Intrinsic value of Kindred Healthcare - KND

Previous Close

$9.00

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$9.00

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of KND 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, %
  2.34
  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
  7,220
  6,155
  6,296
  6,458
  6,640
  6,841
  7,062
  7,302
  7,563
  7,843
  8,144
  8,466
  8,810
  9,176
  9,564
  9,977
  10,414
  10,877
  11,367
  11,884
  12,430
  13,006
  13,613
  14,254
  14,929
  15,639
  16,388
  17,175
  18,004
  18,876
  19,793
Variable operating expenses, $m
 
  3,459
  3,533
  3,616
  3,710
  3,814
  3,928
  4,053
  4,187
  4,332
  4,488
  4,375
  4,552
  4,741
  4,942
  5,155
  5,381
  5,620
  5,873
  6,140
  6,423
  6,720
  7,034
  7,365
  7,714
  8,081
  8,468
  8,875
  9,303
  9,754
  10,227
Fixed operating expenses, $m
 
  2,934
  2,999
  3,065
  3,132
  3,201
  3,271
  3,343
  3,417
  3,492
  3,569
  3,647
  3,728
  3,810
  3,894
  3,979
  4,067
  4,156
  4,248
  4,341
  4,437
  4,534
  4,634
  4,736
  4,840
  4,947
  5,055
  5,167
  5,280
  5,396
  5,515
Total operating expenses, $m
  7,294
  6,393
  6,532
  6,681
  6,842
  7,015
  7,199
  7,396
  7,604
  7,824
  8,057
  8,022
  8,280
  8,551
  8,836
  9,134
  9,448
  9,776
  10,121
  10,481
  10,860
  11,254
  11,668
  12,101
  12,554
  13,028
  13,523
  14,042
  14,583
  15,150
  15,742
Operating income, $m
  -75
  -239
  -235
  -223
  -203
  -174
  -138
  -94
  -41
  19
  88
  444
  530
  625
  729
  843
  966
  1,101
  1,246
  1,402
  1,571
  1,751
  1,945
  2,153
  2,375
  2,612
  2,865
  3,134
  3,421
  3,726
  4,051
EBITDA, $m
  85
  415
  428
  450
  481
  522
  572
  630
  699
  776
  863
  960
  1,066
  1,184
  1,311
  1,450
  1,601
  1,763
  1,938
  2,126
  2,327
  2,543
  2,774
  3,021
  3,284
  3,564
  3,863
  4,180
  4,517
  4,876
  5,256
Interest expense (income), $m
  216
  237
  214
  222
  232
  243
  254
  267
  281
  297
  313
  331
  350
  370
  391
  414
  438
  464
  491
  519
  550
  582
  615
  651
  688
  728
  769
  813
  859
  908
  959
Earnings before tax, $m
  -303
  -476
  -449
  -445
  -434
  -417
  -392
  -361
  -323
  -278
  -225
  113
  180
  255
  338
  429
  528
  637
  755
  883
  1,021
  1,170
  1,330
  1,502
  1,686
  1,884
  2,095
  2,321
  2,561
  2,818
  3,092
Tax expense, $m
  315
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  31
  49
  69
  91
  116
  143
  172
  204
  238
  276
  316
  359
  406
  455
  509
  566
  627
  692
  761
  835
Net income, $m
  -664
  -476
  -449
  -445
  -434
  -417
  -392
  -361
  -323
  -278
  -225
  83
  132
  186
  247
  313
  386
  465
  551
  644
  745
  854
  971
  1,096
  1,231
  1,375
  1,529
  1,694
  1,870
  2,057
  2,257

