Intrinsic value of Civitas Solutions - CIVI

Previous Close

$18.50

  Intrinsic Value

$23.25

stock screener

  Rating & Target

buy

+26%

  Value-price divergence*

+17%

Previous close

$18.50

 
Intrinsic value

$23.25

 
Up/down potential

+26%

 
Rating

buy

 
Value-price divergence*

+17%

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

We calculate the intrinsic value of CIVI 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 0.7

 

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, %
  3.00
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.00
Revenue, $m
  1,408
  1,480
  1,555
  1,634
  1,717
  1,804
  1,895
  1,991
  2,092
  2,197
  2,308
  2,424
  2,546
  2,674
  2,808
  2,949
  3,097
  3,253
  3,416
  3,587
  3,767
  3,956
  4,154
  4,362
  4,581
  4,810
  5,051
  5,304
  5,570
  5,848
  6,141
Variable operating expenses, $m
 
  1,045
  1,097
  1,151
  1,208
  1,268
  1,330
  1,396
  1,465
  1,538
  1,614
  1,667
  1,750
  1,838
  1,931
  2,028
  2,130
  2,236
  2,349
  2,466
  2,590
  2,720
  2,856
  2,999
  3,150
  3,307
  3,473
  3,647
  3,829
  4,021
  4,222
Fixed operating expenses, $m
 
  372
  381
  391
  401
  411
  421
  431
  442
  453
  465
  476
  488
  500
  513
  526
  539
  552
  566
  580
  595
  610
  625
  641
  657
  673
  690
  707
  725
  743
  761
Total operating expenses, $m
  1,350
  1,417
  1,478
  1,542
  1,609
  1,679
  1,751
  1,827
  1,907
  1,991
  2,079
  2,143
  2,238
  2,338
  2,444
  2,554
  2,669
  2,788
  2,915
  3,046
  3,185
  3,330
  3,481
  3,640
  3,807
  3,980
  4,163
  4,354
  4,554
  4,764
  4,983
Operating income, $m
  58
  63
  77
  92
  108
  126
  144
  163
  184
  206
  229
  281
  307
  335
  365
  396
  429
  464
  501
  541
  582
  626
  673
  723
  775
  830
  888
  950
  1,016
  1,085
  1,157
EBITDA, $m
  131
  135
  152
  169
  188
  208
  229
  251
  275
  300
  326
  355
  385
  416
  450
  485
  523
  563
  605
  649
  697
  746
  799
  855
  914
  976
  1,042
  1,111
  1,184
  1,262
  1,344
Interest expense (income), $m
  0
  22
  24
  25
  27
  29
  31
  33
  36
  38
  40
  43
  46
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  90
  96
  101
  106
  112
  118
  125
Earnings before tax, $m
  23
  41
  53
  67
  81
  96
  113
  130
  148
  168
  189
  238
  262
  287
  313
  341
  371
  403
  436
  472
  510
  550
  592
  637
  684
  735
  788
  844
  903
  966
  1,033
Tax expense, $m
  14
  11
  14
  18
  22
  26
  30
  35
  40
  45
  51
  64
  71
  77
  85
  92
  100
  109
  118
  127
  138
  148
  160
  172
  185
  198
  213
  228
  244
  261
  279
Net income, $m
  9
  30
  39
  49
  59
  70
  82
  95
  108
  123
  138
  174
  191
  209
  229
  249
  271
  294
  319
  345
  372
  401
  432
  465
  500
  536
  575
  616
  659
  705
  754

