Intrinsic value of Health Insurance Innovations Cl A - HIIQ

Previous Close

$21.50

  Intrinsic Value

$277.12

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  Rating & Target

str. buy

+999%

Previous close

$21.50

 
Intrinsic value

$277.12

 
Up/down potential

+999%

 
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

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, %
  76.19
  40.90
  37.31
  34.08
  31.17
  28.55
  26.20
  24.08
  22.17
  20.45
  18.91
  17.52
  16.27
  15.14
  14.13
  13.21
  12.39
  11.65
  10.99
  10.39
  9.85
  9.36
  8.93
  8.54
  8.18
  7.86
  7.58
  7.32
  7.09
  6.88
  6.69
Revenue, $m
  0
  261
  358
  480
  629
  809
  1,021
  1,267
  1,548
  1,865
  2,217
  2,606
  3,030
  3,488
  3,981
  4,507
  5,065
  5,656
  6,277
  6,929
  7,612
  8,324
  9,068
  9,841
  10,647
  11,484
  12,354
  13,258
  14,198
  15,175
  16,190
Variable operating expenses, $m
 
  194
  265
  354
  463
  594
  748
  928
  1,132
  1,363
  1,620
  1,899
  2,208
  2,542
  2,901
  3,285
  3,692
  4,122
  4,575
  5,050
  5,548
  6,067
  6,609
  7,173
  7,760
  8,370
  9,004
  9,663
  10,348
  11,060
  11,800
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
  223
  294
  384
  494
  626
  780
  961
  1,166
  1,398
  1,656
  1,936
  2,246
  2,581
  2,941
  3,326
  3,734
  4,165
  4,619
  5,095
  5,594
  6,114
  6,657
  7,222
  7,811
  8,422
  9,057
  9,718
  10,404
  11,117
  11,859
Operating income, $m
  18
  38
  64
  96
  136
  184
  240
  306
  382
  467
  561
  670
  784
  907
  1,040
  1,182
  1,332
  1,491
  1,658
  1,834
  2,018
  2,210
  2,411
  2,619
  2,836
  3,062
  3,297
  3,541
  3,794
  4,058
  4,331
EBITDA, $m
  21
  43
  69
  102
  142
  191
  248
  315
  391
  478
  574
  679
  795
  920
  1,055
  1,198
  1,351
  1,512
  1,681
  1,860
  2,046
  2,241
  2,444
  2,655
  2,875
  3,104
  3,342
  3,589
  3,846
  4,113
  4,391
Interest expense (income), $m
  0
  0
  1
  3
  4
  6
  9
  12
  16
  20
  24
  30
  35
  41
  48
  55
  63
  71
  80
  89
  98
  108
  119
  129
  141
  152
  165
  177
  190
  204
  218
Earnings before tax, $m
  8
  38
  62
  93
  131
  177
  231
  294
  366
  447
  537
  640
  749
  866
  992
  1,126
  1,269
  1,420
  1,579
  1,745
  1,920
  2,102
  2,292
  2,490
  2,696
  2,910
  3,132
  3,363
  3,604
  3,853
  4,113
Tax expense, $m
  -5
  10
  17
  25
  35
  48
  62
  79
  99
  121
  145
  173
  202
  234
  268
  304
  343
  383
  426
  471
  518
  568
  619
  672
  728
  786
  846
  908
  973
  1,040
  1,111
Net income, $m
  5
  28
  46
  68
  96
  129
  169
  215
  267
  326
  392
  467
  546
  632
  724
  822
  926
  1,037
  1,152
  1,274
  1,401
  1,534
  1,673
  1,818
  1,968
  2,124
  2,286
  2,455
  2,631
  2,813
  3,003

