Intrinsic value of Health Insurance Innovations Cl A - HIIQ

Previous Close

$27.90

  Intrinsic Value

$220.76

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  Rating & Target

str. buy

+691%

Previous close

$27.90

 
Intrinsic value

$220.76

 
Up/down potential

+691%

 
Rating

str. buy

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

We calculate the intrinsic value of HIIQ 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  76.19
  37.00
  33.80
  30.92
  28.33
  26.00
  23.90
  22.01
  20.31
  18.77
  17.40
  16.16
  15.04
  14.04
  13.13
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
Revenue, $m
  0
  253
  339
  444
  570
  718
  889
  1,085
  1,305
  1,551
  1,820
  2,114
  2,432
  2,774
  3,138
  3,525
  3,933
  4,363
  4,814
  5,286
  5,779
  6,293
  6,828
  7,384
  7,963
  8,564
  9,189
  9,839
  10,514
  11,216
  11,945
Variable operating expenses, $m
 
  189
  251
  328
  419
  527
  652
  795
  956
  1,134
  1,331
  1,541
  1,773
  2,022
  2,287
  2,569
  2,867
  3,180
  3,509
  3,853
  4,212
  4,586
  4,976
  5,382
  5,804
  6,242
  6,698
  7,171
  7,663
  8,174
  8,706
Fixed operating expenses, $m
 
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  55
  56
  57
  59
Total operating expenses, $m
  166
  218
  280
  358
  450
  559
  684
  828
  990
  1,169
  1,367
  1,578
  1,811
  2,061
  2,327
  2,610
  2,909
  3,223
  3,553
  3,898
  4,258
  4,633
  5,024
  5,431
  5,855
  6,294
  6,751
  7,226
  7,719
  8,231
  8,765
Operating income, $m
  18
  36
  58
  86
  119
  159
  205
  257
  316
  381
  454
  537
  622
  714
  811
  915
  1,025
  1,141
  1,262
  1,389
  1,521
  1,659
  1,803
  1,953
  2,109
  2,270
  2,439
  2,613
  2,795
  2,984
  3,180
EBITDA, $m
  21
  41
  64
  92
  126
  166
  212
  265
  325
  391
  464
  544
  631
  724
  823
  928
  1,039
  1,157
  1,279
  1,408
  1,542
  1,682
  1,828
  1,980
  2,138
  2,302
  2,472
  2,650
  2,834
  3,025
  3,224
Interest expense (income), $m
  0
  0
  1
  2
  4
  6
  8
  10
  13
  16
  20
  24
  28
  33
  38
  43
  49
  55
  61
  67
  74
  81
  89
  97
  105
  113
  122
  131
  141
  150
  161
Earnings before tax, $m
  8
  36
  57
  84
  116
  153
  197
  247
  303
  365
  434
  513
  594
  681
  774
  872
  976
  1,086
  1,201
  1,321
  1,447
  1,578
  1,714
  1,856
  2,004
  2,157
  2,317
  2,482
  2,654
  2,833
  3,020
Tax expense, $m
  -5
  10
  16
  23
  31
  41
  53
  67
  82
  99
  117
  138
  160
  184
  209
  236
  264
  293
  324
  357
  391
  426
  463
  501
  541
  582
  625
  670
  717
  765
  815
Net income, $m
  5
  26
  42
  61
  84
  112
  144
  180
  221
  266
  317
  374
  433
  497
  565
  637
  713
  793
  877
  964
  1,056
  1,152
  1,251
  1,355
  1,463
  1,575
  1,691
  1,812
  1,938
  2,068
  2,204

