$64.25

 
Intrinsic value

$43.60

 
Up/down potential

-32%

 
Rating

sell

 
Value-price divergence*

-40%

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

We calculate the intrinsic value of CERN 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 21.1

 

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, %
  8.38
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
Revenue, $m
  4,796
  5,309
  5,847
  6,409
  6,996
  7,608
  8,244
  8,906
  9,594
  10,309
  11,052
  11,824
  12,627
  13,462
  14,330
  15,233
  16,174
  17,153
  18,174
  19,238
  20,348
  21,507
  22,716
  23,979
  25,300
  26,680
  28,123
  29,632
  31,212
  32,866
  34,598
Variable operating expenses, $m
 
  3,437
  3,776
  4,131
  4,502
  4,888
  5,290
  5,708
  6,142
  6,594
  7,063
  7,466
  7,973
  8,500
  9,048
  9,618
  10,212
  10,831
  11,475
  12,147
  12,848
  13,579
  14,343
  15,141
  15,974
  16,846
  17,757
  18,710
  19,707
  20,752
  21,845
Fixed operating expenses, $m
 
  809
  829
  850
  871
  893
  915
  938
  961
  985
  1,010
  1,035
  1,061
  1,088
  1,115
  1,143
  1,171
  1,201
  1,231
  1,261
  1,293
  1,325
  1,358
  1,392
  1,427
  1,463
  1,499
  1,537
  1,575
  1,615
  1,655
Total operating expenses, $m
  3,885
  4,246
  4,605
  4,981
  5,373
  5,781
  6,205
  6,646
  7,103
  7,579
  8,073
  8,501
  9,034
  9,588
  10,163
  10,761
  11,383
  12,032
  12,706
  13,408
  14,141
  14,904
  15,701
  16,533
  17,401
  18,309
  19,256
  20,247
  21,282
  22,367
  23,500
Operating income, $m
  911
  1,064
  1,242
  1,428
  1,623
  1,827
  2,039
  2,260
  2,491
  2,730
  2,979
  3,323
  3,593
  3,874
  4,167
  4,472
  4,790
  5,122
  5,468
  5,830
  6,207
  6,602
  7,015
  7,446
  7,898
  8,371
  8,867
  9,386
  9,930
  10,500
  11,098
EBITDA, $m
  1,415
  1,447
  1,655
  1,874
  2,102
  2,340
  2,588
  2,846
  3,115
  3,395
  3,686
  3,989
  4,304
  4,632
  4,974
  5,330
  5,701
  6,088
  6,492
  6,913
  7,353
  7,813
  8,294
  8,797
  9,323
  9,873
  10,450
  11,054
  11,687
  12,350
  13,045
Interest expense (income), $m
  18
  19
  25
  32
  39
  46
  53
  61
  69
  78
  86
  95
  105
  115
  125
  136
  147
  158
  170
  183
  196
  209
  224
  238
  254
  270
  287
  305
  323
  342
  363
Earnings before tax, $m
  918
  1,045
  1,217
  1,397
  1,585
  1,781
  1,986
  2,199
  2,421
  2,653
  2,893
  3,228
  3,488
  3,760
  4,042
  4,337
  4,644
  4,964
  5,298
  5,647
  6,012
  6,393
  6,791
  7,208
  7,644
  8,101
  8,580
  9,081
  9,607
  10,157
  10,735
Tax expense, $m
  282
  282
  329
  377
  428
  481
  536
  594
  654
  716
  781
  871
  942
  1,015
  1,091
  1,171
  1,254
  1,340
  1,430
  1,525
  1,623
  1,726
  1,834
  1,946
  2,064
  2,187
  2,317
  2,452
  2,594
  2,742
  2,898
Net income, $m
  636
  763
  888
  1,020
  1,157
  1,300
  1,450
  1,605
  1,768
  1,936
  2,112
  2,356
  2,546
  2,744
  2,951
  3,166
  3,390
  3,624
  3,868
  4,122
  4,389
  4,667
  4,958
  5,262
  5,580
  5,914
  6,263
  6,629
  7,013
  7,415
  7,837

