Intrinsic value of Exactech - EXAC

Previous Close

$31.90

  Intrinsic Value

$5.75

stock screener

  Rating & Target

str. sell

-82%

  Value-price divergence*

-93%

Previous close

$31.90

 
Intrinsic value

$5.75

 
Up/down potential

-82%

 
Rating

str. sell

 
Value-price divergence*

-93%

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

We calculate the intrinsic value of EXAC 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 0.4

 

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, %
  6.61
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  258
  263
  269
  276
  284
  293
  302
  312
  323
  335
  348
  362
  377
  392
  409
  427
  445
  465
  486
  508
  531
  556
  582
  609
  638
  669
  701
  734
  770
  807
  846
Variable operating expenses, $m
 
  240
  245
  251
  258
  266
  275
  284
  294
  305
  317
  328
  341
  355
  370
  386
  403
  421
  440
  460
  481
  504
  527
  552
  578
  606
  635
  665
  697
  731
  766
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
  250
  240
  245
  251
  258
  266
  275
  284
  294
  305
  317
  328
  341
  355
  370
  386
  403
  421
  440
  460
  481
  504
  527
  552
  578
  606
  635
  665
  697
  731
  766
Operating income, $m
  8
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
EBITDA, $m
  27
  42
  43
  44
  45
  46
  48
  50
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
Earnings before tax, $m
  7
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  72
Tax expense, $m
  7
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
Net income, $m
  0
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  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
  294
  287
  293
  301
  309
  319
  329
  340
  352
  365
  379
  394
  410
  427
  445
  465
  485
  507
  529
  554
  579
  606
  634
  664
  695
  728
  763
  800
  839
  879
  922
Adjusted assets (=assets-cash), $m
  281
  287
  293
  301
  309
  319
  329
  340
  352
  365
  379
  394
  410
  427
  445
  465
  485
  507
  529
  554
  579
  606
  634
  664
  695
  728
  763
  800
  839
  879
  922
Revenue / Adjusted assets
  0.918
  0.916
  0.918
  0.917
  0.919
  0.918
  0.918
  0.918
  0.918
  0.918
  0.918
  0.919
  0.920
  0.918
  0.919
  0.918
  0.918
  0.917
  0.919
  0.917
  0.917
  0.917
  0.918
  0.917
  0.918
  0.919
  0.919
  0.918
  0.918
  0.918
  0.918
Average production assets, $m
  113
  115
  117
  120
  124
  128
  132
  136
  141
  146
  152
  158
  164
  171
  178
  186
  194
  203
  212
  222
  232
  242
  254
  266
  278
  292
  306
  320
  336
  352
  369
Working capital, $m
  110
  99
  101
  104
  107
  110
  114
  117
  122
  126
  131
  136
  142
  148
  154
  160
  167
  175
  183
  191
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
Total debt, $m
  20
  21
  23
  24
  26
  28
  30
  33
  35
  38
  41
  44
  48
  51
  55
  59
  64
  68
  73
  78
  84
  90
  96
  102
  109
  116
  123
  131
  139
  148
  157
Total liabilities, $m
  60
  61
  63
  64
  66
  68
  70
  73
  75
  78
  81
  84
  88
  91
  95
  99
  104
  108
  113
  118
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
Total equity, $m
  234
  225
  231
  236
  243
  250
  259
  267
  277
  287
  298
  310
  323
  336
  350
  365
  381
  398
  416
  435
  455
  476
  498
  522
  547
  573
  600
  629
  659
  691
  725
Total liabilities and equity, $m
  294
  286
  294
  300
  309
  318
  329
  340
  352
  365
  379
  394
  411
  427
  445
  464
  485
  506
  529
  553
  579
  606
  634
  664
  696
  729
  763
  800
  838
  879
  922
Debt-to-equity ratio
  0.085
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.220
Adjusted equity ratio
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786
  0.786

