Intrinsic value of ICU Medical - ICUI

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$148.50

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$148.50

 
Intrinsic value

$89.55

 
Up/down potential

-40%

 
Rating

sell

 
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 ICUI 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 2.4

 

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, %
  10.82
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
Revenue, $m
  379
  404
  431
  458
  487
  517
  548
  580
  614
  649
  686
  724
  764
  806
  850
  895
  943
  993
  1,046
  1,101
  1,159
  1,219
  1,282
  1,348
  1,418
  1,491
  1,567
  1,647
  1,731
  1,819
  1,911
Variable operating expenses, $m
 
  240
  256
  272
  289
  307
  325
  344
  364
  385
  407
  429
  453
  477
  503
  530
  559
  589
  620
  652
  686
  722
  759
  799
  840
  883
  928
  976
  1,025
  1,078
  1,132
Fixed operating expenses, $m
 
  74
  76
  78
  79
  81
  83
  86
  88
  90
  92
  94
  97
  99
  102
  104
  107
  110
  112
  115
  118
  121
  124
  127
  130
  133
  137
  140
  144
  147
  151
Total operating expenses, $m
  295
  314
  332
  350
  368
  388
  408
  430
  452
  475
  499
  523
  550
  576
  605
  634
  666
  699
  732
  767
  804
  843
  883
  926
  970
  1,016
  1,065
  1,116
  1,169
  1,225
  1,283
Operating income, $m
  84
  90
  99
  109
  118
  129
  139
  150
  162
  174
  187
  201
  215
  229
  245
  261
  278
  295
  314
  334
  354
  376
  399
  422
  448
  474
  502
  531
  562
  594
  628
EBITDA, $m
  103
  110
  120
  131
  142
  154
  166
  178
  192
  206
  220
  235
  251
  268
  285
  303
  323
  343
  364
  386
  409
  434
  460
  487
  515
  545
  577
  610
  644
  681
  719
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
Earnings before tax, $m
  85
  90
  99
  108
  118
  128
  139
  150
  161
  173
  186
  199
  213
  228
  243
  259
  275
  293
  311
  331
  351
  373
  395
  419
  444
  470
  497
  526
  556
  588
  622
Tax expense, $m
  22
  24
  27
  29
  32
  35
  37
  40
  43
  47
  50
  54
  58
  61
  66
  70
  74
  79
  84
  89
  95
  101
  107
  113
  120
  127
  134
  142
  150
  159
  168
Net income, $m
  63
  66
  72
  79
  86
  93
  101
  109
  118
  126
  135
  146
  156
  166
  177
  189
  201
  214
  227
  242
  256
  272
  288
  306
  324
  343
  363
  384
  406
  430
  454