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  356
  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
  5,630
  5,841
  6,432
  7,051
  7,696
  8,369
  9,069
  9,797
  10,554
  11,341
  12,159
  13,008
  13,891
  14,809
  15,765
  16,758
  17,793
  18,870
  19,993
  21,164
  22,385
  23,660
  24,990
  26,380
  27,832
  29,350
  30,938
  32,599
  34,337
  36,156
  38,061
Adjusted assets (=assets-cash), $m
  5,274
  5,841
  6,432
  7,051
  7,696
  8,369
  9,069
  9,797
  10,554
  11,341
  12,159
  13,008
  13,891
  14,809
  15,765
  16,758
  17,793
  18,870
  19,993
  21,164
  22,385
  23,660
  24,990
  26,380
  27,832
  29,350
  30,938
  32,599
  34,337
  36,156
  38,061
Revenue / Adjusted assets
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
  0.909
Average production assets, $m
  2,699
  2,989
  3,292
  3,608
  3,939
  4,283
  4,641
  5,014
  5,401
  5,804
  6,222
  6,657
  7,109
  7,579
  8,068
  8,576
  9,106
  9,657
  10,232
  10,831
  11,456
  12,108
  12,789
  13,500
  14,244
  15,021
  15,833
  16,683
  17,572
  18,504
  19,478
Working capital, $m
  774
  494
  544
  596
  651
  708
  767
  828
  892
  959
  1,028
  1,100
  1,174
  1,252
  1,333
  1,417
  1,504
  1,595
  1,690
  1,789
  1,892
  2,000
  2,113
  2,230
  2,353
  2,481
  2,615
  2,756
  2,903
  3,057
  3,218
Total debt, $m
  564
  719
  907
  1,104
  1,309
  1,523
  1,746
  1,978
  2,218
  2,468
  2,728
  2,999
  3,279
  3,571
  3,875
  4,191
  4,520
  4,863
  5,220
  5,592
  5,981
  6,386
  6,809
  7,251
  7,713
  8,195
  8,700
  9,228
  9,781
  10,360
  10,965
Total liabilities, $m
  1,702
  1,857
  2,045
  2,242
  2,447
  2,661
  2,884
  3,116
  3,356
  3,606
  3,866
  4,137
  4,417
  4,709
  5,013
  5,329
  5,658
  6,001
  6,358
  6,730
  7,119
  7,524
  7,947
  8,389
  8,851
  9,333
  9,838
  10,366
  10,919
  11,498
  12,103
Total equity, $m
  3,928
  3,983
  4,387
  4,809
  5,249
  5,708
  6,185
  6,682
  7,198
  7,735
  8,292
  8,872
  9,474
  10,100
  10,751
  11,429
  12,135
  12,870
  13,635
  14,434
  15,267
  16,136
  17,043
  17,991
  18,982
  20,017
  21,100
  22,232
  23,418
  24,659
  25,958
Total liabilities and equity, $m
  5,630
  5,840
  6,432
  7,051
  7,696
  8,369
  9,069
  9,798
  10,554
  11,341
  12,158
  13,009
  13,891
  14,809
  15,764
  16,758
  17,793
  18,871
  19,993
  21,164
  22,386
  23,660
  24,990
  26,380
  27,833
  29,350
  30,938
  32,598
  34,337
  36,157
  38,061
Debt-to-equity ratio
  0.144
  0.180
  0.210
  0.230
  0.250
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.400
  0.400
  0.400
  0.410
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
Adjusted equity ratio
  0.677
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  636
  763
  888
  1,020
  1,157
  1,300
  1,450
  1,605
  1,768
  1,936
  2,112
  2,356
  2,546
  2,744
  2,951
  3,166
  3,390
  3,624
  3,868
  4,122
  4,389
  4,667
  4,958
  5,262
  5,580
  5,914
  6,263
  6,629
  7,013
  7,415
  7,837
Depreciation, amort., depletion, $m
  504
  383
  414
  445
  478
  513
  549
