Intrinsic value of HCP - HCP

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$33.18

  Intrinsic Value

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  Value-price divergence*

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$33.18

 
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Our model is not good at valuating stocks of financial companies, such as HCP.

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

We calculate the intrinsic value of HCP 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 15.6

 

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, %
  9.74
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  2,129
  3,406
  5,263
  7,871
  11,420
  16,112
  22,150
  29,732
  39,040
  50,235
  63,451
  78,791
  96,330
  116,110
  138,148
  162,437
  188,954
  217,659
  248,506
  281,446
  316,429
  353,409
  392,348
  433,216
  475,995
  520,677
  567,269
  615,791
  666,275
  718,767
  773,326
Variable operating expenses, $m
 
  2,140
  3,304
  4,939
  7,165
  10,107
  13,893
  18,647
  24,483
  31,503
  39,789
  49,404
  60,401
  72,804
  86,622
  101,853
  118,479
  136,478
  155,820
  176,475
  198,410
  221,597
  246,013
  271,638
  298,462
  326,479
  355,693
  386,118
  417,773
  450,687
  484,896
Fixed operating expenses, $m
 
  132
  136
  139
  142
  146
  150
  153
  157
  161
  165
  169
  173
  178
  182
  187
  192
  196
  201
  206
  211
  217
  222
  228
  233
  239
  245
  251
  258
  264
  271
Total operating expenses, $m
  1,466
  2,272
  3,440
  5,078
  7,307
  10,253
  14,043
  18,800
  24,640
  31,664
  39,954
  49,573
  60,574
  72,982
  86,804
  102,040
  118,671
  136,674
  156,021
  176,681
  198,621
  221,814
  246,235
  271,866
  298,695
  326,718
  355,938
  386,369
  418,031
  450,951
  485,167
Operating income, $m
  663
  1,134
  1,823
  2,792
  4,113
  5,859
  8,108
  10,932
  14,399
  18,571
  23,496
  29,218
  35,755
  43,128
  51,343
  60,398
  70,283
  80,985
  92,485
  104,766
  117,808
  131,595
  146,113
  161,350
  177,300
  193,959
  211,331
  229,422
  248,245
  267,817
  288,159
EBITDA, $m
  1,231
  2,045
  3,228
  4,891
  7,155
  10,150
  14,005
  18,847
  24,791
  31,941
  40,383
  50,182
  61,386
  74,022
  88,101
  103,618
  120,559
  138,898
  158,606
  179,651
  202,002
  225,629
  250,507
  276,618
  303,950
  332,498
  362,267
  393,269
  425,524
  459,063
  493,921
Interest expense (income), $m
  489
  437
  728
  1,151
  1,745
  2,555
  3,624
  5,001
  6,730
  8,852
  11,405
  14,418
  17,915
  21,914
  26,424
  31,449
  36,987
  43,032
  49,577
  56,610
  64,121
  72,097
  80,528
  89,406
  98,724
  108,478
  118,665
  129,288
  140,351
  151,862
  163,830
Earnings before tax, $m
  367
  698
  1,096
  1,641
  2,367
  3,304
  4,483
  5,930
  7,670
  9,719
  12,091
  14,800
  17,840
  21,214
  24,919
  28,949
  33,296
  37,952
  42,908
  48,155
  53,687
  59,499
  65,585
  71,944
  78,575
  85,481
  92,666
  100,134
  107,894
  115,955
  124,329
Tax expense, $m
  4
  188
  296
  443
  639
  892
  1,210
  1,601
  2,071
  2,624
  3,265
  3,996
  4,817
  5,728
  6,728
  7,816
  8,990
  10,247
  11,585
  13,002
  14,496
  16,065
  17,708
  19,425
  21,215
  23,080
  25,020
  27,036
  29,131
  31,308
  33,569
Net income, $m
  628
  509
  800
  1,198
  1,728
  2,412
  3,273
  4,329
  5,599
  7,095
  8,827
  10,804
  13,023
  15,486
  18,191
  21,133
  24,306
  27,705
  31,323
  35,153
  39,192
  43,434
  47,877
  52,519
  57,360
  62,401
  67,646
  73,098
  78,762
  84,647
  90,760

