Intrinsic value of Cardiovascular Systems - CSII

Previous Close

$30.46

  Intrinsic Value

$0.78

stock screener

  Rating & Target

str. sell

-97%

  Value-price divergence*

-147%

Previous close

$30.46

 
Intrinsic value

$0.78

 
Up/down potential

-97%

 
Rating

str. sell

 
Value-price divergence*

-147%

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

We calculate the intrinsic value of CSII 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 1.0

 

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, %
  -2.20
  18.20
  16.88
  15.69
  14.62
  13.66
  12.79
  12.02
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
Revenue, $m
  178
  210
  246
  284
  326
  371
  418
  468
  521
  577
  635
  696
  760
  826
  895
  967
  1,042
  1,119
  1,200
  1,284
  1,371
  1,461
  1,556
  1,654
  1,756
  1,862
  1,973
  2,088
  2,208
  2,334
  2,465
Variable operating expenses, $m
 
  247
  289
  334
  383
  435
  491
  550
  612
  677
  746
  817
  892
  970
  1,051
  1,135
  1,223
  1,314
  1,409
  1,507
  1,609
  1,716
  1,826
  1,941
  2,061
  2,186
  2,316
  2,451
  2,593
  2,740
  2,894
Fixed operating expenses, $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
Total operating expenses, $m
  234
  247
  289
  334
  383
  435
  491
  550
  612
  677
  746
  817
  892
  970
  1,051
  1,135
  1,223
  1,314
  1,409
  1,507
  1,609
  1,716
  1,826
  1,941
  2,061
  2,186
  2,316
  2,451
  2,593
  2,740
  2,894
Operating income, $m
  -56
  -37
  -43
  -50
  -57
  -64
  -73
  -81
  -91
  -100
  -111
  -121
  -132
  -144
  -156
  -168
  -181
  -195
  -209
  -223
  -239
  -254
  -271
  -288
  -305
  -324
  -343
  -363
  -384
  -406
  -429
EBITDA, $m
  -52
  -32
  -38
  -43
  -50
  -57
  -64
  -72
  -80
  -88
  -97
  -106
  -116
  -126
  -137
  -148
  -159
  -171
  -183
  -196
  -209
  -223
  -238
  -253
  -268
  -284
  -301
  -319
  -337
  -356
  -376
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
Earnings before tax, $m
  -56
  -37
  -43
  -50
  -58
  -66
  -74
  -83
  -93
  -103
  -114
  -125
  -136
  -148
  -161
  -174
  -188
  -202
  -216
  -232
  -247
  -264
  -281
  -299
  -317
  -337
  -357
  -378
  -400
  -423
  -446
Tax expense, $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
Net income, $m
  -56
  -37
  -43
  -50
  -58
  -66
  -74
  -83
  -93
  -103
  -114
  -125
  -136
  -148
  -161
  -174
  -188
  -202
  -216
  -232
  -247
  -264
  -281
  -299
  -317
  -337
  -357
  -378
  -400
  -423
  -446

