Intrinsic value of Laboratory of America Holdings - LH

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$143.29

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$143.29

 
Intrinsic value

$155.73

 
Up/down potential

+9%

 
Rating

hold

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

We calculate the intrinsic value of LH 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 14.6

 

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, %
  11.08
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
Revenue, $m
  9,642
  10,172
  10,727
  11,306
  11,913
  12,548
  13,212
  13,908
  14,637
  15,400
  16,200
  17,038
  17,917
  18,838
  19,804
  20,816
  21,879
  22,993
  24,162
  25,388
  26,674
  28,024
  29,441
  30,927
  32,487
  34,125
  35,843
  37,647
  39,540
  41,528
  43,614
Variable operating expenses, $m
 
  6,800
  7,136
  7,487
  7,854
  8,238
  8,641
  9,062
  9,503
  9,965
  10,449
  10,314
  10,846
  11,404
  11,989
  12,602
  13,245
  13,919
  14,627
  15,369
  16,148
  16,965
  17,823
  18,723
  19,667
  20,658
  21,699
  22,791
  23,937
  25,140
  26,403
Fixed operating expenses, $m
 
  1,948
  1,996
  2,046
  2,097
  2,150
  2,203
  2,259
  2,315
  2,373
  2,432
  2,493
  2,555
  2,619
  2,685
  2,752
  2,821
  2,891
  2,963
  3,037
  3,113
  3,191
  3,271
  3,353
  3,437
  3,522
  3,611
  3,701
  3,793
  3,888
  3,985
Total operating expenses, $m
  8,329
  8,748
  9,132
  9,533
  9,951
  10,388
  10,844
  11,321
  11,818
  12,338
  12,881
  12,807
  13,401
  14,023
  14,674
  15,354
  16,066
  16,810
  17,590
  18,406
  19,261
  20,156
  21,094
  22,076
  23,104
  24,180
  25,310
  26,492
  27,730
  29,028
  30,388
Operating income, $m
  1,312
  1,424
  1,594
  1,773
  1,962
  2,160
  2,368
  2,588
  2,819
  3,062
  3,318
  4,231
  4,515
  4,815
  5,130
  5,463
  5,813
  6,182
  6,571
  6,981
  7,413
  7,868
  8,347
  8,852
  9,384
  9,944
  10,534
  11,156
  11,810
  12,500
  13,226
EBITDA, $m
  1,811
  2,301
  2,484
  2,676
  2,879
  3,091
  3,315
  3,551
  3,798
  4,059
  4,334
  4,623
  4,928
  5,249
  5,587
  5,943
  6,318
  6,713
  7,129
  7,567
  8,028
  8,514
  9,026
  9,565
  10,133
  10,731
  11,361
  12,024
  12,722
  13,457
  14,231
Interest expense (income), $m
  211
  190
  205
  222
  240
  258
  277
  297
  318
  340
  363
  387
  412
  439
  467
  496
  526
  558
  592
  627
  664
  703
  743
  786
  831
  878
  927
  979
  1,033
  1,090
  1,150
Earnings before tax, $m
  1,106
  1,235
  1,389
  1,551
  1,722
  1,902
  2,091
  2,291
  2,501
  2,722
  2,955
  3,844
  4,103
  4,376
  4,664
  4,967
  5,287
  5,624
  5,980
  6,354
  6,749
  7,165
  7,604
  8,066
  8,553
  9,066
  9,607
  10,177
  10,777
  11,409
  12,075
Tax expense, $m
  373
  333
  375
  419
  465
  513
  565
  618
  675
  735
  798
  1,038
  1,108
  1,181
  1,259
  1,341
  1,428
  1,519
  1,615
  1,716
  1,822
  1,935
  2,053
  2,178
  2,309
  2,448
  2,594
  2,748
  2,910
  3,081
  3,260
Net income, $m
  732
  901
  1,014
  1,132
  1,257
  1,388
  1,526
  1,672
  1,825
  1,987
  2,157
  2,806
  2,995
  3,194
  3,405
  3,626
  3,860
  4,106
  4,365
  4,639
  4,927
  5,231
  5,551
  5,888
  6,244
  6,618
  7,013
  7,429
  7,867
  8,329
  8,815