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  51
  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
  1,086
  1,088
  1,143
  1,202
  1,263
  1,326
  1,394
  1,464
  1,538
  1,615
  1,697
  1,782
  1,872
  1,966
  2,065
  2,169
  2,278
  2,392
  2,512
  2,638
  2,770
  2,909
  3,055
  3,208
  3,368
  3,537
  3,714
  3,900
  4,095
  4,300
  4,515
Adjusted assets (=assets-cash), $m
  1,035
  1,088
  1,143
  1,202
  1,263
  1,326
  1,394
  1,464
  1,538
  1,615
  1,697
  1,782
  1,872
  1,966
  2,065
  2,169
  2,278
  2,392
  2,512
  2,638
  2,770
  2,909
  3,055
  3,208
  3,368
  3,537
  3,714
  3,900
  4,095
  4,300
  4,515
Revenue / Adjusted assets
  1.360
  1.360
  1.360
  1.359
  1.359
  1.360
  1.359
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
  1.360
Average production assets, $m
  388
  408
  429
  451
  474
  498
  523
  550
  577
  606
  637
  669
  703
  738
  775
  814
  855
  898
  943
  990
  1,040
  1,092
  1,147
  1,204
  1,264
  1,328
  1,394
  1,464
  1,537
  1,614
  1,695
Working capital, $m
  77
  34
  36
  38
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
  75
  79
  83
  87
  91
  96
  100
  105
  111
  116
  122
  128
  135
  141
Total debt, $m
  638
  677
  727
  779
  834
  892
  952
  1,016
  1,082
  1,152
  1,225
  1,302
  1,383
  1,468
  1,556
  1,650
  1,748
  1,851
  1,959
  2,072
  2,191
  2,316
  2,447
  2,585
  2,729
  2,881
  3,041
  3,208
  3,384
  3,568
  3,762
Total liabilities, $m
  941
  979
  1,029
  1,081
  1,136
  1,194
  1,254
  1,318
  1,384
  1,454
  1,527
  1,604
  1,685
  1,770
  1,858
  1,952
  2,050
  2,153
  2,261
  2,374
  2,493
  2,618
  2,749
  2,887
  3,031
  3,183
  3,343
  3,510
  3,686
  3,870
  4,064
Total equity, $m
  146
  109
  114
  120
  126
  133
  139
  146
  154
  162
  170
  178
  187
  197
  206
  217
  228
  239
  251
  264
  277
  291
  305
  321
  337
  354
  371
  390
  410
  430
  452
Total liabilities and equity, $m
  1,087
  1,088
  1,143
  1,201
  1,262
  1,327
  1,393
  1,464
  1,538
  1,616
  1,697
  1,782
  1,872
  1,967
  2,064
  2,169
  2,278
  2,392
  2,512
  2,638
  2,770
  2,909
  3,054
  3,208
  3,368
  3,537
  3,714
  3,900
  4,096
  4,300
  4,516
Debt-to-equity ratio
  4.370
  6.220
  6.360
  6.490
  6.610
  6.720
  6.830
  6.940
  7.040
  7.130
  7.220
  7.310
  7.390
  7.460
  7.540
  7.610
  7.670
  7.740
  7.800
  7.860
  7.910
  7.960
  8.010
  8.060
  8.100
  8.150
  8.190
  8.230
  8.260
  8.300
  8.330
Adjusted equity ratio
  0.092
  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

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  30
  39
  49
  59
  70
  82
  95
  108
  123
  138
  174
  191
  209
  229
  249
  271
  294
  319
  345
  372
  401
  432
  465
  500
  536
  575
  616
  659
  705
  754
Depreciation, amort., depletion, $m
  73
  72
  75
  77
  79
  82
  85
  88
  91
  94
  97
  74
  77
  81
  85
  89
  94
  99
  104
  109
  114
  120
  126
  132
  139
  146
  153
  161
  169
  177
  186
Funds from operations, $m
  82
  102
  114
  126
  139
  152
  167
  183
  199
  217
  235
  247
  268
  290
  314
  339
  365
  393
  422
  453
  486
  521
  558
  597
  638
  682
  728
  777
  828
  883
  940
Change in working capital, $m
  -25
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
Cash from operations, $m
  107
  100
  112
  124
  137
  150
  165
  180
  197
  214
  233
  245
  265
  287
  311
  335
  362
  389
  418
  449
  482
  517
  554
  592
  633
  677
  723
  771
  822
  876
  933
Maintenance CAPEX, $m
  0
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -132
  -139
  -146
  -153
  -161
  -169
  -177
New CAPEX, $m
  -43
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
Cash from investing activities, $m
  -87
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -88
  -92
  -98
  -102
  -108
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -166
  -175
  -183
  -192
  -202
  -212
  -223
  -234
  -246
  -258
Free cash flow, $m
  20
  37
  46
  55
  64
  74
  85
  97
  109
  122
  135
  143
  158
  175
  193
  211
  231
  252
  275
  299
  324
  351
  379
  409
  441
  475
  510
  548
  588
  630
  675
Issuance/(repayment) of debt, $m
  -7
  46
  50
  52
  55
  58
  60
  63
  67
  70
  73
  77
  81
  85
  89
  93
  98
  103
  108
  113
  119
  125
  131
  138
  145
  152
  159
  167
  176
  184
  194
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  
  -11
  46
  50
  52
  55
  58
  60
  63
  67
  70
  73
  77
  81
  85
  89
  93
  98
  103
  108
  113
  119
  125
  131
  138
  145
  152
  159
  167
  176
  184
  194
Total cash flow (excl. dividends), $m
  9
  84
  96
  107
  119
  132
  145
  160
  175
  191
  209
  220
  239
  260
  281
  305
  329
  355
  383
  412
  443
  476
  510
  547
  585
  626
  670
  715
  764
  815
  869
Retained Cash Flow (-), $m
  -25
  -7
  -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
  -20
  -20
  -22
Prev. year cash balance distribution, $m
 
