Intrinsic value of Cutera - CUTR

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$20.30

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$20.30

 
Intrinsic value

$81.74

 
Up/down potential

+303%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of CUTR 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, %
  24.21
  26.70
  24.53
  22.58
  20.82
  19.24
  17.81
  16.53
  15.38
  14.34
  13.41
  12.57
  11.81
  11.13
  10.52
  9.96
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
Revenue, $m
  118
  150
  186
  228
  276
  329
  387
  451
  521
  595
  675
  760
  850
  945
  1,044
  1,148
  1,257
  1,370
  1,488
  1,611
  1,739
  1,871
  2,009
  2,153
  2,302
  2,457
  2,618
  2,785
  2,960
  3,142
  3,331
Variable operating expenses, $m
 
  110
  137
  168
  203
  242
  285
  332
  383
  438
  497
  560
  626
  695
  768
  845
  925
  1,008
  1,095
  1,186
  1,280
  1,378
  1,479
  1,585
  1,695
  1,809
  1,927
  2,051
  2,179
  2,313
  2,452
Fixed operating expenses, $m
 
  31
  32
  32
  33
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  45
  46
  47
  48
  49
  50
  52
  53
  54
  56
  57
  58
  60
  61
  63
Total operating expenses, $m
  116
  141
  169
  200
  236
  276
  320
  368
  420
  475
  535
  599
  666
  736
  810
  888
  970
  1,054
  1,142
  1,234
  1,329
  1,428
  1,531
  1,638
  1,749
  1,865
  1,984
  2,109
  2,239
  2,374
  2,515
Operating income, $m
  2
  9
  18
  28
  40
  53
  67
  83
  101
  120
  140
  161
  184
  208
  233
  259
  287
  316
  346
  377
  410
  443
  479
  515
  553
  593
  634
  677
  721
  767
  816
EBITDA, $m
  3
  9
  18
  29
  40
  54
  68
  85
  102
  121
  142
  163
  186
  210
  236
  262
  290
  319
  350
  381
  414
  448
  484
  521
  559
  599
  641
  684
  729
  776
  825
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  9
  10
  12
  13
  14
  15
  16
  17
  19
  20
  22
  23
  25
  26
  28
Earnings before tax, $m
  3
  9
  17
  27
  39
  51
  65
  81
  98
  116
  135
  156
  178
  201
  225
  251
  278
  305
  334
  364
  396
  428
  462
  498
  534
  573
  612
  654
  697
  741
  788
Tax expense, $m
  0
  2
  5
  7
  10
  14
  18
  22
  26
  31
  37
  42
  48
  54
  61
  68
  75
  82
  90
  98
  107
  116
  125
  134
  144
  155
  165
  176
  188
  200
  213
Net income, $m
  3
  6
  13
  20
  28
  37
  48
  59
  71
  85
  99
  114
  130
  147
  165
  183
  203
  223
  244
  266
  289
  313
  338
  363
  390
  418
  447
  477
  508
  541
  575