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  125
  171
  229
  300
  385
  485
  601
  733
  882
  1,048
  1,230
  1,429
  1,644
  1,874
  2,120
  2,382
  2,658
  2,948
  3,253
  3,572
  3,905
  4,252
  4,613
  4,989
  5,380
  5,787
  6,209
  6,648
  7,104
  7,578
  8,071
Adjusted assets (=assets-cash), $m
  125
  171
  229
  300
  385
  485
  601
  733
  882
  1,048
  1,230
  1,429
  1,644
  1,874
  2,120
  2,382
  2,658
  2,948
  3,253
  3,572
  3,905
  4,252
  4,613
  4,989
  5,380
  5,787
  6,209
  6,648
  7,104
  7,578
  8,071
Revenue / Adjusted assets
  0.000
  1.480
  1.480
  1.480
  1.481
  1.480
  1.479
  1.480
  1.480
  1.480
  1.480
  1.479
  1.479
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
Average production assets, $m
  12
  16
  22
  29
  37
  47
  58
  71
  85
  101
  118
  137
  158
  180
  204
  229
  256
  284
  313
  344
  376
  409
  444
  480
  518
  557
  597
  640
  683
  729
  776
Working capital, $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
Total debt, $m
  0
  28
  64
  108
  160
  222
  293
  375
  466
  568
  681
  803
  935
  1,078
  1,229
  1,390
  1,560
  1,739
  1,927
  2,123
  2,328
  2,542
  2,765
  2,996
  3,237
  3,488
  3,748
  4,018
  4,299
  4,591
  4,895
Total liabilities, $m
  77
  105
  141
  185
  237
  299
  370
  452
  543
  645
  758
  880
  1,012
  1,155
  1,306
  1,467
  1,637
  1,816
  2,004
  2,200
  2,405
  2,619
  2,842
  3,073
  3,314
  3,565
  3,825
  4,095
  4,376
  4,668
  4,972
Total equity, $m
  48
  66
  88
  115
  148
  186
  231
  282
  339
  402
  472
  549
  631
  720
  814
  915
  1,021
  1,132
  1,249
  1,372
  1,499
  1,633
  1,772
  1,916
  2,066
  2,222
  2,384
  2,553
  2,728
  2,910
  3,099
Total liabilities and equity, $m
  125
  171
  229
  300
  385
  485
  601
  734
  882
  1,047
  1,230
  1,429
  1,643
  1,875
  2,120
  2,382
  2,658
  2,948
  3,253
  3,572
  3,904
  4,252
  4,614
  4,989
  5,380
  5,787
  6,209
  6,648
  7,104
  7,578
  8,071
Debt-to-equity ratio
  0.000
  0.430
  0.730
  0.940
  1.080
  1.190
  1.270
  1.330
  1.380
  1.410
  1.440
  1.460
  1.480
  1.500
  1.510
  1.520
  1.530
  1.540
  1.540
  1.550
  1.550
  1.560
  1.560
  1.560
  1.570
  1.570
  1.570
  1.570
  1.580
  1.580
  1.580
Adjusted equity ratio
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  26
  42
  61
  84
  112
  144
  180
  221
  266
  317
  374
  433
  497
  565
  637
  713
  793
  877
  964
  1,056
  1,152
  1,251
  1,355
  1,463
  1,575
  1,691
  1,812
  1,938
  2,068
  2,204
Depreciation, amort., depletion, $m
  3
  5
  5
  6
  6
  7
  7
  8
  9
  10
  11
  8
  9
  10
  12
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
Funds from operations, $m
  24
  31
  47
  67
  91
  119
  151
  188
  230
  276
  327
  382
  442
  507
  576
  650
  727
  809
  894
  984
  1,077
  1,175
  1,276
  1,382
  1,492
  1,606
  1,725
  1,848
  1,976
  2,110
  2,248
Change in working capital, $m
  6
  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 operations, $m
  18
  31
  47
  67
  91
  119
  151
  188
  230
  276
  327
  382
  442
  507
  576
  650
  727
  809
  894
  984
  1,077
  1,175
  1,276
  1,382
  1,492
  1,606
  1,725
  1,848
  1,976
  2,110
  2,248
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
New CAPEX, $m
  -3
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -47
Cash from investing activities, $m
  -3
  -5
  -7
  -8
  -10
  -12
  -14
  -16
  -18
  -21
  -24
  -26
  -29
  -31
  -34
  -37
  -40
  -42
  -45
  -49
  -51
  -54
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -85
  -88
Free cash flow, $m
  15
  26
  41
  59
  81
  107
  137
  172
  212
  256
  304
  356
  414
  476
  542
  613
  688
  766
  849
  936
  1,026
  1,120
  1,219
  1,321
  1,427
  1,538
  1,653
  1,772
  1,896
  2,025
  2,160
Issuance/(repayment) of debt, $m
  -8
  28
  36
  44
  52
  62
  71
  81
  92
  102
  112
  122
  132
  142
  152
  161
  170
  179
  188
  196
  205
  214
  223
  232
  241
  250
  260
  270
  281
  292
  304
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -10
  28
  36
  44
  52
  62
  71
  81
  92
  102
  112
  122
  132
  142
  152
  161
  170
  179
  188
  196
  205
  214
  223
  232
  241
  250
  260
  270
  281
  292
  304
Total cash flow (excl. dividends), $m
  5
  55
  76
  103
  133
  169
  209
  254
  303
  358
  416
  479
  546
  618
  694
  774
  858
  945
  1,037
  1,132
  1,231
  1,334
  1,441
  1,553
  1,668
  1,788
  1,913
  2,042
  2,177
  2,317
  2,463
Retained Cash Flow (-), $m
  -8
  -18
  -22
  -27
  -33
  -38
  -45
  -51
  -57
  -64
  -70
  -76
  -83
  -89
  -95
  -100
  -106
  -112
  -117
  -122
  -128
  -133
  -139
  -144
  -150
  -156
  -162
  -169
  -175
  -182
  -189
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
 