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  434
  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
  14,247
  14,574
  15,368
  16,198
  17,067
  17,977
  18,929
  19,925
  20,969
  22,063
  23,209
  24,410
  25,668
  26,988
  28,372
  29,823
  31,345
  32,941
  34,615
  36,372
  38,215
  40,149
  42,179
  44,309
  46,544
  48,889
  51,351
  53,936
  56,648
  59,495
  62,484
Adjusted assets (=assets-cash), $m
  13,813
  14,574
  15,368
  16,198
  17,067
  17,977
  18,929
  19,925
  20,969
  22,063
  23,209
  24,410
  25,668
  26,988
  28,372
  29,823
  31,345
  32,941
  34,615
  36,372
  38,215
  40,149
  42,179
  44,309
  46,544
  48,889
  51,351
  53,936
  56,648
  59,495
  62,484
Revenue / Adjusted assets
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
Average production assets, $m
  5,096
  5,371
  5,664
  5,970
  6,290
  6,625
  6,976
  7,343
  7,728
  8,131
  8,553
  8,996
  9,460
  9,946
  10,456
  10,991
  11,552
  12,140
  12,757
  13,405
  14,084
  14,797
  15,545
  16,330
  17,153
  18,018
  18,925
  19,878
  20,877
  21,927
  23,028
Working capital, $m
  651
  804
  847
  893
  941
  991
  1,044
  1,099
  1,156
  1,217
  1,280
  1,346
  1,415
  1,488
  1,564
  1,644
  1,728
  1,816
  1,909
  2,006
  2,107
  2,214
  2,326
  2,443
  2,567
  2,696
  2,832
  2,974
  3,124
  3,281
  3,445
Total debt, $m
  5,850
  5,868
  6,345
  6,844
  7,366
  7,913
  8,485
  9,084
  9,712
  10,369
  11,057
  11,779
  12,536
  13,329
  14,160
  15,033
  15,947
  16,907
  17,913
  18,969
  20,076
  21,239
  22,458
  23,738
  25,082
  26,492
  27,971
  29,524
  31,154
  32,866
  34,662
Total liabilities, $m
  8,741
  8,759
  9,236
  9,735
  10,257
  10,804
  11,376
  11,975
  12,603
  13,260
  13,948
  14,670
  15,427
  16,220
  17,051
  17,924
  18,838
  19,798
  20,804
  21,860
  22,967
  24,130
  25,349
  26,629
  27,973
  29,383
  30,862
  32,415
  34,045
  35,757
  37,553
Total equity, $m
  5,506
  5,815
  6,132
  6,463
  6,810
  7,173
  7,553
  7,950
  8,367
  8,803
  9,260
  9,739
  10,242
  10,768
  11,320
  11,899
  12,507
  13,143
  13,812
  14,513
  15,248
  16,020
  16,829
  17,679
  18,571
  19,507
  20,489
  21,520
  22,603
  23,739
  24,931
Total liabilities and equity, $m
  14,247
  14,574
  15,368
  16,198
  17,067
  17,977
  18,929
  19,925
  20,970
  22,063
  23,208
  24,409
  25,669
  26,988
  28,371
  29,823
  31,345
  32,941
  34,616
  36,373
  38,215
  40,150
  42,178
  44,308
  46,544
  48,890
  51,351
  53,935
  56,648
  59,496
  62,484
Debt-to-equity ratio
  1.062
  1.010
  1.030
  1.060
  1.080
  1.100
  1.120
  1.140
  1.160
  1.180
  1.190
  1.210
  1.220
  1.240
  1.250
  1.260
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.330
  1.340
  1.350
  1.360
  1.370
  1.370
  1.380
  1.380
  1.390
Adjusted equity ratio
  0.370
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  732
  901
  1,014
  1,132
  1,257
  1,388
  1,526
  1,672
  1,825
  1,987
  2,157
  2,806
  2,995
  3,194
  3,405
  3,626
  3,860
  4,106
  4,365
  4,639
  4,927
  5,231
  5,551
  5,888
  6,244
  6,618
  7,013
  7,429
  7,867
  8,329