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  95
  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
  15,759
  25,047
  38,698
  57,872
  83,970
  118,469
  162,868
  218,617
  287,058
  369,373
  466,549
  579,348
  708,308
  853,749
  1,015,793
  1,194,392
  1,389,365
  1,600,432
  1,827,253
  2,069,459
  2,326,686
  2,598,599
  2,884,914
  3,185,413
  3,499,961
  3,828,507
  4,171,099
  4,527,878
  4,899,084
  5,285,054
  5,686,220
Adjusted assets (=assets-cash), $m
  15,664
  25,047
  38,698
  57,872
  83,970
  118,469
  162,868
  218,617
  287,058
  369,373
  466,549
  579,348
  708,308
  853,749
  1,015,793
  1,194,392
  1,389,365
  1,600,432
  1,827,253
  2,069,459
  2,326,686
  2,598,599
  2,884,914
  3,185,413
  3,499,961
  3,828,507
  4,171,099
  4,527,878
  4,899,084
  5,285,054
  5,686,220
Revenue / Adjusted assets
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
Average production assets, $m
  12,124
  19,396
  29,967
  44,815
  65,025
  91,741
  126,123
  169,293
  222,293
  286,037
  361,288
  448,638
  548,502
  661,130
  786,614
  924,918
  1,075,902
  1,239,349
  1,414,995
  1,602,556
  1,801,748
  2,012,314
  2,234,031
  2,466,733
  2,710,314
  2,964,735
  3,230,032
  3,506,316
  3,793,772
  4,092,661
  4,403,318
Working capital, $m
  0
  1,288
  1,989
  2,975
  4,317
  6,090
  8,373
  11,239
  14,757
  18,989
  23,984
  29,783
  36,413
  43,890
  52,220
  61,401
  71,424
  82,275
  93,935
  106,387
  119,610
  133,589
  148,308
  163,756
  179,926
  196,816
  214,428
  232,769
  251,852
  271,694
  292,317
Total debt, $m
  9,190
  15,159
  23,978
  36,365
  53,224
  75,510
  104,192
  140,205
  184,418
  237,594
  300,369
  373,238
  456,546
  550,501
  655,181
  770,557
  896,509
  1,032,858
  1,179,384
  1,335,849
  1,502,018
  1,677,674
  1,862,633
  2,056,756
  2,259,954
  2,472,195
  2,693,509
  2,923,988
  3,163,787
  3,413,124
  3,672,277
Total liabilities, $m
  10,212
  16,180
  24,999
  37,386
  54,245
  76,531
  105,213
  141,226
  185,439
  238,615
  301,390
  374,259
  457,567
  551,522
  656,202
  771,578
  897,530
  1,033,879
  1,180,405
  1,336,870
  1,503,039
  1,678,695
  1,863,654
  2,057,777
  2,260,975
  2,473,216
  2,694,530
  2,925,009
  3,164,808
  3,414,145
  3,673,298
Total equity, $m
  5,548
  8,867
  13,699
  20,487
  29,725
  41,938
  57,655
  77,390
  101,618
  130,758
  165,158
  205,089
  250,741
  302,227
  359,591
  422,815
  491,835
  566,553
  646,847
  732,588
  823,647
  919,904
  1,021,259
  1,127,636
  1,238,986
  1,355,292
  1,476,569
  1,602,869
  1,734,276
  1,870,909
  2,012,922
Total liabilities and equity, $m
  15,760
  25,047
  38,698
  57,873
  83,970
  118,469
  162,868
  218,616
  287,057
  369,373
  466,548
  579,348
  708,308
  853,749
  1,015,793
  1,194,393
  1,389,365
  1,600,432
  1,827,252
  2,069,458
  2,326,686
  2,598,599
  2,884,913
  3,185,413
  3,499,961
  3,828,508
  4,171,099
  4,527,878
  4,899,084
  5,285,054
  5,686,220
Debt-to-equity ratio
  1.656
  1.710
  1.750
  1.780
  1.790
  1.800
  1.810
  1.810
  1.810
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
  1.820
Adjusted equity ratio
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  628
  509
  800
  1,198
  1,728
  2,412
  3,273
  4,329
  5,599
  7,095
  8,827
  10,804
  13,023
  15,486
  18,191
  21,133
  24,306
  27,705
  31,323
  35,153
  39,192
  43,434
  47,877
  52,519
  57,360
  62,401
  67,646
  73,098
  78,762
  84,647
  90,760
Depreciation, amort., depletion, $m
  568
  911
  1,405
  2,098
  3,043
  4,291
  5,898
  7,915
  10,392
  13,370
  16,887
  20,964
  25,631
  30,894
  36,758
  43,220
  50,276
  57,914
  66,121
  74,886
  84,194
  94,033
  104,394
  115,268
  126,650
  138,539
  150,936
  163,847
  177,279
  191,246
  205,763
Funds from operations, $m
  1,249
  1,420
  2,204
  3,297
  4,771
  6,703
  9,170
  12,244
  15,990
  20,465
  25,714
  31,768