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  54
  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
  92
  48
  60
  73
  89
  106
  125
  145
  168
  192
  217
  245
  274
  304
  336
  370
  405
  441
  479
  519
  560
  603
  647
  693
  741
  791
  843
  897
  953
  1,012
  1,073
Adjusted assets (=assets-cash), $m
  38
  48
  60
  73
  89
  106
  125
  145
  168
  192
  217
  245
  274
  304
  336
  370
  405
  441
  479
  519
  560
  603
  647
  693
  741
  791
  843
  897
  953
  1,012
  1,073
Revenue / Adjusted assets
  3.105
  3.125
  3.100
  3.123
  3.101
  3.104
  3.096
  3.110
  3.101
  3.099
  3.111
  3.102
  3.102
  3.109
  3.107
  3.103
  3.104
  3.107
  3.106
  3.104
  3.105
  3.103
  3.105
  3.107
  3.107
  3.106
  3.106
  3.105
  3.106
  3.105
  3.104
Average production assets, $m
  2
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
Working capital, $m
  60
  8
  9
  12
  14
  17
  20
  23
  27
  30
  34
  39
  43
  48
  53
  59
  64
  70
  76
  82
  89
  95
  102
  110
  117
  125
  134
  142
  151
  160
  170
Total debt, $m
  0
  8
  18
  29
  41
  55
  71
  88
  106
  125
  146
  169
  192
  217
  243
  271
  299
  329
  360
  392
  426
  461
  497
  535
  574
  615
  657
  701
  747
  795
  844
Total liabilities, $m
  31
  39
  49
  60
  72
  86
  102
  119
  137
  156
  177
  200
  223
  248
  274
  302
  330
  360
  391
  423
  457
  492
  528
  566
  605
  646
  688
  732
  778
  826
  875
Total equity, $m
  61
  9
  11
  14
  16
  19
  23
  27
  31
  35
  40
  45
  50
  56
  62
  68
  74
  81
  88
  95
  103
  111
  119
  128
  136
  146
  155
  165
  175
  186
  197
Total liabilities and equity, $m
  92
  48
  60
  74
  88
  105
  125
  146
  168
  191
  217
  245
  273
  304
  336
  370
  404
  441
  479
  518
  560
  603
  647
  694
  741
  792
  843
  897
  953
  1,012
  1,072
Debt-to-equity ratio
  0.000
  0.940
  1.620
  2.140
  2.540
  2.840
  3.080
  3.280
  3.430
  3.560
  3.660
  3.750
  3.820
  3.880
  3.930
  3.980
  4.020
  4.050
  4.080
  4.110
  4.130
  4.160
  4.170
  4.190
  4.210
  4.220
  4.230
  4.250
  4.260
  4.270
  4.280
Adjusted equity ratio
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  6
  13
  20
  28
  37
  48
  59
  71
  85
  99
  114
  130
  147
  165
  183
  203
  223
  244
  266
  289
  313
  338
  363
  390
  418
  447
  477
  508
  541
  575
Depreciation, amort., depletion, $m
  1
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
Funds from operations, $m
  -3
  7
  13
  21
  29
  38
  49
  60
  73
  86
  101
  116
  132
  149
  167
  186
  206
  226
  248
  270
  293
  318
  343
  369
  396
  424
  454
  484
  516
  549
  584
Change in working capital, $m
  -5
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
Cash from operations, $m
  2
  6
  11
  18
  27
  36
  46
  57
  69
  82
  97
  112
  128
  144
  162
  181
  200
  221
  242
  264
  287
  311
  336
  362
  388
  416
  445
  476
  507
  540
  574
Maintenance CAPEX, $m
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
New CAPEX, $m
  -1
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -3
  0
  0
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
Free cash flow, $m
  -1
  5
  10
  17
  25
  34
  44
  55
  67
  80
  94
  109
  124
  141
  158
  177
  196
  216
  237
  259
  281
  305
  329
  354
  381
  408
  437
  467
  498
  530
  564
Issuance/(repayment) of debt, $m
  0
  8
  10
  11
  12
  14
  15
  17
  18
  20
  21
  22
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
Issuance/(repurchase) of shares, $m
  5
  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  
  4
  8
  10
  11
  12
  14
  15
  17
  18
  20
  21
  22
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
Total cash flow (excl. dividends), $m
  3
  13
  20
  28
  38
  48
  60
  72
  85
  100
  115
  131
  148
  166
  185
  204
  224
  246
  268
  291
  315
  340
  365
  392
  420
  449
  479
  511
  544
  578
  613
Retained Cash Flow (-), $m
  -11
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
Prev. year cash balance distribution, $m
 
  54
  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
 
  65
  18
  26
  35
  45
  56
  68
  81
  95
  110
  126
  143
  160
  179
  198
  218
  239
  261
  284
  307
  332
  357
  384
  411
  440
  470
  501
  533
  567
  602
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
 