  586
  625
  665
  707
  666
  711
  758
  807
  858
  911
  966
  1,023
  1,083
  1,146
  1,211
  1,279
  1,350
  1,424
  1,502
  1,583
  1,668
  1,757
  1,850
  1,948
Funds from operations, $m
  1,108
  1,146
  1,302
  1,465
  1,635
  1,813
  1,998
  2,191
  2,392
  2,601
  2,819
  3,022
  3,257
  3,502
  3,758
  4,023
  4,300
  4,589
  4,891
  5,206
  5,534
  5,878
  6,237
  6,612
  7,005
  7,416
  7,847
  8,298
  8,770
  9,265
  9,784
Change in working capital, $m
  -48
  48
  50
  52
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  81
  84
  87
  91
  95
  99
  103
  108
  112
  117
  123
  128
  134
  140
  147
  154
  161
Cash from operations, $m
  1,156
  1,098
  1,252
  1,412
  1,581
  1,756
  1,939
  2,130
  2,328
  2,535
  2,749
  2,950
  3,183
  3,425
  3,677
  3,939
  4,213
  4,498
  4,796
  5,107
  5,431
  5,770
  6,124
  6,495
  6,882
  7,288
  7,712
  8,157
  8,623
  9,111
  9,623
Maintenance CAPEX, $m
  0
  -270
  -299
  -329
  -361
  -394
  -428
  -464
  -501
  -540
  -580
  -622
  -666
  -711
  -758
  -807
  -858
  -911
  -966
  -1,023
  -1,083
  -1,146
  -1,211
  -1,279
  -1,350
  -1,424
  -1,502
  -1,583
  -1,668
  -1,757
  -1,850
New CAPEX, $m
  -772
  -290
  -303
  -317
  -330
  -344
  -358
  -373
  -387
  -403
  -418
  -435
  -452
  -470
  -489
  -509
  -529
  -551
  -575
  -599
  -625
  -652
  -681
  -711
  -743
  -777
  -812
  -850
  -889
  -931
  -975
Cash from investing activities, $m
  -790
  -560
  -602
  -646
  -691
  -738
  -786
  -837
  -888
  -943
  -998
  -1,057
  -1,118
  -1,181
  -1,247
  -1,316
  -1,387
  -1,462
  -1,541
  -1,622
  -1,708
  -1,798
  -1,892
  -1,990
  -2,093
  -2,201
  -2,314
  -2,433
  -2,557
  -2,688
  -2,825
Free cash flow, $m
  366
  538
  650
  767
  889
  1,018
  1,153
  1,293
  1,439
  1,592
  1,751
  1,893
  2,065
  2,244
  2,430
  2,624
  2,826
  3,036
  3,256
  3,484
  3,723
  3,972
  4,232
  4,504
  4,789
  5,086
  5,398
  5,724
  6,065
  6,423
  6,798
Issuance/(repayment) of debt, $m
  0
  181
  188
  197
  205
  214
  223
  232
  241
  250
  260
  270
  281
  292
  304
  316
  329
  343
  357
  372
  388
  405
  423
  442
  462
  483
  505
  528
  553
  579
  606
Issuance/(repurchase) of shares, $m
  -636
  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  
  -587
  181
  188
  197
  205
  214
  223
  232
  241
  250
  260
  270
  281
  292
  304
  316
  329
  343
  357
  372
  388
  405
  423
  442
  462
  483
  505
  528
  553
  579
  606
Total cash flow (excl. dividends), $m
  -231
  720
  838
  963
  1,095
  1,232
  1,375
  1,525
  1,680
  1,842
  2,011
  2,163
  2,346
  2,536
  2,734
  2,940
  3,155
  3,379
  3,613
  3,856
  4,111
  4,377
  4,655
  4,946
  5,251
  5,569
  5,903
  6,252
  6,618
  7,002
  7,404
Retained Cash Flow (-), $m
  -58
  -385
  -404
  -422
  -440
  -459
  -477
  -497
  -516
  -537
  -558
  -579
  -602
  -626
  -651
  -678
  -706
  -735
  -766
  -798
  -833
  -869
  -907
  -948
  -990
  -1,035
  -1,083
  -1,133
  -1,185
  -1,241
  -1,299
Prev. year cash balance distribution, $m
 