  38,654
  46,380
  54,949
  64,353
  74,582
  85,619
  97,444
  110,039
  123,386
  137,467
  152,271
  167,787
  184,010
  200,940
  218,582
  236,944
  256,041
  275,893
  296,523
Change in working capital, $m
  35
  483
  702
  986
  1,342
  1,774
  2,282
  2,866
  3,518
  4,232
  4,996
  5,799
  6,630
  7,477
  8,330
  9,181
  10,023
  10,851
  11,660
  12,451
  13,224
  13,979
  14,719
  15,448
  16,170
  16,890
  17,612
  18,341
  19,083
  19,842
  20,623
Cash from operations, $m
  1,214
  619
  1,503
  2,311
  3,429
  4,930
  6,888
  9,378
  12,472
  16,233
  20,718
  25,970
  32,024
  38,903
  46,618
  55,172
  64,559
  74,768
  85,784
  97,588
  110,162
  123,489
  137,552
  152,339
  167,840
  184,051
  200,970
  218,603
  236,958
  256,051
  275,900
Maintenance CAPEX, $m
  0
  -567
  -906
  -1,400
  -2,094
  -3,039
  -4,287
  -5,894
  -7,911
  -10,388
  -13,366
  -16,883
  -20,964
  -25,631
  -30,894
  -36,758
  -43,220
  -50,276
  -57,914
  -66,121
  -74,886
  -84,194
  -94,033
  -104,394
  -115,268
  -126,650
  -138,539
  -150,936
  -163,847
  -177,279
  -191,246
New CAPEX, $m
  -888
  -7,273
  -10,571
  -14,849
  -20,210
  -26,716
  -34,382
  -43,171
  -53,000
  -63,744
  -75,251
  -87,350
  -99,865
  -112,627
  -125,484
  -138,304
  -150,984
  -163,447
  -175,646
  -187,561
  -199,193
  -210,565
  -221,718
  -232,702
  -243,580
  -254,421
  -265,297
  -276,284
  -287,456
  -298,889
  -310,656
Cash from investing activities, $m
  -411
  -7,840
  -11,477
  -16,249
  -22,304
  -29,755
  -38,669
  -49,065
  -60,911
  -74,132
  -88,617
  -104,233
  -120,829
  -138,258
  -156,378
  -175,062
  -194,204
  -213,723
  -233,560
  -253,682
  -274,079
  -294,759
  -315,751
  -337,096
  -358,848
  -381,071
  -403,836
  -427,220
  -451,303
  -476,168
  -501,902
Free cash flow, $m
  803
  -7,220
  -9,975
  -13,938
  -18,875
  -24,825
  -31,781
  -39,686
  -48,438
  -57,898
  -67,899
  -78,263
  -88,805
  -99,355
  -109,760
  -119,890
  -129,645
  -138,955
  -147,776
  -156,094
  -163,916
  -171,270
  -178,199
  -184,757
  -191,008
  -197,021
  -202,866
  -208,617
  -214,344
  -220,117
  -226,003
Issuance/(repayment) of debt, $m
  -1,748
  6,064
  8,818
  12,387
  16,859
  22,287
  28,682
  36,014
  44,213
  53,176
  62,775
  72,868
  83,308
  93,955
  104,680
  115,375
  125,952
  136,349
  146,526
  156,465
  166,169
  175,656
  184,959
  194,123
  203,198
  212,241
  221,314
  230,479
  239,799
  249,337
  259,153
Issuance/(repurchase) of shares, $m
  59
  4,474
  5,989
  8,339
  11,254
  14,751
  18,816
  23,407
  28,454
  33,862
  39,524
  45,325
  51,149
  56,886
  62,443
  67,739
  72,713
  77,323
  81,545
  85,370
  88,806
  91,872
  94,595
  97,011
  99,161
  101,085
  102,830
  104,438
  105,952
  107,414
  108,862
Cash from financing (excl. dividends), $m  
  -74
  10,538
  14,807
  20,726
  28,113
  37,038
  47,498
  59,421
  72,667
  87,038
  102,299
  118,193
  134,457
  150,841
  167,123
  183,114
  198,665
  213,672
  228,071
  241,835
  254,975
  267,528
  279,554
  291,134
  302,359
  313,326
  324,144
  334,917
  345,751
  356,751
  368,015
Total cash flow (excl. dividends), $m
  728
  -1,155
  -1,156
  -1,551
  -2,015
  -2,538
  -3,099
  -3,672
  -4,226
  -4,722
  -5,124
  -5,395
  -5,497
  -5,400
  -5,080
  -4,515
  -3,693
  -2,605
  -1,250
  371
  2,252
  4,386
  6,760
  9,365
  12,189
  15,220
  18,448
  21,862
  25,455
  29,220
  33,150
Retained Cash Flow (-), $m
  3,796
  -3,319
  -4,832
  -6,788
  -9,239
  -12,213
  -15,717
  -19,735
  -24,228
  -29,140
  -34,400
  -39,931
  -45,652
  -51,486
  -57,364
  -63,224
  -69,020
  -74,718
  -80,294
  -85,741
  -91,058
  -96,257
  -101,355
  -106,377
  -111,350
  -116,306
  -121,277
  -126,300
  -131,407
  -136,633
  -142,013
Prev. year cash balance distribution, $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 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
 
