Intrinsic value of CryoLife - CRY

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$15.65

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$15.65

 
Intrinsic value

$22.61

 
Up/down potential

+44%

 
Rating

buy

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

We calculate the intrinsic value of CRY 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, %
  23.29
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
Revenue, $m
  180
  203
  226
  251
  278
  305
  334
  364
  395
  428
  462
  497
  533
  571
  611
  652
  694
  739
  785
  833
  883
  935
  990
  1,047
  1,106
  1,168
  1,232
  1,300
  1,371
  1,445
  1,522
Variable operating expenses, $m
 
  106
  117
  130
  142
  156
  170
  184
  199
  215
  232
  241
  258
  277
  296
  316
  337
  358
  380
  404
  428
  453
  480
  507
  536
  566
  597
  630
  664
  700
  738
Fixed operating expenses, $m
 
  68
  69
  71
  73
  75
  77
  78
  80
  82
  84
  87
  89
  91
  93
  96
  98
  100
  103
  106
  108
  111
  114
  116
  119
  122
  125
  129
  132
  135
  138
Total operating expenses, $m
  159
  174
  186
  201
  215
  231
  247
  262
  279
  297
  316
  328
  347
  368
  389
  412
  435
  458
  483
  510
  536
  564
  594
  623
  655
  688
  722
  759
  796
  835
  876
Operating income, $m
  22
  29
  39
  51
  62
  75
  88
  101
  115
  130
  146
  169
  186
  203
  221
  240
  260
  280
  302
  324
  347
  371
  396
  423
  450
  479
  510
  541
  575
  609
  646
EBITDA, $m
  30
  42
  53
  65
  77
  90
  104
  118
  133
  149
  165
  182
  199
  218
  237
  257
  277
  299
  321
  345
  369
  395
  421
  449
  478
  509
  541
  574
  609
  646
  684
Interest expense (income), $m
  2
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
Earnings before tax, $m
  18
  25
  35
  45
  56
  68
  80
  93
  106
  120
  134
  157
  172
  188
  205
  223
  241
  260
  280
  301
  322
  345
  369
  393
  419
  446
  475
  504
  535
  568
  602
Tax expense, $m
  7
  7
  9
  12
  15
  18
  22
  25
  29
  32
  36
  42
  47
  51
  55
  60
  65
  70
  76
  81
  87
  93
  100
  106
  113
  120
  128
  136
  145
  153
  163
Net income, $m
  11
  18
  26
  33
  41
  50
  58
  68
  77
  87
  98
  114
  126
  138
  150
  163
  176
  190
  204
  220
  235
  252
  269
  287
  306
  326
  346
  368
  391
  414
  439

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  57
  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
  316
  291
  326
  362
  400
  439
  481
  524
  569
  616
  664
  715
  767
  822
  879
  938
  999
  1,063
  1,129
  1,199
  1,271
  1,346
  1,424
  1,506
  1,591
  1,680
  1,773
  1,870
  1,972
  2,078
  2,190
Adjusted assets (=assets-cash), $m
  259
  291
  326
  362
  400
  439
  481
  524
  569
  616
  664
  715
  767
  822
  879
  938
  999
  1,063
  1,129
  1,199
  1,271
  1,346
  1,424
  1,506
  1,591
  1,680
  1,773
  1,870
  1,972
  2,078
  2,190
Revenue / Adjusted assets
  0.695
  0.698
  0.693
  0.693
  0.695
  0.695
  0.694
  0.695
  0.694
  0.695
  0.696
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
Average production assets, $m
  59
  66
  74
  82
  90
  99
  109
  118
  128
  139
  150
  161
  173
  186
  198
  212
  226
  240
  255
  271
  287
  304
  322
  340
  359
  380
  401
  422
  445
  469
  495
Working capital, $m
  117
  73
  82
  91
  100
  110
  121
  131
  143
  154
  167
  179
  193
  206
  220
  235
  251
  267
  283
  301
  319
  338
  357
  378
  399
  422
  445
  469
  495
  521
  549
Total debt, $m
  72
  80
  93
  107
  122
  138
  154
  171
  189
  208
  227
  247
  267
  289
  311
  334
  359
  384
  410
  437
  466
  495
  526
  558
  592
  627
  664
  702
  742
  784
  828
Total liabilities, $m
  107
  115
  128
  142
  157
  173
  189
  206
  224
  243
  262
  282
  302
  324
  346
  369
  394
  419
  445
  472
  501
  530
  561
  593
  627
  662
  699
  737
  777
  819
  863
Total equity, $m
  209
  177
  197
  219
  242
  266
  291
  317
  345
  373
  402
  433
  465
  498
  532
  568
  605
  644
  684
  726
  770
  816
  863
  912
  964
  1,018
  1,075
  1,133
  1,195
  1,260
  1,327
Total liabilities and equity, $m
  316
  292
  325
  361
  399
  439
  480
  523
  569
  616
  664
  715
  767
  822
  878
  937
  999
  1,063
  1,129
  1,198
  1,271
  1,346
  1,424
  1,505
  1,591
  1,680
  1,774
  1,870
  1,972
  2,079
  2,190
Debt-to-equity ratio
  0.344
  0.450
  0.470
  0.490
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
Adjusted equity ratio
  0.587
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606
  0.606