  330
  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
 
  664
  435
  542
  654
  773
  898
  1,028
  1,164
  1,306
  1,453
  1,584
  1,744
  1,910
  2,083
  2,262
  2,449
  2,644
  2,847
  3,058
  3,278
  3,508
  3,748
  3,998
  4,260
  4,534
  4,820
  5,119
  5,433
  5,761
  6,105
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
 
  637
  398
  471
  539
  599
  651
  694
  727
  750
  762
  752
  744
  726
  699
  664
  622
  575
  524
  471
  417
  363
  311
  262
  217
  176
  141
  110
  84
  63
  46
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

Cerner Corporation designs, develops, markets, installs, hosts, and supports health care information technology, health care devices, hardware, and content solutions for health care organizations and consumers in the United States and internationally. The company offers Cerner Millennium architecture, which includes clinical, financial, and management information systems that allow providers to access an individual’s electronic health record at the point of care, and organizes and delivers information for physicians, nurses, laboratory technicians, pharmacists, front- and back-office professionals, and consumers. It also provides HealtheIntent platform, a cloud-based platform that enables organizations to aggregate, transform, and reconcile data across the continuum of care, as well as assists to enhance outcomes and lower costs. In addition, the company offers a portfolio of clinical and financial health care information technology solutions, as well as departmental, connectivity, population health, and care coordination solutions; and various complementary services, including support, hosting, managed, implementation, and strategic consulting services. Further, it provides various services, such as implementation and training, remote hosting, operational management, revenue cycle, support and maintenance, health care data analysis, clinical process optimization, transaction processing, employer health centers, employee wellness programs, and third party administrator services for employer-based health plans; and complementary hardware and devices for third parties. It serves integrated delivery networks, physician groups and networks, managed care organizations, hospitals, medical centers, reference laboratories, home health agencies, blood banks, imaging centers, pharmacies, pharmaceutical manufacturers, employers, governments, and public health organizations. Cerner Corporation was founded in 1979 and is headquartered in North Kansas City, Missouri.

FINANCIAL RATIOS  of  Cerner (CERN)

Valuation Ratios
P/E Ratio 33.3
Price to Sales 4.4
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 55.2
Growth Rates
Sales Growth Rate 8.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.1%
Cap. Spend. - 3 Yr. Gr. Rate 5.7%
Financial Strength
Quick Ratio 14
Current Ratio 0
LT Debt to Equity 13.7%
Total Debt to Equity 14.4%
Interest Coverage 52
Management Effectiveness
Return On Assets 11.6%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital 14.2%
Ret/ On T. Cap. - 3 Yr. Avg. 14.1%
Return On Equity 16.3%
Return On Equity - 3 Yr. Avg. 15.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 83.8%
Gross Margin - 3 Yr. Avg. 83%
EBITDA Margin 30%
EBITDA Margin - 3 Yr. Avg. 30%
Operating Margin 19%
Oper. Margin - 3 Yr. Avg. 19.7%
Pre-Tax Margin 19.1%
Pre-Tax Margin - 3 Yr. Avg. 19.8%
Net Profit Margin 13.3%
Net Profit Margin - 3 Yr. Avg. 13.6%
Effective Tax Rate 30.7%
Eff/ Tax Rate - 3 Yr. Avg. 31.3%
Payout Ratio 0%

CERN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CERN stock intrinsic value calculation we used $4796 million for the last fiscal year's total revenue generated by Cerner. The default revenue input number comes from 2016 income statement of Cerner. 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 CERN stock valuation model: a) initial revenue growth rate of 10.7% 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 4.3%, whose default value for CERN is calculated based on our internal credit rating of Cerner, 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 Cerner.
    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 CERN stock the variable cost ratio is equal to 64.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $789 million in the base year in the intrinsic value calculation for CERN 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 Cerner.

Corporate tax rate of 27% is the nominal tax rate for Cerner. 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 CERN 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 CERN are equal to 56.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Cerner 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 CERN is equal to 9.3%. 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 - $3928 million for Cerner - 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 327.863 million for Cerner 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 Cerner at the current share price and the inputted number of shares is $21.1 billion.