  37
  54
  75
  101
  130
  164
  203
  246
  294
  346
  402
  464
  530
  600
  674
  752
  834
  920
  1,010
  1,103
  1,201
  1,302
  1,408
  1,518
  1,632
  1,751
  1,874
  2,002
  2,135
  2,274
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
 
  35
  50
  66
  83
  101
  119
  137
  154
  169
  182
  191
  198
  201
  201
  198
  191
  181
  169
  155
  140
  124
  108
  92
  77
  63
  51
  40
  31
  23
  17
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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Health Insurance Innovations, Inc. is a developer, distributor and cloud-based administrator of individual and family health insurance plans (IFPs) and supplemental products, which include short-term medical (STM) insurance plans, and guaranteed-issue and underwritten hospital indemnity plans. The Company also develops, distributes and administers supplemental products, which include a range of additional insurance and non-insurance products, such as pharmacy benefit cards, dental plans, vision plans, cancer/critical illness plans, deductible and gap protection plans, and life insurance policies that are purchased as supplements to IFP. The Company's STM plans are provided up to six months, 11 months, or 364 days of health insurance coverage with a range of deductible and copay levels. Individual major medical (IMM) plans cover prescription drugs, pre-existing conditions and preventive care, while STM plans provide optional coverage for prescription drugs.


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FINANCIAL RATIOS  of  Health Insurance Innovations Cl A (HIIQ)

Valuation Ratios
P/E Ratio 83
Price to Sales 2.2
Price to Book 8.6
Price to Tangible Book
Price to Cash Flow 23.1
Price to Free Cash Flow 27.7
Growth Rates
Sales Growth Rate 76.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 10.4%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 11.4%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 5.9%
EBITDA Margin - 3 Yr. Avg. 4.1%
Operating Margin 10.3%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate -62.5%
Eff/ Tax Rate - 3 Yr. Avg. 12.5%
Payout Ratio 0%

HIIQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HIIQ stock intrinsic value calculation we used $185 million for the last fiscal year's total revenue generated by Health Insurance Innovations Cl A. The default revenue input number comes from 2016 income statement of Health Insurance Innovations Cl A. 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 HIIQ stock valuation model: a) initial revenue growth rate of 37% 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 HIIQ is calculated based on our internal credit rating of Health Insurance Innovations Cl A, 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 Health Insurance Innovations Cl A.
    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 HIIQ stock the variable cost ratio is equal to 75.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $28 million in the base year in the intrinsic value calculation for HIIQ 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 Health Insurance Innovations Cl A.

Corporate tax rate of 27% is the nominal tax rate for Health Insurance Innovations Cl A. 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 HIIQ 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 HIIQ are equal to 6.5%.

Life of production assets of 17.7 years is the average useful life of capital assets used in Health Insurance Innovations Cl A 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 HIIQ is equal to 0%. 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 - $48 million for Health Insurance Innovations Cl A - 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 16.244 million for Health Insurance Innovations Cl A 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 Health Insurance Innovations Cl A at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Health Insurance Innovations Clears Key Benchmark, Hitting 90-Plus RS Rating   [Dec-13-17 03:00AM  Investor's Business Daily]
▶ Health Insurance Innovations posts 3Q profit   [06:40PM  Associated Press]
▶ Trump Executive Order Hits ObamaCare Insurers   [12:29PM  Investor's Business Daily]
Financial statements of HIIQ
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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