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
Depreciation, amort., depletion, $m
  19
  18
  19
  19
  20
  20
  21
  21
  22
  23
  24
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
Funds from operations, $m
  16
  35
  35
  36
  37
  38
  39
  41
  42
  44
  45
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  88
  93
  97
  102
  107
Change in working capital, $m
  -14
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  30
  33
  33
  34
  34
  35
  36
  37
  38
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
Maintenance CAPEX, $m
  0
  -17
  -17
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
New CAPEX, $m
  -32
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Cash from investing activities, $m
  -34
  -19
  -20
  -20
  -21
  -22
  -23
  -23
  -25
  -26
  -28
  -28
  -29
  -31
  -32
  -34
  -35
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -62
  -65
  -69
Free cash flow, $m
  -4
  14
  14
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
Issuance/(repayment) of debt, $m
  4
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Issuance/(repurchase) of shares, $m
  1
  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
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Total cash flow (excl. dividends), $m
  0
  15
  15
  15
  15
  15
  15
  15
  16
  16
  16
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
Retained Cash Flow (-), $m
  -6
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
Prev. year cash balance distribution, $m
 
  13
  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
  10
  9
  8
  8
  7
  7
  6
  6
  5
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  -1
  -1
  -1
  -1
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
  9
  8
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  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
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Exactech, Inc. develops, manufactures, markets, distributes and sells orthopedic implant devices, related surgical instrumentation and biologic services to hospitals and physicians. The Company's segments include knee, hip, biologics and spine, extremity and other products. Its other products segment includes miscellaneous sales categories, such as bone cement, instrument rental fees, shipping charges and other product lines. The Company distributes joint replacement systems, including knee, hip, spine and extremity implant systems, and biologic products and services and bone cement materials used in orthopedic surgery and dental procedures. The Exactech Knee System provides solutions for partial, primary and revision total knee arthroplasty. Its hip solutions address the continuum of hip arthroplasty. It manufactures and distributes various products and services designed for the healing and regeneration of bone and soft tissue, including products, which contain human allograft.

FINANCIAL RATIOS  of  Exactech (EXAC)

Valuation Ratios
P/E Ratio 0
Price to Sales 1.8
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 15.2
Price to Free Cash Flow -227.3
Growth Rates
Sales Growth Rate 6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 52.4%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 8.5%
Total Debt to Equity 8.5%
Interest Coverage 8
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 4.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 68.6%
Gross Margin - 3 Yr. Avg. 69.4%
EBITDA Margin 10.5%
EBITDA Margin - 3 Yr. Avg. 14.8%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 7.6%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 6.9%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 52.8%
Payout Ratio 0%

EXAC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EXAC stock intrinsic value calculation we used $258 million for the last fiscal year's total revenue generated by Exactech. The default revenue input number comes from 2016 income statement of Exactech. 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 EXAC stock valuation model: a) initial revenue growth rate of 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 EXAC is calculated based on our internal credit rating of Exactech, 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 Exactech.
    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 EXAC stock the variable cost ratio is equal to 91.1%.

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 EXAC 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 Exactech.

Corporate tax rate of 27% is the nominal tax rate for Exactech. 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 EXAC 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 EXAC are equal to 43.6%.

Life of production assets of 6.8 years is the average useful life of capital assets used in Exactech 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 EXAC is equal to 37.6%. 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 - $234 million for Exactech - 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 14.092 million for Exactech 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 Exactech at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
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WMGI Wright Medical 26.47 0.43  str.sell
SYK Stryker 149.32 99.03  sell
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JNJ Johnson&Johnso 142.04 96.55  sell
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COMPANY NEWS

▶ ETFs with exposure to Exactech, Inc. : October 9, 2017   [Oct-09-17 11:30AM  Capital Cube]
▶ Exactech posts 2Q profit   [Jul-28-17 08:04PM  Associated Press]
▶ ETFs with exposure to Exactech, Inc. : June 19, 2017   [Jun-19-17 03:19PM  Capital Cube]
▶ Exactech posts 1Q profit   [Apr-25-17 04:42PM  Associated Press]
▶ Exactech Posts Q4 Loss of 82 Cents a Share   [Feb-22-17 09:46AM  Investopedia]
▶ Exactech Posts Q4 Loss of 82 Cents a Share   [09:46AM  at Investopedia]
▶ Exactech reports 4Q loss   [10:02AM  Associated Press]
▶ Here is What Hedge Funds Think About Exactech, Inc. (EXAC)   [Dec-11-16 04:31AM  at Insider Monkey]
Financial statements of EXAC
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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