Intrinsic value of NxStage Medical - NXTM

Previous Close

$29.25

  Intrinsic Value

$7.70

stock screener

  Rating & Target

str. sell

-74%

  Value-price divergence*

+7%

Previous close

$29.25

 
Intrinsic value

$7.70

 
Up/down potential

-74%

 
Rating

str. sell

 
Value-price divergence*

+7%

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

We calculate the intrinsic value of NXTM 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 1.8

 

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, %
  8.93
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  366
  399
  433
  469
  506
  545
  585
  626
  670
  715
  762
  810
  861
  914
  969
  1,026
  1,086
  1,148
  1,213
  1,281
  1,352
  1,426
  1,504
  1,585
  1,670
  1,759
  1,852
  1,949
  2,051
  2,158
  2,270
Variable operating expenses, $m
 
  266
  288
  312
  336
  361
  387
  415
  443
  473
  503
  531
  564
  599
  635
  672
  711
  752
  795
  839
  886
  935
  985
  1,039
  1,094
  1,152
  1,213
  1,277
  1,344
  1,414
  1,487
Fixed operating expenses, $m
 
  133
  137
  140
  143
  147
  151
  155
  158
  162
  166
  171
  175
  179
  184
  188
  193
  198
  203
  208
  213
  218
  224
  229
  235
  241
  247
  253
  260
  266
  273
Total operating expenses, $m
  371
  399
  425
  452
  479
  508
  538
  570
  601
  635
  669
  702
  739
  778
  819
  860
  904
  950
  998
  1,047
  1,099
  1,153
  1,209
  1,268
  1,329
  1,393
  1,460
  1,530
  1,604
  1,680
  1,760
Operating income, $m
  -4
  0
  8
  17
  27
  36
  47
  57
  68
  80
  92
  109
  122
  136
  150
  165
  181
  198
  215
  234
  253
  273
  295
  317
  341
  365
  391
  419
  447
  478
  510
EBITDA, $m
  29
  15
  24
  34
  44
  55
  66
  78
  90
  103
  116
  130
  145
  160
  176
  192
  210
  228
  247
  267
  289
  311
  334
  359
  384
  411
  440
  470
  501
  534
  569
Interest expense (income), $m
  1
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  40
Earnings before tax, $m
  -6
  -1
  7
  15
  24
  32
  42
  51
  62
  72
  83
  99
  111
  124
  137
  151
  166
  181
  197
  214
  232
  251
  270
  291
  313
  336
  360
  385
  412
  440
  469
Tax expense, $m
  1
  0
  2
  4
  6
  9
  11
  14
  17
  20
  22
  27
  30
  33
  37
  41
  45
  49
  53
  58
  63
  68
  73
  79
  84
  91
  97
  104
  111
  119
  127
Net income, $m
  -5
  -1
  5
  11
  17
  24
  31
  38
  45
  53
  61
  72
  81
  91
  100
  110
  121
  132
  144
  156
  169
  183
  197
  212
  228
  245
  263
  281
  301
  321
  343

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  60
  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
  317
  280
  304
  329
  355
  382
  411
  440
  470
  502
  535
  569
  605
  642
  680
  720
  762
  806
  852
  900
  949
  1,002
  1,056
  1,113
  1,173
  1,235
  1,300
  1,369
  1,440
  1,515
  1,594
Adjusted assets (=assets-cash), $m
  257
  280
  304
  329
  355
  382
  411
  440
  470
  502
  535
  569
  605
  642
  680
  720
  762
  806
  852
  900
  949
  1,002
  1,056
  1,113
  1,173
  1,235
  1,300
  1,369
  1,440
  1,515
  1,594
Revenue / Adjusted assets
  1.424
  1.425
  1.424
  1.426
  1.425
  1.427
  1.423
  1.423
  1.426
  1.424
  1.424
  1.424
  1.423
  1.424
  1.425
  1.425
  1.425
  1.424
  1.424
  1.423
  1.425
  1.423
  1.424
  1.424
  1.424
  1.424
  1.425
  1.424
  1.424
  1.424
  1.424
Average production assets, $m
  96
  105
  114
  123
  133
  143
  153
  164
  175
  187
  200
  212
  226
  239
  254
  269
  284
  301
  318
  336
  354
  374
  394
  415
  437
  461
  485
  511
  537
  565
  595
Working capital, $m
  96
  41
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  90
  95
  101
  107
  113
  119
  126
  133
  141
  148
  156
  165
  174
  183
  193
  203
  213
  224
  236
Total debt, $m
  13
  21
  32
  43
  55
  67
  79
  92
  106
  120
  134
  150
  165
  182
  199
  217
  236
  255
  275
  296
  319
  342
  366
  391
  418
  445
  474
  505
  536
  570
  605
Total liabilities, $m
  116
  124
  135
  146
  158
  170
  182
  195
  209
  223
  237
  253
  268
  285
  302
  320
  339
  358
  378
  399
  422
  445
  469
  494
  521
  548
  577
  608
  639
  673
  708
Total equity, $m
  201
  156
  169
  183
  198
  213
  228
  245
  261
  279
  297
  316
  336
  357
  378
  401
  424
  448
  474
  500
  528
  557
  587
  619
  652
  687
  723
  761
  801
  842
  886
Total liabilities and equity, $m
  317
  280
  304
  329
  356
  383
  410
  440
  470
  502
  534
  569
  604
  642
  680
  721
  763
  806
  852
  899
  950
  1,002
  1,056
  1,113
  1,173
  1,235
  1,300
  1,369
  1,440
  1,515
  1,594
Debt-to-equity ratio
  0.065
  0.140
  0.190
  0.240
  0.280
  0.310
  0.350
  0.380
  0.400
  0.430
  0.450
  0.470
  0.490
  0.510
  0.530
  0.540
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.680
Adjusted equity ratio
  0.549
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556
  0.556