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  445
  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
  705
  277
  295
  314
  334
  354
  376
  398
  421
  445
  470
  497
  524
  553
  583
  614
  647
  681
  717
  755
  795
  836
  879
  925
  972
  1,022
  1,075
  1,130
  1,187
  1,248
  1,311
Adjusted assets (=assets-cash), $m
  260
  277
  295
  314
  334
  354
  376
  398
  421
  445
  470
  497
  524
  553
  583
  614
  647
  681
  717
  755
  795
  836
  879
  925
  972
  1,022
  1,075
  1,130
  1,187
  1,248
  1,311
Revenue / Adjusted assets
  1.458
  1.458
  1.461
  1.459
  1.458
  1.460
  1.457
  1.457
  1.458
  1.458
  1.460
  1.457
  1.458
  1.458
  1.458
  1.458
  1.457
  1.458
  1.459
  1.458
  1.458
  1.458
  1.458
  1.457
  1.459
  1.459
  1.458
  1.458
  1.458
  1.458
  1.458
Average production assets, $m
  103
  110
  117
  125
  132
  141
  149
  158
  167
  176
  186
  197
  208
  219
  231
  244
  257
  270
  285
  299
  315
  332
  349
  367
  386
  405
  426
  448
  471
  495
  520
Working capital, $m
  528
  89
  94
  100
  107
  113
  120
  127
  134
  142
  150
  159
  167
  176
  186
  196
  207
  218
  229
  241
  254
  267
  281
  295
  310
  326
  343
  361
  379
  398
  419
Total debt, $m
  0
  3
  6
  9
  13
  16
  20
  24
  28
  32
  36
  41
  46
  51
  56
  61
  67
  73
  79
  86
  92
  100
  107
  115
  123
  132
  141
  150
  160
  171
  182
Total liabilities, $m
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  137
  145
  152
  160
  168
  177
  186
  195
  205
  216
  227
Total equity, $m
  660
  229
  244
  260
  276
  293
  311
  329
  348
  368
  389
  411
  433
  457
  482
  508
  535
  564
  593
  624
  657
  691
  727
  765
  804
  845
  889
  934
  982
  1,032
  1,084
Total liabilities and equity, $m
  705
  277
  295
  314
  334
  354
  376
  398
  421
  445
  470
  497
  524
  553
  583
  614
  647
  682
  717
  755
  794
  836
  879
  925
  972
  1,022
  1,075
  1,129
  1,187
  1,248
  1,311
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.040
  0.050
  0.060
  0.060
  0.070
  0.080
  0.090
  0.090
  0.100
  0.110
  0.110
  0.120
  0.120
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
Adjusted equity ratio
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827
  0.827

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  63
  66
  72
  79
  86
  93
  101
  109
  118
  126
  135
  146
  156
  166
  177
  189
  201
  214
  227
  242
  256
  272
  288
  306
  324
  343
  363
  384
  406
  430
  454
Depreciation, amort., depletion, $m
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  36
  38
  41
  43
  45
  47
  50
  53
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  91
Funds from operations, $m
  81
  86
  94
  102
  110
  119
  128
  137
  147
  158
  169
  180
  192
  205
  218
  232
  246
  261
  277
  294
  312
  330
  350
  370
  391
  414
  438
  463
  489
  516
  545
Change in working capital, $m
  -9
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
Cash from operations, $m
  90
  85
  88
  96
  104
  112
  121
  130
  140
  150
  161
  172
  183
  195
  208
  222
  236
  250
  266
  282
  299
  317
  336
  356
  376
  398
  421
  445
  470
  497
  525
Maintenance CAPEX, $m
  0
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -36
  -38
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
New CAPEX, $m
  -25
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  16
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -47
  -50
  -53
  -56
  -59
  -61
  -65
  -69
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -112
Free cash flow, $m
  106
  60
  61
  68
  74
  81
  88
  95
  103
  111
  120
  129
  138
  148
  158
  169
  180
  192
  204
  217
  231
  245
  260
  276
  293
  311
  329
  349
  369
  391
  413
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
Issuance/(repurchase) of shares, $m
  2
  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  
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
Total cash flow (excl. dividends), $m
  109
  63
  64
  71
  77
  84
  92
  99
  107
  115
  124
  133
  143
  153
  163
  174
  186
  198
  210
  224
  238
  252
  268
  284
  301
  319
  338
  358
  379
  401
  424
Retained Cash Flow (-), $m
  -80
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -52
Prev. year cash balance distribution, $m
 
  445
  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
 
  494
  49
  55
  61
  68
  74
  81
  88
  96
  103
  111
  120
  129
  138
  148
  158
  169
  181
  192
  205
  218
  232
  247
  262
  278
  295
  313
  331
  351
  372
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
 