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  18
  26
  33
  41
  50
  58
  68
  77
  87
  98
  114
  126
  138
  150
  163
  176
  190
  204
  220
  235
  252
  269
  287
  306
  326
  346
  368
  391
  414
  439
Depreciation, amort., depletion, $m
  8
  13
  14
  14
  15
  15
  16
  17
  18
  19
  19
  13
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  35
  36
  38
Funds from operations, $m
  20
  31
  39
  47
  56
  65
  75
  85
  95
  106
  117
  127
  139
  152
  165
  179
  194
  209
  224
  241
  258
  275
  294
  314
  334
  355
  377
  401
  425
  451
  478
Change in working capital, $m
  0
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  24
  26
  27
  28
Cash from operations, $m
  20
  51
  30
  38
  46
  55
  64
  74
  84
  94
  105
  114
  126
  138
  151
  164
  178
  193
  208
  223
  240
  257
  274
  293
  312
  333
  354
  376
  400
  424
  450
Maintenance CAPEX, $m
  0
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -36
New CAPEX, $m
  -6
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -74
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -25
  -27
  -28
  -30
  -31
  -34
  -36
  -37
  -39
  -42
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -61
Free cash flow, $m
  -54
  39
  18
  24
  32
  39
  47
  56
  64
  74
  83
  91
  102
  112
  124
  136
  148
  161
  174
  188
  202
  217
  233
  250
  267
  285
  304
  323
  344
  366
  388
Issuance/(repayment) of debt, $m
  74
  13
  13
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  73
  13
  13
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
Total cash flow (excl. dividends), $m
  19
  52
  31
  39
  47
  55
  64
  73
  82
  92
  102
  111
  122
  134
  146
  159
  172
  186
  200
  215
  231
  247
  264
  282
  300
  320
  340
  362
  384
  408
  432
Retained Cash Flow (-), $m
  -54
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -47
  -50
  -52
  -54
  -56
  -59
  -62
  -64
  -67
Prev. year cash balance distribution, $m
 
  52
  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
 
  84
  10
  17
  24
  31
  38
  46
  55
  64
  73
  80
  90
  101
  112
  123
  135
  147
  160
  173
  187
  201
  217
  232
  249
  266
  284
  303
  322
  343
  365
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
 