  8,815
Depreciation, amort., depletion, $m
  499
  877
  890
  903
  917
  932
  947
  963
  980
  997
  1,016
  393
  413
  434
  457
  480
  504
  530
  557
  585
  615
  646
  679
  713
  749
  787
  826
  868
  912
  957
  1,006
Funds from operations, $m
  962
  1,778
  1,904
  2,036
  2,174
  2,320
  2,474
  2,635
  2,805
  2,985
  3,173
  3,199
  3,408
  3,629
  3,861
  4,106
  4,364
  4,636
  4,922
  5,224
  5,542
  5,877
  6,230
  6,601
  6,993
  7,405
  7,839
  8,297
  8,779
  9,286
  9,821
Change in working capital, $m
  -214
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  97
  102
  107
  112
  117
  123
  129
  136
  142
  150
  157
  165
Cash from operations, $m
  1,176
  1,761
  1,860
  1,990
  2,126
  2,270
  2,421
  2,580
  2,748
  2,924
  3,110
  3,132
  3,339
  3,556
  3,785
  4,026
  4,280
  4,548
  4,830
  5,127
  5,440
  5,770
  6,118
  6,484
  6,869
  7,276
  7,704
  8,154
  8,629
  9,129
  9,656
Maintenance CAPEX, $m
  0
  -223
  -235
  -247
  -261
  -275
  -289
  -305
  -321
  -337
  -355
  -374
  -393
  -413
  -434
  -457
  -480
  -504
  -530
  -557
  -585
  -615
  -646
  -679
  -713
  -749
  -787
  -826
  -868
  -912
  -957
New CAPEX, $m
  -279
  -275
  -293
  -306
  -320
  -335
  -351
  -367
  -385
  -403
  -422
  -443
  -464
  -486
  -510
  -535
  -561
  -588
  -617
  -647
  -679
  -713
  -748
  -785
  -824
  -865
  -907
  -952
  -1,000
  -1,049
  -1,101
Cash from investing activities, $m
  -796
  -498
  -528
  -553
  -581
  -610
  -640
  -672
  -706
  -740
  -777
  -817
  -857
  -899
  -944
  -992
  -1,041
  -1,092
  -1,147
  -1,204
  -1,264
  -1,328
  -1,394
  -1,464
  -1,537
  -1,614
  -1,694
  -1,778
  -1,868
  -1,961
  -2,058
Free cash flow, $m
  380
  1,263
  1,333
  1,436
  1,545
  1,660
  1,781
  1,908
  2,042
  2,184
  2,333
  2,316
  2,482
  2,657
  2,841
  3,035
  3,239
  3,455
  3,683
  3,923
  4,176
  4,442
  4,724
  5,020
  5,333
  5,662
  6,010
  6,376
  6,762
  7,168
  7,597
Issuance/(repayment) of debt, $m
  -667
  452
  477
  499
  522
  547
  572
  599
  627
  657
  689
  722
  757
  793
  832
  872
  915
  959
  1,006
  1,056
  1,108
  1,162
  1,220
  1,280
  1,343
  1,410
  1,480
  1,553
  1,630
  1,711
  1,796
Issuance/(repurchase) of shares, $m
  27
  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  
  -650
  452
  477
  499
  522
  547
  572
  599
  627
  657
  689
  722
  757
  793
  832
  872
  915
  959
  1,006
  1,056
  1,108
  1,162
  1,220
  1,280
  1,343
  1,410
  1,480
  1,553
  1,630
  1,711
  1,796
Total cash flow (excl. dividends), $m
  -283
  1,715
  1,810
  1,935
  2,068
  2,207
  2,353
  2,507
  2,670
  2,841
  3,021
  3,038
  3,238
  3,450
  3,672
  3,907
  4,154
  4,414
  4,689
  4,978
  5,283
  5,605
  5,943
  6,300
  6,676
  7,072
  7,489
  7,929
  8,392
  8,879
  9,393
Retained Cash Flow (-), $m
  -561
  -309
  -317
  -331
  -347
  -363
  -380
  -398
  -417
  -436
  -457
  -479
  -502
  -527
  -552
  -579
  -607
  -637
  -668
  -701
  -735
  -772
  -810
  -850
  -892
  -936
  -982
  -1,031
  -1,082
  -1,136
  -1,193
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
 