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
  176
  242
  324
  425
  547
  690
  856
  1,046
  1,260
  1,498
  1,761
  2,047
  2,357
  2,690
  3,045
  3,423
  3,821
  4,241
  4,682
  5,143
  5,625
  6,127
  6,650
  7,194
  7,759
  8,347
  8,958
  9,593
  10,253
  10,939
Adjusted assets (=assets-cash), $m
  125
  176
  242
  324
  425
  547
  690
  856
  1,046
  1,260
  1,498
  1,761
  2,047
  2,357
  2,690
  3,045
  3,423
  3,821
  4,241
  4,682
  5,143
  5,625
  6,127
  6,650
  7,194
  7,759
  8,347
  8,958
  9,593
  10,253
  10,939
Revenue / Adjusted assets
  0.000
  1.483
  1.479
  1.481
  1.480
  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
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
  1.480
Average production assets, $m
  12
  17
  23
  31
  41
  53
  66
  82
  101
  121
  144
  169
  197
  227
  259
  293
  329
  368
  408
  450
  495
  541
  589
  640
  692
  746
  803
  862
  923
  986
  1,052
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
  31
  72
  123
  185
  260
  348
  450
  567
  699
  846
  1,008
  1,184
  1,375
  1,580
  1,799
  2,031
  2,277
  2,536
  2,807
  3,091
  3,388
  3,697
  4,019
  4,354
  4,703
  5,065
  5,441
  5,832
  6,239
  6,662
Total liabilities, $m
  77
  108
  149
  200
  262
  337
  425
  527
  644
  776
  923
  1,085
  1,261
  1,452
  1,657
  1,876
  2,108
  2,354
  2,613
  2,884
  3,168
  3,465
  3,774
  4,096
  4,431
  4,780
  5,142
  5,518
  5,909
  6,316
  6,739
Total equity, $m
  48
  68
  93
  125
  163
  210
  265
  329
  402
  484
  575
  676
  786
  905
  1,033
  1,169
  1,314
  1,467
  1,629
  1,798
  1,975
  2,160
  2,353
  2,553
  2,762
  2,980
  3,205
  3,440
  3,684
  3,937
  4,201
Total liabilities and equity, $m
  125
  176
  242
  325
  425
  547
  690
  856
  1,046
  1,260
  1,498
  1,761
  2,047
  2,357
  2,690
  3,045
  3,422
  3,821
  4,242
  4,682
  5,143
  5,625
  6,127
  6,649
  7,193
  7,760
  8,347
  8,958
  9,593
  10,253
  10,940
Debt-to-equity ratio
  0.000
  0.470
  0.780
  0.990
  1.130
  1.240
  1.310
  1.370
  1.410
  1.450
  1.470
  1.490
  1.510
  1.520
  1.530
  1.540
  1.550
  1.550
  1.560
  1.560
  1.570
  1.570
  1.570
  1.570
  1.580
  1.580
  1.580
  1.580
  1.580
  1.580
  1.590
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
  28
  46
  68
  96
  129
  169
  215
  267
  326
  392
  467
  546
  632
  724
  822
  926
  1,037
  1,152
  1,274
  1,401
  1,534
  1,673
  1,818
  1,968
  2,124
  2,286
  2,455
  2,631
  2,813
  3,003
Depreciation, amort., depletion, $m
  3
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  10
  11
  13
  15
  17
  19
  21
  23
  25
  28
  31
  33
  36
  39
  42
  45
  49
  52
  56
  59
Funds from operations, $m
  24
  33
  51
  74
  102
  136
  177
  223
  277
  337
  404
  477
  558
  645
  739
  839
  945
  1,057
  1,176
  1,300
  1,429
  1,565
  1,706
  1,854
  2,007
  2,166
  2,332
  2,504
  2,683
  2,869
  3,062
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
  33
  51
  74
  102
  136
  177
  223
  277
  337
  404
  477
  558
  645
  739
  839
  945
  1,057
  1,176
  1,300
  1,429
  1,565
  1,706
  1,854
  2,007
  2,166
  2,332
  2,504
  2,683
  2,869
  3,062
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -31
  -33
  -36
  -39
  -42
  -45
  -49
  -52
  -56
New CAPEX, $m
  -3
  -5
  -6
  -8
  -10
  -12
  -14
  -16
  -18
  -21
  -23
  -25
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -63
  -66
Cash from investing activities, $m
  -3
  -6
  -7
  -9
  -12
  -14
  -17
  -20
  -23
  -27
  -30
  -33
  -38
  -41
  -45
  -49
  -53
  -57
  -61
  -65
  -69
  -74
  -79
  -83
  -88
  -93
  -99
  -104
  -110
  -115
  -122
Free cash flow, $m
  15
  27
  44
  65
  91
  122
  160
  204
  254
  311
  374
  444
  520
  604
  694
  790
  892
  1,000
  1,114
  1,234
  1,360
  1,491
  1,628
  1,770
  1,918
  2,073
  2,233
  2,400
  2,573
  2,753
  2,940
Issuance/(repayment) of debt, $m
  -8
  31
  40
  51
  62
  75
  88
  102
  117
  132
  147
  162
  176
  191
  205
  219
  232
  246
  259
  271
  284
  297
  309
  322
  335
  348
  362
  376
  391
  407
  423
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
  31
  40
  51
  62
  75
  88
  102
  117
  132
  147
  162
  176
  191
  205
  219
  232
  246
  259
  271
  284
  297
  309
  322
  335
  348
  362
  376
  391
  407
  423
Total cash flow (excl. dividends), $m
  5
  59
  84
  116
  153
  197
  248
  306
  371
  443
  521
  605
  697
  795
  899
  1,009
  1,125
  1,246
  1,373
  1,506
  1,644
  1,787
  1,937
  2,092
  2,254
  2,421
  2,595
  2,776
  2,964
  3,160
  3,363
Retained Cash Flow (-), $m
  -8
  -20
  -25
  -32
  -39
  -47
  -55
  -64
  -73
  -82
  -91
  -101
  -110
  -119
  -128
  -136
  -145
  -153
  -161
  -169
  -177
  -185
  -193
  -201
  -209
  -217
  -226
  -235
  -244
  -253
  -263
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
 
  39
  59
  84
  114
  151
  193
  242
  298
  360
  430
  504
  587
  676
  771
  872
  980
  1,093
  1,212
  1,336
  1,467
  1,603
  1,744
  1,891
  2,045
  2,204
  2,370
  2,542
  2,720
  2,906
  3,099
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
 
  37
  54
  73
  94
  117
  140
  164
  186
  207
  225
  240
  250
  257
  259
  256
  249
  238
  223
  206
  186
  166
  145
  124
  104
  86
  69
  55
  42
  32
  23
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.

FINANCIAL RATIOS  of  Health Insurance Innovations Cl A (HIIQ)

Valuation Ratios
P/E Ratio 64
Price to Sales 1.7
Price to Book 6.7
Price to Tangible Book
Price to Cash Flow 17.8
Price to Free Cash Flow 21.3
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 40.9% 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 16.442 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 $0.4 billion.

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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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