  81
  9
  15
  19
  24
  28
  31
  34
  37
  38
  38
  39
  38
  38
  36
  34
  32
  29
  27
  24
  21
  18
  15
  13
  10
  8
  6
  5
  4
  3
Current shareholders' claim on cash, %
  100
  100.0
  100.0
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CryoLife, Inc., together with its subsidiaries, manufactures and distributes medical devices worldwide. It also processes and distributes implantable human tissues for use in cardiac and vascular surgeries. The company operates in two segments, Medical Devices and Preservation Services. It offers surgical sealants and hemostats, including BioGlue Surgical Adhesive, an agent for cross-linking proteins for cardiac, vascular, pulmonary, and general surgical applications; BioFoam Surgical Matrix, which is used as an adjunct in sealing abdominal parenchymal tissues, as well as an adjunct for hemostasis in cardiovascular surgery; and PerClot, an absorbable powdered hemostat for use in surgical procedures, including cardiac, vascular, orthopedic, neurological, gynecological, ENT, and trauma surgeries. The company also provides cardiac laser therapy products, which include laser console system and single-use, as well as fiber-optic hand-pieces for the treatment of coronary artery disease in patients with severe angina; and On-X heart valves for aortic and mitral indications. In addition, it distributes ProCol vascular bioprosthesis, a biological graft that provides vascular access for end-stage renal disease in hemodialysis patients; and PhotoFix, a bovine pericardial patch for use in cardiac and vascular repairing activities. Further, it distributes CryoValve SG pulmonary heart valves and CryoPatch SG pulmonary cardiac patch tissues that are processed using its proprietary SynerGraft technology; and vascular preservation services, such as CryoVein and CryoArtery tissues to treat various vascular reconstructions, such as peripheral bypass, hemodialysis access, and aortic infections. The company serves physicians, hospitals, and other healthcare facilities, as well as cardiac, vascular, thoracic, and general surgeons. CryoLife, Inc. was founded in 1984 and is headquartered in Kennesaw, Georgia.

FINANCIAL RATIOS  of  CryoLife (CRY)

Valuation Ratios
P/E Ratio 46.8
Price to Sales 2.9
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 25.7
Price to Free Cash Flow 36.7
Growth Rates
Sales Growth Rate 23.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 11
Current Ratio 1
LT Debt to Equity 32.1%
Total Debt to Equity 34.4%
Interest Coverage 10
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.1%
Return On Equity 6%
Return On Equity - 3 Yr. Avg. 4.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 66.1%
Gross Margin - 3 Yr. Avg. 63.7%
EBITDA Margin 15.6%
EBITDA Margin - 3 Yr. Avg. 11.4%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 10%
Pre-Tax Margin - 3 Yr. Avg. 6.8%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 38.9%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
Payout Ratio 0%

CRY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRY stock intrinsic value calculation we used $180 million for the last fiscal year's total revenue generated by CryoLife. The default revenue input number comes from 2016 income statement of CryoLife. 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 CRY stock valuation model: a) initial revenue growth rate of 12.5% 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 CRY is calculated based on our internal credit rating of CryoLife, 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 CryoLife.
    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 CRY stock the variable cost ratio is equal to 52.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $66 million in the base year in the intrinsic value calculation for CRY 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 5.6% for CryoLife.

Corporate tax rate of 27% is the nominal tax rate for CryoLife. 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 CRY 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 CRY are equal to 32.5%.

Life of production assets of 12.9 years is the average useful life of capital assets used in CryoLife 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 CRY is equal to 36.1%. 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 - $209 million for CryoLife - 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 33.64 million for CryoLife 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 CryoLife at the current share price and the inputted number of shares is $0.5 billion.


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COMPANY NEWS

▶ ETFs with exposure to CryoLife, Inc. : April 5, 2017   [Apr-05-17 04:35PM  Capital Cube]
▶ Cryolife 4Q Revenues Missed Street Estimates   [Feb-17-17 02:15PM  Investopedia]
▶ CryoLife beats 4Q profit forecasts   [Feb-15-17 07:56PM  Associated Press]
▶ ETFs with exposure to CryoLife, Inc. : February 3, 2017   [Feb-03-17 10:35AM  Capital Cube]
▶ Is Cryolife Inc (CRY) A Good Stock To Buy?   [Dec-04-16 10:41PM  at Insider Monkey]
▶ James W. Bullock Joins CryoLife Board of Directors   [Oct-25-16 05:20PM  PR Newswire]
Stock chart of CRY Financial statements of CRY
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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