Intrinsic value of Community Healthcare Trust - CHCT

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$25.93

  Intrinsic Value

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  Value-price divergence*

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Our model is not good at valuating stocks of financial companies, such as CHCT.

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

We calculate the intrinsic value of CHCT 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 0.3

 

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, %
  177.78
  40.00
  36.50
  33.35
  30.52
  27.96
  25.67
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.89
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
Revenue, $m
  25
  35
  48
  64
  83
  106
  134
  165
  201
  242
  286
  336
  389
  447
  509
  576
  646
  720
  798
  880
  966
  1,055
  1,148
  1,245
  1,346
  1,451
  1,560
  1,673
  1,791
  1,913
  2,040
Variable operating expenses, $m
 
  24
  32
  43
  57
  72
  91
  112
  137
  164
  195
  228
  265
  304
  346
  391
  439
  490
  543
  598
  657
  717
  781
  847
  915
  987
  1,061
  1,138
  1,218
  1,301
  1,388
Fixed operating expenses, $m
 
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
Total operating expenses, $m
  21
  28
  36
  47
  61
  77
  96
  117
  142
  169
  200
  233
  270
  310
  352
  397
  445
  496
  549
  604
  664
  724
  788
  854
  922
  994
  1,069
  1,146
  1,226
  1,309
  1,396
Operating income, $m
  4
  7
  11
  16
  22
  30
  38
  48
  60
  72
  87
  102
  119
  138
  157
  178
  201
  224
  249
  275
  302
  331
  361
  391
  423
  457
  492
  528
  565
  604
  645
EBITDA, $m
  17
  25
  36
  49
  65
  85
  107
  134
  164
  198
  235
  276
  321
  370
  422
  477
  536
  598
  663
  732
  803
  878
  956
  1,037
  1,122
  1,209
  1,301
  1,395
  1,494
  1,596
  1,703
Interest expense (income), $m
  1
  2
  3
  4
  5
  7
  8
  11
  13
  16
  19
  23
  27
  31
  36
  41
  47
  52
  58
  65
  71
  78
  85
  93
  101
  109
  118
  126
  136
  145
  155
Earnings before tax, $m
  3
  5
  8
  12
  17
  23
  30
  38
  46
  56
  67
  79
  92
  106
  121
  137
  154
  172
  191
  211
  231
  253
  275
  298
  323
  348
  374
  401
  429
  459
  489
Tax expense, $m
  0
  1
  2
  3
  5
  6
  8
  10
  13
  15
  18
  21
  25
  29
  33
  37
  42
  46
  52
  57
  62
  68
  74
  81
  87
  94
  101
  108
  116
  124
  132
Net income, $m
  3
  4
  6
  9
  13
  17
  22
  27
  34
  41
  49
  58
  67
  78
  89
  100
  113
  126
  139
  154
  169
  184
  201
  218
  236
  254
  273
  293
  314
  335
  357