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  61
  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
  142
  96
  112
  129
  148
  169
  190
  213
  237
  262
  289
  317
  346
  376
  407
  440
  474
  509
  546
  584
  624
  665
  708
  752
  799
  847
  897
  950
  1,005
  1,062
  1,122
Adjusted assets (=assets-cash), $m
  81
  96
  112
  129
  148
  169
  190
  213
  237
  262
  289
  317
  346
  376
  407
  440
  474
  509
  546
  584
  624
  665
  708
  752
  799
  847
  897
  950
  1,005
  1,062
  1,122
Revenue / Adjusted assets
  2.198
  2.188
  2.196
  2.202
  2.203
  2.195
  2.200
  2.197
  2.198
  2.202
  2.197
  2.196
  2.197
  2.197
  2.199
  2.198
  2.198
  2.198
  2.198
  2.199
  2.197
  2.197
  2.198
  2.199
  2.198
  2.198
  2.200
  2.198
  2.197
  2.198
  2.197
Average production assets, $m
  38
  45
  52
  61
  69
  79
  89
  100
  111
  123
  135
  148
  162
  176
  191
  206
  222
  238
  256
  273
  292
  311
  331
  352
  374
  397
  420
  445
  470
  497
  525
Working capital, $m
  69
  9
  11
  13
  15
  17
  19
  21
  23
  26
  29
  31
  34
  37
  40
  44
  47
  50
  54
  58
  62
  66
  70
  74
  79
  84
  89
  94
  99
  105
  111
Total debt, $m
  0
  7
  16
  24
  34
  44
  55
  67
  79
  92
  105
  119
  134
  149
  165
  182
  199
  217
  235
  255
  275
  295
  317
  340
  363
  388
  413
  440
  467
  496
  527
Total liabilities, $m
  42
  48
  57
  65
  75
  85
  96
  108
  120
  133
  146
  160
  175
  190
  206
  223
  240
  258
  276
  296
  316
  336
  358
  381
  404
  429
  454
  481
  508
  537
  568
Total equity, $m
  101
  47
  55
  64
  73
  83
  94
  105
  117
  130
  143
  156
  171
  186
  201
  217
  234
  252
  270
  289
  308
  328
  350
  372
  395
  418
  443
  469
  496
  525
  554
Total liabilities and equity, $m
  143
  95
  112
  129
  148
  168
  190
  213
  237
  263
  289
  316
  346
  376
  407
  440
  474
  510
  546
  585
  624
  664
  708
  753
  799
  847
  897
  950
  1,004
  1,062
  1,122
Debt-to-equity ratio
  0.000
  0.160
  0.280
  0.380
  0.460
  0.530
  0.590
  0.630
  0.670
  0.710
  0.740
  0.760
  0.780
  0.800
  0.820
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.910
  0.920
  0.930
  0.930
  0.940
  0.940
  0.950
  0.950
Adjusted equity ratio
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -56
  -37
  -43
  -50
  -58
  -66
  -74
  -83
  -93
  -103
  -114
  -125
  -136
  -148
  -161
  -174
  -188
  -202
  -216
  -232
  -247
  -264
  -281
  -299
  -317
  -337
  -357
  -378
  -400
  -423
  -446
Depreciation, amort., depletion, $m
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  40
  42
  44
  47
  50
  53
Funds from operations, $m
  -10
  -32
  -38
  -44
  -51
  -58
  -65
  -73
  -82
  -91
  -100
  -110
  -120
  -131
  -142
  -153
  -165
  -178
  -191
  -204
  -218
  -233
  -248
  -264
  -280
  -297
  -315
  -333
  -353
  -373
  -394
Change in working capital, $m
  14
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  -24
  -34
  -39
  -46
  -53
  -60
  -68
  -76
  -84
  -93
  -103
  -113
  -123
  -134
  -145
  -157
  -169
  -181
  -194
  -208
  -222
  -237
  -252
  -268
  -285
  -302
  -320
  -338
  -358
  -378
  -400
Maintenance CAPEX, $m
  0
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -44
  -47
  -50
New CAPEX, $m
  -5
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
Cash from investing activities, $m
  -4
  -11
  -12
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -24
  -27
  -29
  -30
  -33
  -34
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -70
  -74
  -78
Free cash flow, $m
  -28
  -44
  -51
  -59
  -67
  -76
  -86
  -95
  -106
  -116
  -128
  -139
  -151
  -164
  -177
  -191
  -205
  -220
  -235
  -251
  -268
  -285
  -303
  -322
  -342
  -362
  -383
  -405
  -428
  -452
  -477
Issuance/(repayment) of debt, $m
  0
  7
  8
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
Issuance/(repurchase) of shares, $m
  4
  44
  51
  59
  67
  76
  85
  95
  105
  116
  127
  139
  151
  163
  177
  190
  204
  219
  235
  250
  267
  284
  302
  321
  340
  361
  382
  404
  427
  451
  476
Cash from financing (excl. dividends), $m  
  4
  51
  59
  68
  77
  86
  96
  107
  117
  129
  140
  153
  166
  178
  193
  207
  221
  237
  254
  269
  287
  305
  324
  344
  363
  385
  407
  431
  455
  480
  506
Total cash flow (excl. dividends), $m
  -23
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
Retained Cash Flow (-), $m
  38
  -44
  -51
  -59
  -67
  -76
  -85
  -95
  -105
  -116
  -127
  -139
  -151
  -163
  -177
  -190
  -204
  -219
  -235
  -250
  -267
  -284
  -302
  -321
  -340
  -361
  -382
  -404
  -427
  -451
  -476
Prev. year cash balance distribution, $m
 