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  246
  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
  6,113
  5,338
  5,461
  5,601
  5,759
  5,933
  6,125
  6,333
  6,559
  6,802
  7,063
  7,343
  7,641
  7,958
  8,295
  8,653
  9,032
  9,434
  9,858
  10,307
  10,780
  11,280
  11,807
  12,362
  12,948
  13,564
  14,213
  14,896
  15,615
  16,371
  17,167
Adjusted assets (=assets-cash), $m
  5,867
  5,338
  5,461
  5,601
  5,759
  5,933
  6,125
  6,333
  6,559
  6,802
  7,063
  7,343
  7,641
  7,958
  8,295
  8,653
  9,032
  9,434
  9,858
  10,307
  10,780
  11,280
  11,807
  12,362
  12,948
  13,564
  14,213
  14,896
  15,615
  16,371
  17,167
Revenue / Adjusted assets
  1.231
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
  1.153
Average production assets, $m
  1,559
  3,748
  3,834
  3,933
  4,044
  4,166
  4,301
  4,447
  4,606
  4,777
  4,960
  5,156
  5,365
  5,588
  5,825
  6,076
  6,342
  6,624
  6,922
  7,237
  7,570
  7,921
  8,291
  8,681
  9,092
  9,524
  9,980
  10,460
  10,965
  11,496
  12,054
Working capital, $m
  798
  -209
  -214
  -220
  -226
  -233
  -240
  -248
  -257
  -267
  -277
  -288
  -300
  -312
  -325
  -339
  -354
  -370
  -386
  -404
  -423
  -442
  -463
  -485
  -508
  -532
  -557
  -584
  -612
  -642
  -673
Total debt, $m
  3,243
  2,856
  2,967
  3,093
  3,235
  3,392
  3,564
  3,752
  3,955
  4,174
  4,409
  4,660
  4,929
  5,214
  5,518
  5,840
  6,181
  6,542
  6,924
  7,328
  7,754
  8,204
  8,678
  9,178
  9,705
  10,260
  10,844
  11,458
  12,105
  12,786
  13,502
Total liabilities, $m
  5,300
  4,804
  4,915
  5,041
  5,183
  5,340
  5,512
  5,700
  5,903
  6,122
  6,357
  6,608
  6,877
  7,162
  7,466
  7,788
  8,129
  8,490
  8,872
  9,276
  9,702
  10,152
  10,626
  11,126
  11,653
  12,208
  12,792
  13,407
  14,054
  14,734
  15,450
Total equity, $m
  813
  534
  546
  560
  576
  593
  612
  633
  656
  680
  706
  734
  764
  796
  830
  865
  903
  943
  986
  1,031
  1,078
  1,128
  1,181
  1,236
  1,295
  1,356
  1,421
  1,490
  1,562
  1,637
  1,717
Total liabilities and equity, $m
  6,113
  5,338
  5,461
  5,601
  5,759
  5,933
  6,124
  6,333
  6,559
  6,802
  7,063
  7,342
  7,641
  7,958
  8,296
  8,653
  9,032
  9,433
  9,858
  10,307
  10,780
  11,280
  11,807
  12,362
  12,948
  13,564
  14,213
  14,897
  15,616
  16,371
  17,167
Debt-to-equity ratio
  3.989
  5.350
  5.430
  5.520
  5.620
  5.720
  5.820
  5.920
  6.030
  6.140
  6.240
  6.350
  6.450
  6.550
  6.650
  6.750
  6.840
  6.930
  7.020
  7.110
  7.190
  7.270
  7.350
  7.420
  7.500
  7.560
  7.630
  7.690
  7.750
  7.810
  7.870
Adjusted equity ratio
  0.097
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -664
  -476
  -449
  -445
  -434
  -417
  -392
  -361
  -323
  -278
  -225
  83
  132
  186
  247
  313
  386
  465
  551
  644
  745
  854
  971
  1,096
  1,231
  1,375
  1,529
  1,694
  1,870
  2,057
  2,257
Depreciation, amort., depletion, $m
  160
  654
  663
  673
  684
  696
  709
  724
  740
  757
  775
  516
  537
  559
  582
  608
  634
  662
  692
  724
  757
  792
  829
  868
  909
  952
  998
  1,046
  1,096
  1,150
  1,205
Funds from operations, $m
  91
  178
  213
  227
  249
  279
  317
  363
  417
  479
  550
  598
  668
  745
  829
  921
  1,020
  1,127
  1,243
  1,368
  1,502
  1,646
  1,800
  1,964
  2,140
  2,328
  2,527
  2,740
  2,966
  3,207
  3,462
Change in working capital, $m
  -94
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
Cash from operations, $m
  185
  182
  218
  233
  255
  286
  325
  371
  426
  489
  560
  609
  680
  757
  842
  935
  1,035
  1,143
  1,260
  1,386
  1,521
  1,666
  1,821
  1,986
  2,163
  2,352
  2,553
  2,767
  2,995
  3,236
  3,494
Maintenance CAPEX, $m
  0
  -367
  -375
  -383
  -393
  -404
  -417
  -430
  -445
  -461
  -478
  -496
  -516
  -537
  -559
  -582
  -608
  -634
  -662
  -692
  -724
  -757
  -792
  -829
  -868
  -909
  -952
  -998
  -1,046
  -1,096
  -1,150
New CAPEX, $m
  -131
  -76
  -86
  -99
  -111
  -123
  -135
  -146
  -159
  -171
  -183
  -196
  -209
  -223
  -237
  -251
  -266
  -282
  -298
  -315
  -333
  -351
  -370
  -390
  -411
  -433
  -456
  -480
  -505
  -531
  -559
Cash from investing activities, $m
  -200
  -443
  -461
  -482
  -504
  -527
  -552
  -576
  -604
  -632
  -661
  -692
  -725
  -760
  -796
  -833
  -874
  -916
  -960
  -1,007
  -1,057
  -1,108
  -1,162
  -1,219
  -1,279
  -1,342
  -1,408
  -1,478
  -1,551
  -1,627
  -1,709
Free cash flow, $m
  -15
  -261
  -243
  -249
  -249
  -241
  -226
  -205
  -177
  -142
  -101
  -83
  -45
  -2
  47
  101
  161
  227
  300
  379
  465
  558
  659
  767
  884
  1,010
  1,145
  1,289
  1,444
  1,609
  1,785
Issuance/(repayment) of debt, $m
  138
  -306
  110
  126
  142
  157
  172
  188
  203
  219
  235
  251
  268
  286
  303
  322
  341
  361
  382
  404
  426
  450
  474
  500
  527
  555
  584
  615
  647
  681
  716
Issuance/(repurchase) of shares, $m
  0
  887
  462
  459
  450
  434
  411
  382
  345
  302
  251
  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  
  105
  581
  572
  585
  592
  591
  583
  570
  548
  521
  486
  251
  268
  286
  303
  322
  341
  361
  382
  404
  426
  450
  474
  500
  527
  555
  584
  615
  647
  681
  716
Total cash flow (excl. dividends), $m
  90
  320
  329
  336
  343
  350
  357
  364
  371
  378
  386
  169
  223
  284
  350
  423
  502
  588
  682
  782
  891
  1,007
  1,133
  1,267
  1,411
  1,565
  1,729
  1,904
  2,091
  2,290
  2,501
Retained Cash Flow (-), $m
  687
  -887
  -462
  -459
  -450
  -434
  -411
  -382
  -345
  -302
  -251
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
  -80
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
 