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COMPANY NEWS

▶ Cerner: Focus in near future is inward, not on M&A   [Jul-28-17 04:10PM  American City Business Journals]
▶ Cerner meets 2Q profit forecasts   [Jul-27-17 09:47PM  Associated Press]
▶ No news yet on Patterson successor   [07:00PM  American City Business Journals]
▶ Cerner Reports Second Quarter 2017 Results   [04:06PM  GlobeNewswire]
▶ These 3 stocks are poised for a bounce   [Jul-26-17 08:47AM  CNBC Videos]
▶ ETFs with exposure to Cerner Corp. : July 24, 2017   [Jul-24-17 02:48PM  Capital Cube]
▶ [$$] Neal Patterson Made a Fortune by Putting Medical Data in Digital Form   [Jul-15-17 12:37AM  The Wall Street Journal]
▶ ETFs with exposure to Cerner Corp. : July 14, 2017   [Jul-14-17 01:27PM  Capital Cube]
▶ From Oklahoma farm boy to health care giant: Friends remember Neal Patterson   [Jul-13-17 04:00PM  American City Business Journals]
▶ Neal Patterson, a giant of Kansas City entrepreneurship, dies   [09:26AM  American City Business Journals]
▶ Cerner Corp. Value Analysis (NASDAQ:CERN) : July 7, 2017   [Jul-07-17 03:54PM  Capital Cube]
▶ Cerner will roll out next phase of DoD system this month   [03:51PM  American City Business Journals]
▶ Medical Software Uptrend Steady, Even As TrumpCare Rocks The Boat   [Jul-06-17 05:23PM  Investor's Business Daily]
▶ 3 Stocks with Huge Competitive Advantages   [Jun-19-17 12:48PM  Motley Fool]
▶ House budgets $65M for VA to implement Cerner EHR with a catch   [Jun-15-17 04:56PM  American City Business Journals]
▶ VA selects Cerner to overhaul health record system   [Jun-07-17 01:03PM  American City Business Journals]
▶ Cerner looks to bolster stock price with $500M repurchase   [May-30-17 02:10PM  American City Business Journals]
▶ Cerner Announces Share Repurchase Program   [May-25-17 09:00AM  GlobeNewswire]
▶ Patterson remains absent from Cerner's annual shareholder meeting   [May-24-17 03:35PM  American City Business Journals]
▶ Better Buy: Veeva Systems Inc. vs. Cerner Corporation   [May-23-17 07:24AM  Motley Fool]
▶ Truman Med, Cerner team up to help patients manage chronic disease   [May-17-17 04:20PM  American City Business Journals]
▶ Cerner: Behavioral health is a 'growth area' for industry   [May-15-17 04:30PM  American City Business Journals]
▶ Cerner Named to Forbes 2017 Americas Best Employers List   [May-10-17 04:15PM  GlobeNewswire]
▶ Jeff Auxier Comments on Cerner   [May-09-17 04:03PM  GuruFocus.com]
▶ Which Companies Are Now Outperforming 95% Of All Stocks?   [May-03-17 12:20PM  Investor's Business Daily]
▶ Cerner Rises On Accelerating Growth; Earns IBD Rating Upgrade   [11:30AM  Investor's Business Daily]
▶ As regulations and cost pressures rise, Cerner's business grows   [03:35PM  American City Business Journals]
▶ Cerner beats Street 1Q forecasts   [Apr-27-17 04:26PM  Associated Press]
▶ Cerner Reports First Quarter 2017 Results   [04:01PM  GlobeNewswire]
▶ Cerner Has Further to Go on the Upside   [Apr-17-17 01:19PM  TheStreet.com]
▶ Which KC-area stocks had the best, worst March? Take a look   [Apr-03-17 04:50PM  at bizjournals.com]
▶ Which KC-area stocks had the best, worst March? Take a look   [04:50PM  American City Business Journals]
▶ Ex-Siemens Executive Donald Rucker To Head ONC   [Mar-31-17 05:52PM  at Forbes]
▶ Cerner tool saves lives, dollars by mitigating infection threat   [Mar-29-17 04:59PM  at bizjournals.com]
▶ Cerner tool saves lives, dollars by mitigating infection threat   [04:59PM  American City Business Journals]
▶ Cerner helps Missouri town join drug monitoring program   [Mar-27-17 04:07PM  at bizjournals.com]
▶ Cerner helps Missouri town join drug monitoring program   [04:07PM  American City Business Journals]
▶ Cerner may benefit from VA's health record overhaul   [Mar-23-17 01:50PM  at bizjournals.com]
▶ Cerner may benefit from VA's health record overhaul   [01:50PM  American City Business Journals]
▶ Cerner: Tech can help reduce uninsured pains from ACA reform   [Mar-14-17 05:51PM  at bizjournals.com]
▶ Cerner's new campus brings out the bells and whistles   [Mar-10-17 12:13PM  at bizjournals.com]
▶ Palmetto Health Expands Cerner Health IT System   [Mar-07-17 04:01PM  GlobeNewswire]
Stock chart of CERN Financial statements of CERN
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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