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  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
  0
  0
Total assets, $m
  252
  350
  478
  637
  831
  1,064
  1,337
  1,653
  2,012
  2,416
  2,864
  3,357
  3,893
  4,473
  5,094
  5,757
  6,460
  7,202
  7,982
  8,800
  9,657
  10,550
  11,482
  12,452
  13,460
  14,509
  15,599
  16,732
  17,909
  19,133
  20,405
Adjusted assets (=assets-cash), $m
  250
  350
  478
  637
  831
  1,064
  1,337
  1,653
  2,012
  2,416
  2,864
  3,357
  3,893
  4,473
  5,094
  5,757
  6,460
  7,202
  7,982
  8,800
  9,657
  10,550
  11,482
  12,452
  13,460
  14,509
  15,599
  16,732
  17,909
  19,133
  20,405
Revenue / Adjusted assets
  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
  0.100
  0.100
Average production assets, $m
  182
  254
  347
  463
  604
  772
  971
  1,200
  1,461
  1,754
  2,079
  2,437
  2,827
  3,247
  3,698
  4,180
  4,690
  5,228
  5,795
  6,389
  7,011
  7,659
  8,336
  9,040
  9,772
  10,534
  11,325
  12,147
  13,002
  13,890
  14,814
Working capital, $m
  0
  -3
  -4
  -5
  -7
  -9
  -11
  -13
  -16
  -19
  -23
  -27
  -31
  -36
  -41
  -46
  -52
  -58
  -64
  -70
  -77
  -84
  -92
  -100
  -108
  -116
  -125
  -134
  -143
  -153
  -163
Total debt, $m
  51
  74
  104
  141
  186
  240
  303
  376
  460
  553
  657
  772
  896
  1,031
  1,175
  1,329
  1,492
  1,664
  1,845
  2,035
  2,233
  2,441
  2,657
  2,882
  3,116
  3,359
  3,612
  3,875
  4,148
  4,432
  4,727
Total liabilities, $m
  58
  81
  111
  148
  193
  247
  310
  383
  467
  560
  664
  779
  903
  1,038
  1,182
  1,336
  1,499
  1,671
  1,852
  2,042
  2,240
  2,448
  2,664
  2,889
  3,123
  3,366
  3,619
  3,882
  4,155
  4,439
  4,734
Total equity, $m
  194
  269
  367
  489
  639
  817
  1,027
  1,269
  1,545
  1,855
  2,200
  2,578
  2,990
  3,435
  3,912
  4,421
  4,961
  5,531
  6,130
  6,759
  7,416
  8,103
  8,818
  9,563
  10,338
  11,143
  11,980
  12,850
  13,754
  14,694
  15,671
Total liabilities and equity, $m
  252
  350
  478
  637
  832
  1,064
  1,337
  1,652
  2,012
  2,415
  2,864
  3,357
  3,893
  4,473
  5,094
  5,757
  6,460
  7,202
  7,982
  8,801
  9,656
  10,551
  11,482
  12,452
  13,461
  14,509
  15,599
  16,732
  17,909
  19,133
  20,405
Debt-to-equity ratio
  0.263
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  4
  6
  9
  13
  17
  22
  27
  34
  41
  49
  58
  67
  78
  89
  100
  113
  126
  139
  154
  169
  184
  201
  218
  236
  254
  273
  293
  314
  335
  357
Depreciation, amort., depletion, $m
  13
  18
  25
  33
  43
  55
  69
  86
  104
  125
  149
  174
  202
  232
  264
  299
  335
  373
  414
  456
  501
  547
  595
  646
  698
  752
  809
  868
  929
  992
  1,058
Funds from operations, $m
  15
  22
  31
  42
  56
  72
  91
  113
  138
  166
  198
  232
  269
  310
  353
  399
  448
  499
  553
  610
  670
  732
  796
  864
  934
  1,006
  1,082
  1,161
  1,242
  1,327
  1,415
Change in working capital, $m
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Cash from operations, $m
  15
  76
  32
  43
  57
  74
  93
  116
  141
  170
  201
  236
  273
  314
  358
  404
  453
  505
  560
  617
  676
  739
  804
  871
  942
  1,015
  1,091
  1,170
  1,252
  1,337
  1,426
Maintenance CAPEX, $m
  0
  -13
  -18
  -25
  -33
  -43
  -55
  -69
  -86
  -104
  -125
  -149
  -174
  -202
  -232
  -264
  -299
  -335
  -373
  -414
  -456
  -501
  -547
  -595
  -646
  -698
  -752
  -809
  -868
  -929
  -992
New CAPEX, $m
  -105
  -73
  -93
  -116
  -141
  -169
  -198
  -229
  -261
  -293
  -325
  -358
  -390
  -421
  -451
  -481
  -510
  -539
  -567
  -594
  -622
  -649
  -676
  -704
  -732
  -761
  -791
  -822
  -855
  -888
  -924
Cash from investing activities, $m
  -117
  -86
  -111
  -141
  -174
  -212
  -253
  -298
  -347
  -397
  -450
  -507
  -564
  -623
  -683
  -745
  -809
  -874
  -940
  -1,008
  -1,078
  -1,150
  -1,223
  -1,299
  -1,378
  -1,459
  -1,543
  -1,631
  -1,723
  -1,817
  -1,916
Free cash flow, $m
  -102
  -9
  -79
  -97
  -117
  -138
  -160
  -183
  -206
  -228
  -250
  -270
  -290
  -308
  -326
  -341
  -355
  -369
  -380
  -391
  -401
  -411
  -420
  -428
  -437
  -445
  -453
  -462
  -471
  -480
  -490
Issuance/(repayment) of debt, $m
  0
  23
  30
  37
  45
  54
  63
  73
  83
  94
  104
  114
  124
  134
  144
  154
  163
  172
  181
  190
  199
  207
  216
  225
  234
  243
  253
  263
  273
  284
  295
Issuance/(repurchase) of shares, $m
  87
  61
  147
  182
  221
  263
  307
  352
  398
  444
  490
  535
  578
  619
  659
  696
  732
  766
  799
  830
  860
  890
  919
  948
  977
  1,007
  1,037
  1,069
  1,102
  1,136
  1,172
Cash from financing (excl. dividends), $m  
  120
  84
  177
  219
  266
  317
  370
  425
  481
  538
  594
  649
  702
  753
  803
  850
  895
  938
  980
  1,020
  1,059
  1,097
  1,135
  1,173
  1,211
  1,250
  1,290
  1,332
  1,375
  1,420
  1,467
Total cash flow (excl. dividends), $m
  18
  14
  -49
  -60
  -72
  -84
  -97
  -110
  -122
  -134
  -146
  -156
  -166
  -174
  -181
  -187
  -192
  -196
  -199
  -202
  -203
  -204
  -204
  -203
  -202
  -201
  -200
  -199
  -198
  -196
  -195
Retained Cash Flow (-), $m
  -72
  -77
  -98
  -122
  -149
  -179
  -210
  -242
  -276
  -310
  -344
  -378
  -412
  -445
  -477
  -509
  -540
  -570
  -599
  -629
  -657
  -686
  -715
  -745
  -775
  -805
  -837
  -870
  -904
  -940
  -977
Prev. year cash balance distribution, $m
 