  44
  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
 
  121
  90
  101
  113
  126
  139
  153
  168
  184
  201
  211
  230
  250
  272
  294
  318
  344
  371
  399
  430
  462
  496
  531
  569
  610
  652
  697
  744
  794
  847
Discount rate, %
 
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
 
  110
  74
  74
  73
  70
  67
  63
  58
  53
  47
  40
  34
  29
  24
  19
  15
  12
  9
  6
  5
  3
  2
  1
  1
  1
  0
  0
  0
  0
  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

Civitas Solutions, Inc. is a provider of home- and community-based health and human services to individuals with intellectual, developmental, physical or behavioral disabilities and other special needs. The Company operates through two segments: Human Services and Post-Acute Specialty Rehabilitation Services (SRS). The Human Services segment provides home- and community-based human services to individuals with intellectual and/or developmental disabilities (I/DD), youth with emotional, behavioral and/or medically complex challenges or at-risk youth (ARY), and elders. The SRS segment delivers healthcare and community-based health and human services to individuals having suffered acquired brain injury, spinal injuries, and other catastrophic injuries and illnesses. Within its SRS segment, its NeuroRestorative business unit is focused on rehabilitation and transitional living services, and its CareMeridian business unit is focused on the medically-intensive post-acute care services.

FINANCIAL RATIOS  of  Civitas Solutions (CIVI)

Valuation Ratios
P/E Ratio 76.5
Price to Sales 0.5
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 6.4
Price to Free Cash Flow 10.8
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 6.1%
Financial Strength
Quick Ratio 7
Current Ratio 0.1
LT Debt to Equity 432.2%
Total Debt to Equity 437%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. -0.3%
Return On Total Capital 1.2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.4%
Return On Equity 6.7%
Return On Equity - 3 Yr. Avg. -19.1%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 22.4%
Gross Margin - 3 Yr. Avg. 22.2%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 5.1%
Operating Margin 4.1%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 1.6%
Pre-Tax Margin - 3 Yr. Avg. -0.2%
Net Profit Margin 0.6%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 60.9%
Eff/ Tax Rate - 3 Yr. Avg. 46.7%
Payout Ratio 0%

CIVI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CIVI stock intrinsic value calculation we used $1408 million for the last fiscal year's total revenue generated by Civitas Solutions. The default revenue input number comes from 2016 income statement of Civitas Solutions. 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 CIVI stock valuation model: a) initial revenue growth rate of 5.1% 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 10.1%, whose default value for CIVI is calculated based on our internal credit rating of Civitas Solutions, 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 Civitas Solutions.
    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 CIVI stock the variable cost ratio is equal to 70.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $363 million in the base year in the intrinsic value calculation for CIVI 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 Civitas Solutions.

Corporate tax rate of 27% is the nominal tax rate for Civitas Solutions. 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 CIVI 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 CIVI are equal to 27.6%.

Life of production assets of 9.1 years is the average useful life of capital assets used in Civitas Solutions 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 CIVI is equal to 2.3%. 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 - $146 million for Civitas Solutions - 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 38.184 million for Civitas Solutions 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 Civitas Solutions at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Civitas Solutions beats 3Q profit forecasts   [Aug-09-17 09:33PM  Associated Press]
▶ Civitas Solutions misses 2Q profit forecasts   [04:34PM  Associated Press]
▶ Civitas Solutions meets 1Q profit forecasts   [Feb-09-17 05:11PM  Associated Press]
▶ Do Hedge Funds Love Civitas Solutions Inc (CIVI)?   [Dec-20-16 02:58PM  at Insider Monkey]
▶ Xencor Inc (XNCR): What Smart Money Thinks about This Stock?   [Dec-04-16 03:53PM  at Insider Monkey]
▶ 5 Stocks With Rising RSIs That Lost Hedge Fund Support   [Jul-12-16 10:37AM  at Insider Monkey]
Financial statements of CIVI
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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