  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
Discount rate, %
 
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $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
Current shareholders' claim on cash, %
  100
  77.7
  62.6
  51.4
  43.0
  36.5
  31.5
  27.5
  24.3
  21.7
  19.6
  17.9
  16.4
  15.2
  14.1
  13.3
  12.5
  11.8
  11.3
  10.7
  10.3
  9.9
  9.6
  9.2
  9.0
  8.7
  8.5
  8.3
  8.1
  7.9
  7.7

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. It primarily invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing. The fund also invests in mezzanine loans and other debt instruments. It engages in acquisition, development, leasing, selling and managing of healthcare real estate and provides mortgage and other financing to healthcare providers. The fund benchmarks the performance of its portfolio against the S&P 500 Index, Berkshire Hathaway Index, and MSCI REIT Index. HCP, Inc. was formed in 1985 and is based in Irvine, California with additional office in Nashville and San Francisco.

FINANCIAL RATIOS  of  HCP (HCP)

Valuation Ratios
P/E Ratio 24.7
Price to Sales 7.3
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 47.6
Growth Rates
Sales Growth Rate 9.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -0.7%
Cap. Spend. - 3 Yr. Gr. Rate 35.4%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 149.4%
Total Debt to Equity 165.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1.8%
Return On Equity 8.4%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 65.3%
Gross Margin - 3 Yr. Avg. 70.2%
EBITDA Margin 66.9%
EBITDA Margin - 3 Yr. Avg. 64.3%
Operating Margin 31.1%
Oper. Margin - 3 Yr. Avg. 34.9%
Pre-Tax Margin 17.2%
Pre-Tax Margin - 3 Yr. Avg. 13.7%
Net Profit Margin 29.5%
Net Profit Margin - 3 Yr. Avg. 19%
Effective Tax Rate 1.1%
Eff/ Tax Rate - 3 Yr. Avg. -2.2%
Payout Ratio 156.1%

HCP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HCP stock intrinsic value calculation we used $2129 million for the last fiscal year's total revenue generated by HCP. The default revenue input number comes from 2016 income statement of HCP. 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 HCP stock valuation model: a) initial revenue growth rate of 60% 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 9.7%, whose default value for HCP is calculated based on our internal credit rating of HCP, 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 HCP.
    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 HCP stock the variable cost ratio is equal to 62.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $129 million in the base year in the intrinsic value calculation for HCP 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 4.8% for HCP.

Corporate tax rate of 27% is the nominal tax rate for HCP. 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 HCP 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 HCP are equal to 569.4%.

Life of production assets of 21.4 years is the average useful life of capital assets used in HCP 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 HCP is equal to 37.8%. 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 - $5548 million for HCP - 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 468.944 million for HCP 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 HCP at the current share price and the inputted number of shares is $15.6 billion.