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
Cash available for distribution, $m
 
  -567
  -132
  -123
  -107
  -84
  -54
  -17
  26
  76
  134
  141
  193
  252
  316
  387
  464
  548
  639
  737
  843
  958
  1,080
  1,212
  1,352
  1,503
  1,664
  1,836
  2,019
  2,214
  2,422
Discount rate, %
 
  14.20
  14.91
  15.66
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
  25.50
  26.78
  28.12
  29.52
  31.00
  32.55
  34.17
  35.88
  37.68
  39.56
  41.54
  43.62
  45.80
  48.09
  50.49
  53.02
  55.67
  58.45
PV of cash for distribution, $m
 
  -496
  -100
  -79
  -58
  -38
  -20
  -5
  6
  14
  18
  14
  14
  13
  11
  9
  7
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  47.2
  41.6
  36.8
  32.7
  29.3
  26.4
  24.1
  22.2
  20.7
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6
  19.6

Kindred Healthcare, Inc., incorporated on March 27, 1998, is a healthcare services company. The Company, through its subsidiaries, operates transitional care (TC) hospitals, a home health, hospice and community care business, inpatient rehabilitation hospitals (IRFs), a contract rehabilitation services business, nursing centers and assisted living facilities across the United States. The Company operates through divisions: the Kindred at Home division, the hospital division, the Kindred Rehabilitation Services division and the nursing center division. These divisions represent six segments: home health services, hospice services, hospitals, Kindred Hospital Rehabilitation Services, RehabCare and nursing centers. The home health services and hospice services operating segments are contained within the Kindred at Home division while the Kindred Hospital Rehabilitation Services and RehabCare operating segments are both contained within the Kindred Rehabilitation Services division.

FINANCIAL RATIOS  of  Kindred Healthcare (KND)

Valuation Ratios
P/E Ratio -1.2
Price to Sales 0.1
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 4.1
Price to Free Cash Flow 14.2
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.7%
Cap. Spend. - 3 Yr. Gr. Rate 3%
Financial Strength
Quick Ratio 9
Current Ratio 0.4
LT Debt to Equity 395.4%
Total Debt to Equity 398.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -3.6%
Ret/ On Assets - 3 Yr. Avg. -0.9%
Return On Total Capital -15.3%
Ret/ On T. Cap. - 3 Yr. Avg. -6.6%
Return On Equity -57.4%
Return On Equity - 3 Yr. Avg. -23.4%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 94.7%
Gross Margin - 3 Yr. Avg. 94.5%
EBITDA Margin 1%
EBITDA Margin - 3 Yr. Avg. 3.4%
Operating Margin -1%
Oper. Margin - 3 Yr. Avg. 1.4%
Pre-Tax Margin -4.2%
Pre-Tax Margin - 3 Yr. Avg. -1.8%
Net Profit Margin -9.2%
Net Profit Margin - 3 Yr. Avg. -4%
Effective Tax Rate -104%
Eff/ Tax Rate - 3 Yr. Avg. -19.6%
Payout Ratio -7.8%

KND stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KND stock intrinsic value calculation we used $6034 million for the last fiscal year's total revenue generated by Kindred Healthcare. The default revenue input number comes from 2016 income statement of Kindred Healthcare. 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 KND 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 14.2%, whose default value for KND is calculated based on our internal credit rating of Kindred Healthcare, 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 Kindred Healthcare.
    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 KND stock the variable cost ratio is equal to 56.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2871 million in the base year in the intrinsic value calculation for KND 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 7.5% for Kindred Healthcare.

Corporate tax rate of 27% is the nominal tax rate for Kindred Healthcare. 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 KND stock is equal to 0.3%.

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 KND are equal to 60.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Kindred Healthcare 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 KND is equal to -3.4%. 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 - $123 million for Kindred Healthcare - 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 88 million for Kindred Healthcare 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 Kindred Healthcare at the current share price and the inputted number of shares is $0.8 billion.

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Financial statements of KND
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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