  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
  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
 
  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
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for 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
Current shareholders' claim on cash, %
  100
  84.5
  64.1
  49.8
  39.4
  31.8
  26.2
  21.8
  18.5
  15.8
  13.7
  12.0
  10.7
  9.5
  8.6
  7.8
  7.1
  6.5
  6.0
  5.6
  5.2
  4.8
  4.5
  4.3
  4.0
  3.8
  3.6
  3.4
  3.3
  3.1
  3.0

Community Healthcare Trust Incorporated owns real estate properties. The company is based in Franklin, Tennessee.

FINANCIAL RATIOS  of  Community Healthcare Trust (CHCT)

Valuation Ratios
P/E Ratio 112.3
Price to Sales 13.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 22.5
Price to Free Cash Flow -3.7
Growth Rates
Sales Growth Rate 177.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.2%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 26.3%
Total Debt to Equity 26.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 1.9%
Return On Equity - 3 Yr. Avg. 0.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 80%
Gross Margin - 3 Yr. Avg. 80.4%
EBITDA Margin 68%
EBITDA Margin - 3 Yr. Avg. 54.1%
Operating Margin 16%
Oper. Margin - 3 Yr. Avg. 18.3%
Pre-Tax Margin 12%
Pre-Tax Margin - 3 Yr. Avg. 17%
Net Profit Margin 12%
Net Profit Margin - 3 Yr. Avg. 17%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 600%

CHCT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHCT stock intrinsic value calculation we used $25 million for the last fiscal year's total revenue generated by Community Healthcare Trust. The default revenue input number comes from 2016 income statement of Community Healthcare Trust. 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 CHCT stock valuation model: a) initial revenue growth rate of 40% 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 5.3%, whose default value for CHCT is calculated based on our internal credit rating of Community Healthcare Trust, 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 Community Healthcare Trust.
    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 CHCT stock the variable cost ratio is equal to 68%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4 million in the base year in the intrinsic value calculation for CHCT 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 Community Healthcare Trust.

Corporate tax rate of 27% is the nominal tax rate for Community Healthcare Trust. 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 CHCT 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 CHCT are equal to 726%.

Life of production assets of 14 years is the average useful life of capital assets used in Community Healthcare Trust 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 CHCT is equal to -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 - $194 million for Community Healthcare Trust - 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 12.91 million for Community Healthcare Trust 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 Community Healthcare Trust at the current share price and the inputted number of shares is $0.3 billion.


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COMPANY NEWS

▶ Community Healthcare Trust reports 1Q results   [May-09-17 07:40PM  Associated Press]
▶ Community Healthcare Trust reports 4Q results   [Feb-23-17 07:45PM  Associated Press]
▶ Community Healthcare Trust Update on Recent Activities   [Jan-06-17 06:04PM  PR Newswire]
▶ [$$] This REIT Plans Up to $35 Million in Buys a Quarter   [Nov-14-16 02:19PM  at Barrons.com]
▶ 3 Small Cap REITs Poised To Profit   [Jun-06-16 07:00AM  at Forbes]
▶ What Do Hedge Funds Think About Upland Software Inc (UPLD)?   [Nov-23  02:21PM  at Insider Monkey]
Stock chart of CHCT Financial statements of CHCT Annual reports of CHCT
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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