  63
  16
  23
  29
  35
  41
  46
  51
  55
  58
  60
  61
  61
  60
  58
  55
  52
  48
  44
  39
  34
  30
  25
  21
  17
  14
  11
  8
  6
  5
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
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Cutera, Inc., a medical device company, designs, develops, manufactures, markets, and services laser and other energy based aesthetics systems worldwide. The company offers enlighten platform, a laser system that is used for tattoo removal, as well as for the treatment of benign pigmented lesions; excel HR platform, a hair removal solution for various skin types; and truSculpt, a high-powered radio frequency platform designed for deep tissue heating. It also provides excel V, a vascular and benign pigmented lesion treatment platform; and xeo platform, a multi-application platform on which a customer purchases hand piece applications for the removal of unwanted hair, treatment of vascular lesions, and skin rejuvenation by treating discoloration, fine lines, and laxity. In addition, the company offers GenesisPlus system, a laser product for use in the temporary increase of clear nails in patients with onychomycosis, as well as for the treatment of fine wrinkles, diffuse redness, and rosacea; solera console platform, including Opus and Titan consoles; and CoolGlide systems, as well as provides myQ, a third-party sourced system for the Japanese market. Further, it provides pulsed light hand pieces for the treatment of discoloration, hair removal, and vascular treatments; Pearl and Pearl Fractional hand pieces; dermal filler products; and post-warranty services through extended service contracts or direct billing, as well as offers Titan hand piece refills and marketing brochures through the Internet. The company markets and sells its products through direct sales force to plastic surgeons, dermatologists, gynecologists, primary care physicians, family practitioners, podiatrists, and other qualified practitioners, as well as for physicians offering aesthetic treatments in non-medical offices. Cutera, Inc. was founded in 1998 and is headquartered in Brisbane, California.

FINANCIAL RATIOS  of  Cutera (CUTR)

Valuation Ratios
P/E Ratio 93.2
Price to Sales 2.4
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 139.8
Price to Free Cash Flow 279.5
Growth Rates
Sales Growth Rate 24.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
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 3.5%
Ret/ On Assets - 3 Yr. Avg. -3.6%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. -4.7%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. -4.7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 57.6%
Gross Margin - 3 Yr. Avg. 56.5%
EBITDA Margin 3.4%
EBITDA Margin - 3 Yr. Avg. -3.8%
Operating Margin 1.7%
Oper. Margin - 3 Yr. Avg. -5.5%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. -4.8%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. -5.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -3.3%
Payout Ratio 0%

CUTR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CUTR stock intrinsic value calculation we used $118 million for the last fiscal year's total revenue generated by Cutera. The default revenue input number comes from 2016 income statement of Cutera. 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 CUTR stock valuation model: a) initial revenue growth rate of 26.7% 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 CUTR is calculated based on our internal credit rating of Cutera, 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 Cutera.
    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 CUTR stock the variable cost ratio is equal to 73.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $30 million in the base year in the intrinsic value calculation for CUTR 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 Cutera.

Corporate tax rate of 27% is the nominal tax rate for Cutera. 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 CUTR 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 CUTR are equal to 1.3%.

Life of production assets of 2.5 years is the average useful life of capital assets used in Cutera 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 CUTR is equal to 5.1%. 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 - $61 million for Cutera - 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 13.867 million for Cutera 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 Cutera at the current share price and the inputted number of shares is $0.3 billion.


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RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ ETFs with exposure to Cutera, Inc. : April 17, 2017   [Apr-17-17 12:51PM  Capital Cube]
▶ ETFs with exposure to Cutera, Inc. : April 5, 2017   [Apr-05-17 04:36PM  Capital Cube]
▶ Cutera to Present at the 29th Annual ROTH Conference   [Feb-28-17 07:30AM  GlobeNewswire]
▶ Why Cutera (CUTR) Stock Might be a Great Pick   [Feb-17-17 08:48AM  Zacks]
▶ Cutera posts 4Q profit   [Feb-13-17 06:01PM  Associated Press]
▶ Is Cutera, Inc. (CUTR) A Good Stock To Buy?   [Dec-10-16 09:54PM  at Insider Monkey]
▶ Cutera to Present at Two Upcoming Investor Conferences   [Oct-19-16 08:00AM  GlobeNewswire]
▶ Cutera Announces Management Changes   [04:05PM  GlobeNewswire]
▶ Cutera Reports Second Quarter 2016 Results   [04:02PM  GlobeNewswire]
▶ Cutera Reports First Quarter 2016 Results   [04:02PM  GlobeNewswire]
▶ Cutera to Present at the 28th Annual ROTH Conference   [Feb-25-16 04:03PM  GlobeNewswire]
▶ Cutera Reports Fourth Quarter 2015 Results   [04:03PM  GlobeNewswire]
Stock chart of CUTR Financial statements of CUTR
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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