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COMPANY NEWS

▶ 3 Dividend Stocks for Retirement   [Jun-16-17 12:06PM  Motley Fool]
▶ ETFs with exposure to HCP, Inc. : June 15, 2017   [Jun-15-17 02:09PM  Capital Cube]
▶ 7 Things You Didn't Know About HCP, Inc.   [Jun-05-17 12:03PM  Motley Fool]
▶ HCP Appoints Scott Brinker as Chief Investment Officer   [May-15-17 09:00AM  PR Newswire]
▶ HCP Earnings: Moving in the Right Direction   [May-02-17 05:19PM  Motley Fool]
▶ HCP reports 1Q results   [08:09AM  Associated Press]
▶ Better Buy: HCP, Inc. vs. Ventas   [Apr-28-17 03:51PM  Motley Fool]
▶ HCP Declares Quarterly Cash Dividend on Common Stock   [Apr-27-17 04:15PM  PR Newswire]
▶ How Safe Is HCP and Its Dividend?   [Apr-03-17 12:54PM  Motley Fool]
▶ 5 Reasons to Buy HCP, Inc. Now   [Mar-24-17 03:16PM  Motley Fool]
▶ Blackstone buys four South Florida senior living centers for $155M   [Mar-14-17 11:30AM  at bizjournals.com]
▶ Here's Why the Best Is Yet to Come For HCP   [Mar-10-17 01:23PM  at Motley Fool]
▶ In Your 40s? 2 Stocks You Should Consider Buying   [Mar-08-17 08:47AM  at Motley Fool]
▶ 3 Stocks You Can Keep Forever   [Feb-24-17 04:05PM  at Motley Fool]
▶ Post Earnings Coverage as HCP Revenue Increased 3.3%   [Feb-21-17 08:15AM  Accesswire]
▶ HCP Earnings Beat Estimates   [09:03PM  at Investopedia]
▶ Healthcare REIT HCP Notches a Small Beat in Q4   [05:22PM  at Investopedia]
▶ Better Buy: HCP, Inc. vs. Ventas   [Feb-06-17 04:45PM  at Motley Fool]
▶ HCP Inc. Issues New Dividend   [08:44AM  at Investopedia]
▶ 2 Stocks to Supplement Your Social Security Income   [Feb-03-17 04:01PM  at Motley Fool]
▶ HCP Declares Quarterly Cash Dividend on Common Stock   [Feb-02-17 04:15PM  PR Newswire]
▶ 20 Healthcare REITs Yielding Over 4%   [Jan-31-17 07:08AM  at Insider Monkey]
▶ 3 Reasons HCP Inc. Stock Could Rise   [Jan-27-17 02:42PM  at Motley Fool]
▶ Meet the New Members of S&P's 'Dividend Aristocrats'   [Jan-25-17 04:20PM  at Barrons.com]
▶ 3 Reasons HCP Stock Could Fall   [07:27AM  at Motley Fool]
▶ Retirement Investing 2017: 3 Stocks to Put on Your Radar   [Jan-21-17 03:58PM  at Motley Fool]
▶ 5 Signs HCP's Best Days Are Ahead   [Jan-19-17 02:12PM  at Motley Fool]
▶ HCP Announces Tax Treatment of 2016 Distributions   [Jan-17-17 04:15PM  PR Newswire]
▶ Trump Wants Universal Health Insurance Coverage? (HCP, HCN)   [Jan-16-17 09:45AM  at Investopedia]
▶ Instant Analysis: HCP Names a New CEO   [Jan-13-17 02:54PM  at Motley Fool]
▶ REITs to Suffer on Senate Plans to Repeal Obamacare (HCP)   [Jan-12-17 08:40AM  at Investopedia]
▶ HCP, Inc.'s Best Moves in 2016   [Jan-07-17 04:11PM  at Motley Fool]
▶ Better Buy: HCP, Inc. vs. Brookdale Senior Living   [Jan-04-17 08:41AM  at Motley Fool]
▶ 2 Healthcare Stocks With Better Dividends Than HCP, Inc.   [Jan-01-17 07:52AM  at Motley Fool]
▶ Where Will HCP, Inc. Be in 10 Years?   [Dec-31-16 04:09PM  at Motley Fool]
▶ The One Thing You Shouldn't Do As Interest Rates Rise   [Dec-28-16 10:12AM  at Forbes]
▶ 3 Top High-Yield Dividend Stocks   [Dec-21-16 10:52AM  at Motley Fool]
Stock chart of HCP Financial statements of HCP Annual reports of HCP
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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