  1,406
  1,493
  1,604
  1,721
  1,844
  1,973
  2,110
  2,253
  2,405
  2,564
  2,559
  2,736
  2,923
  3,120
  3,328
  3,547
  3,778
  4,021
  4,277
  4,548
  4,833
  5,134
  5,450
  5,784
  6,136
  6,507
  6,898
  7,309
  7,743
  8,201
Discount rate, %
 
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
 
  1,309
  1,286
  1,268
  1,239
  1,199
  1,148
  1,088
  1,020
  945
  865
  732
  655
  577
  501
  428
  359
  296
  240
  190
  148
  112
  83
  60
  42
  29
  19
  13
  8
  5
  3
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

Laboratory Corporation of America Holdings operates as an independent clinical laboratory company worldwide. It operates through two segments, LabCorp Diagnostics and Covance Drug Development. The company offers a range of clinical laboratory tests and procedures, such as blood chemistry analyses, urinalyses, blood cell counts, thyroid tests, Pap tests, hemoglobin A1C, PSA, tests for sexually-transmitted diseases, HCV tests, vitamin D, microbiology cultures and procedures, and alcohol and other substance-abuse tests that are used by hospitals, physicians and other healthcare providers and commercial clients to assist in the diagnosis, monitoring and treatment of diseases and medical conditions through the examination of substances in blood, tissues, and other specimens. It also provides specialty testing services in the areas of women's health, allergy, diagnostic genetics, cardiovascular disease, infectious disease, endocrinology, oncology, coagulation, pharmacogenetics, toxicology, and pain management; and esoteric testing, cancer diagnostics, and other complex procedures. In addition, the company provides drug development solutions, as well as laboratory testing services. Further, it provides its testing services through a sales force to the managed care organizations, biopharmaceutical companies, governmental agencies, physicians and other healthcare providers, hospitals and health systems, employers, patients and consumers, contract research organizations, food and nutritional companies, and independent clinical laboratories. The company has collaboration with university, hospital and academic institutions, such as Duke University, Johns Hopkins University, Boston University, Columbia University, The Mount Sinai Hospital, the University of Tennessee, and Yale University to license and commercialize new diagnostic tests. Laboratory Corporation of America Holdings was founded in 1971 and is headquartered in Burlington, North Carolina.

FINANCIAL RATIOS  of  Laboratory of America Holdings (LH)

Valuation Ratios
P/E Ratio 20.1
Price to Sales 1.5
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 12.5
Price to Free Cash Flow 16.4
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9%
Cap. Spend. - 3 Yr. Gr. Rate 6.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 96.3%
Total Debt to Equity 106.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.2%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 6.5%
Ret/ On T. Cap. - 3 Yr. Avg. 6.9%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 14.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 33%
Gross Margin - 3 Yr. Avg. 34.4%
EBITDA Margin 18.8%
EBITDA Margin - 3 Yr. Avg. 18%
Operating Margin 13.6%
Oper. Margin - 3 Yr. Avg. 13.4%
Pre-Tax Margin 11.5%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 7.6%
Net Profit Margin - 3 Yr. Avg. 7%
Effective Tax Rate 33.7%
Eff/ Tax Rate - 3 Yr. Avg. 36.9%
Payout Ratio 0%

LH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LH stock intrinsic value calculation we used $9642 million for the last fiscal year's total revenue generated by Laboratory of America Holdings. The default revenue input number comes from 2016 income statement of Laboratory of America Holdings. 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 LH stock valuation model: a) initial revenue growth rate of 5.5% 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 7.4%, whose default value for LH is calculated based on our internal credit rating of Laboratory of America Holdings, 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 Laboratory of America Holdings.
    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 LH stock the variable cost ratio is equal to 67.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1900 million in the base year in the intrinsic value calculation for LH 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 Laboratory of America Holdings.

Corporate tax rate of 27% is the nominal tax rate for Laboratory of America Holdings. 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 LH 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 LH are equal to 52.8%.

Life of production assets of 22.9 years is the average useful life of capital assets used in Laboratory of America Holdings 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 LH is equal to 7.9%. 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 - $5506 million for Laboratory of America Holdings - 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 101.903 million for Laboratory of America Holdings 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 Laboratory of America Holdings at the current share price and the inputted number of shares is $14.6 billion.


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COMPANY NEWS

▶ Class-action lawsuit claims LabCorp overcharges patients for tests   [Apr-10-17 11:50AM  American City Business Journals]
▶ How much of a pay raise did LabCorp's David King get in 2016?   [07:55AM  American City Business Journals]
▶ College hires leader for Biotechnology Center of Excellence   [Mar-15-17 07:56PM  at bizjournals.com]
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▶ CellNetix buys back stake from PAML ahead of LabCorp deal   [Mar-03-17 04:15PM  at bizjournals.com]
▶ LabCorp to buy 1,600-employee Washington firm   [Feb-23-17 05:38PM  at bizjournals.com]
▶ Laboratory Corporation 4Q Earnings Beats Street   [01:05PM  at Investopedia]
▶ LabCorp to acquire Washington company, per report   [09:43AM  at bizjournals.com]
▶ Labcorp: Not That Deal, Please   [08:48AM  at Bloomberg]
▶ Why LabCorp, comScore, and Atwood Oceanics Slumped Today   [Feb-06-17 05:50PM  at Motley Fool]
▶ LabCorp In Talks to Buy Contract Researcher PPD   [11:15AM  at Investopedia]
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Stock chart of LH Financial statements of LH
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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