  61
  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
 
  24
  -43
  -50
  -58
  -66
  -75
  -84
  -93
  -104
  -114
  -125
  -137
  -149
  -161
  -175
  -188
  -202
  -217
  -232
  -248
  -264
  -282
  -299
  -318
  -337
  -358
  -379
  -400
  -423
  -447
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
  -40
  -44
  -48
  -51
  -54
  -57
  -58
  -59
  -60
  -59
  -58
  -57
  -54
  -51
  -48
  -44
  -40
  -36
  -32
  -27
  -23
  -20
  -16
  -13
  -10
  -8
  -6
  -5
  -3
Current shareholders' claim on cash, %
  100
  89.9
  81.0
  73.1
  66.0
  59.7
  54.1
  49.0
  44.5
  40.4
  36.7
  33.4
  30.4
  27.7
  25.3
  23.0
  21.0
  19.2
  17.5
  16.0
  14.6
  13.4
  12.2
  11.2
  10.2
  9.3
  8.5
  7.8
  7.1
  6.5
  6.0

Cardiovascular Systems, Inc., a medical technology company, develops, manufactures, and markets devices to treat vascular diseases in the United States. It offers peripheral arterial disease products, including Diamondback 360 Peripheral Orbital Atherectomy System (OAS), Stealth 360° Peripheral OAS, Diamondback 360 60cm Peripheral OAS, Diamondback 360 Low Profile Peripheral OAS, Diamondback 360 1.50 Peripheral OAS, and Diamondback 360 2.00 Peripheral OAS, which are catheter-based platforms for treating a range of plaque types, such as calcified plaque, in leg arteries both above and below the knee and address many of the limitations associated with other surgical, catheter, and pharmacological treatment alternatives, as well as Diamondback 360 Coronary OAS, an atherectomy device for the treatment of calcified coronary arteries. The company sells its products directly to hospitals or office-based labs. Cardiovascular Systems, Inc. was founded in 1989 and is headquartered in St. Paul, Minnesota.

FINANCIAL RATIOS  of  Cardiovascular Systems (CSII)

Valuation Ratios
P/E Ratio -17.8
Price to Sales 5.6
Price to Book 9.9
Price to Tangible Book
Price to Cash Flow -41.6
Price to Free Cash Flow -34.4
Growth Rates
Sales Growth Rate -2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -76.2%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -35.8%
Ret/ On Assets - 3 Yr. Avg. -26.3%
Return On Total Capital -46.7%
Ret/ On T. Cap. - 3 Yr. Avg. -33%
Return On Equity -46.7%
Return On Equity - 3 Yr. Avg. -33.8%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 80.3%
Gross Margin - 3 Yr. Avg. 78.6%
EBITDA Margin -29.2%
EBITDA Margin - 3 Yr. Avg. -23.4%
Operating Margin -31.5%
Oper. Margin - 3 Yr. Avg. -24.6%
Pre-Tax Margin -31.5%
Pre-Tax Margin - 3 Yr. Avg. -25%
Net Profit Margin -31.5%
Net Profit Margin - 3 Yr. Avg. -25%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CSII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSII stock intrinsic value calculation we used $178 million for the last fiscal year's total revenue generated by Cardiovascular Systems. The default revenue input number comes from 2016 income statement of Cardiovascular Systems. 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 CSII stock valuation model: a) initial revenue growth rate of 18.2% 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 CSII is calculated based on our internal credit rating of Cardiovascular Systems, 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 Cardiovascular Systems.
    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 CSII stock the variable cost ratio is equal to 117.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CSII 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 Cardiovascular Systems.

Corporate tax rate of 27% is the nominal tax rate for Cardiovascular Systems. 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 CSII 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 CSII are equal to 21.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Cardiovascular Systems 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 CSII is equal to 4.5%. 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 - $101 million for Cardiovascular Systems - 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 32.443 million for Cardiovascular Systems 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 Cardiovascular Systems at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ Cardiovascular Systems beats 4Q profit forecasts   [12:33AM  Associated Press]
▶ Cardiovascular Systems reports 3Q loss   [May-03-17 06:01PM  Associated Press]
Stock chart of CSII Financial statements of CSII
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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