  474
  45
  48
  50
  52
  54
  55
  55
  55
  54
  53
  51
  49
  46
  43
  40
  37
  33
  30
  26
  23
  19
  16
  13
  11
  9
  7
  5
  4
  3
Current shareholders' claim on cash, %
  100
  100.0
  100.0
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ICU Medical, Inc. develops, manufactures, and sells medical devices used in infusion therapy, oncology, and critical care applications worldwide. It offers infusion therapy products comprising a tube running from a bottle or plastic bag containing a solution to a catheter inserted in a patient’s vein for use in hospitals and ambulatory clinics. The company’s infusion therapy products include needlefree connector products, such as MicroClave and MicroClave Clear, Neutron, NanoClave, SwabCap, and Clave; custom infusion sets; and Tego needlefree hemodialysis connectors. It also provides critical care products used to monitor signs, as well as physiological functions of organ systems. The company’s critical care products comprises hemodynamic monitoring systems and SafeSet closed blood sampling and conservation systems, as well as catheters, Lopez Valve, and cables and accessories for hemodynamic monitoring. In addition, it offers a line of oncology products that are used to prepare and deliver hazardous medications used in chemotherapy, such as ChemoLock and ChemoClave closed system transfer devices and components, and Diana hazardous drug compounding systems. The company sells its products to medical product manufacturers, distributors, and end users. ICU Medical, Inc. was founded in 1984 and is headquartered in San Clemente, California.

FINANCIAL RATIOS  of  ICU Medical (ICUI)

Valuation Ratios
P/E Ratio 38.5
Price to Sales 6.4
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 27
Price to Free Cash Flow 37.3
Growth Rates
Sales Growth Rate 10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 78.6%
Cap. Spend. - 3 Yr. Gr. Rate 4.6%
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 9.5%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 10.2%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 53%
Gross Margin - 3 Yr. Avg. 51.6%
EBITDA Margin 27.4%
EBITDA Margin - 3 Yr. Avg. 24.1%
Operating Margin 22.2%
Oper. Margin - 3 Yr. Avg. 18.3%
Pre-Tax Margin 22.4%
Pre-Tax Margin - 3 Yr. Avg. 18.6%
Net Profit Margin 16.6%
Net Profit Margin - 3 Yr. Avg. 12.7%
Effective Tax Rate 25.9%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 0%

ICUI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ICUI stock intrinsic value calculation we used $379 million for the last fiscal year's total revenue generated by ICU Medical. The default revenue input number comes from 2016 income statement of ICU Medical. 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 ICUI stock valuation model: a) initial revenue growth rate of 6.7% 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 ICUI is calculated based on our internal credit rating of ICU Medical, 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 ICU Medical.
    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 ICUI stock the variable cost ratio is equal to 59.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $72 million in the base year in the intrinsic value calculation for ICUI 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 ICU Medical.

Corporate tax rate of 27% is the nominal tax rate for ICU Medical. 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 ICUI 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 ICUI are equal to 27.2%.

Life of production assets of 5.7 years is the average useful life of capital assets used in ICU Medical 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 ICUI is equal to 21.9%. 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 - $660 million for ICU Medical - 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 16.372 million for ICU Medical 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 ICU Medical at the current share price and the inputted number of shares is $2.4 billion.


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COMPANY NEWS

▶ ETFs with exposure to ICU Medical, Inc. : April 5, 2017   [Apr-05-17 04:54PM  Capital Cube]
▶ [$$] ICU Medical Outlook Misses Wall Street Targets   [Mar-01-17 09:40PM  The Wall Street Journal]
▶ ICU Medical beats 4Q profit forecasts   [05:48PM  Associated Press]
▶ Is ICU Medical, Incorporated (ICUI) A Good Stock To Buy?   [Dec-10-16 04:06PM  at Insider Monkey]
▶ Pfizer Sells Hospira Device Unit to ICU Medical   [09:25AM  at Investopedia]
▶ Pfizer Sells Infusion Therapy Business (PFE)   [03:22PM  at Investopedia]
▶ [$$] ICU Medical To Buy Pfizer Unit in $1 Billion Deal   [09:38AM  at The Wall Street Journal]
Stock chart of ICUI Financial statements of ICUI
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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