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  -1
  5
  11
  17
  24
  31
  38
  45
  53
  61
  72
  81
  91
  100
  110
  121
  132
  144
  156
  169
  183
  197
  212
  228
  245
  263
  281
  301
  321
  343
Depreciation, amort., depletion, $m
  33
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  21
  23
  24
  25
  27
  28
  30
  32
  34
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  59
Funds from operations, $m
  -28
  14
  21
  28
  35
  42
  50
  58
  67
  76
  85
  94
  104
  114
  126
  137
  150
  162
  176
  190
  205
  220
  237
  254
  272
  291
  311
  332
  354
  378
  402
Change in working capital, $m
  -33
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Cash from operations, $m
  5
  11
  17
  24
  31
  38
  46
  54
  62
  71
  80
  89
  99
  109
  120
  131
  143
  156
  169
  183
  197
  213
  229
  246
  263
  282
  301
  322
  344
  366
  390
Maintenance CAPEX, $m
  0
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
New CAPEX, $m
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
Cash from investing activities, $m
  -9
  -19
  -19
  -20
  -22
  -23
  -25
  -26
  -27
  -30
  -31
  -33
  -34
  -37
  -38
  -40
  -43
  -44
  -47
  -50
  -53
  -54
  -57
  -60
  -64
  -67
  -70
  -75
  -78
  -82
  -86
Free cash flow, $m
  -4
  -8
  -2
  3
  9
  15
  21
  28
  35
  42
  49
  56
  64
  73
  82
  91
  101
  111
  122
  133
  145
  158
  171
  185
  199
  215
  231
  248
  266
  285
  305
Issuance/(repayment) of debt, $m
  -2
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Issuance/(repurchase) of shares, $m
  6
  14
  8
  3
  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  
  5
  24
  19
  14
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Total cash flow (excl. dividends), $m
  1
  16
  17
  17
  20
  27
  34
  41
  48
  56
  64
  71
  80
  89
  99
  109
  119
  131
  142
  155
  167
  181
  195
  210
  226
  243
  260
  278
  298
  318
  339
Retained Cash Flow (-), $m
  -9
  -14
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
Prev. year cash balance distribution, $m
 
  58
  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
 
  61
  3
  3
  6
  12
  18
  24
  31
  38
  46
  52
  60
  68
  77
  86
  96
  106
  117
  128
  140
  152
  165
  178
  193
  208
  224
  240
  258
  276
  296
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
 
  58
  3
  3
  5
  9
  13
  17
  19
  22
  24
  25
  26
  26
  26
  25
  24
  23
  22
  20
  18
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  99.0
  98.4
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2

NxStage Medical, Inc., a medical technology company, develops, manufactures, and markets products and services for patients suffering from chronic or acute kidney failure. Its primary product includes the System One, a portable hemodialysis system, which is used primarily for home hemodialysis and a range of dialysis therapies to deliver in the home setting. The company operates through three segments: System One, In-Center, and Services. The System One segment sells and rents the NxStage System One and PureFlow SL dialysate preparation equipment, as well as sells disposable products in the home market for the treatment of end-stage renal disease (ESRD) patients in the home or a home-like setting and in the critical care market for the treatment of hospital-based patients with acute kidney failure or fluid overload. The In-Center segment engages in the sale of blood tubing sets and needles for hemodialysis primarily for the treatment of ESRD patients at dialysis centers, and needles for apheresis. The Services segment offers dialysis services to patients at NxStage Kidney Care dialysis centers. NxStage Medical, Inc. markets its products through direct sales and distributors to hospitals and dialysis centers in the United States and internationally. The company was formerly known as QB Medical, Inc. and changed its name to NxStage Medical, Inc. NxStage Medical, Inc. was founded in 1998 and is headquartered in Lawrence, Massachusetts.

FINANCIAL RATIOS  of  NxStage Medical (NXTM)

Valuation Ratios
P/E Ratio -380
Price to Sales 5.2
Price to Book 9.5
Price to Tangible Book
Price to Cash Flow 380
Price to Free Cash Flow -474.9
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -10.9%
Financial Strength
Quick Ratio 30
Current Ratio 0
LT Debt to Equity 5.5%
Total Debt to Equity 6.5%
Interest Coverage -5
Management Effectiveness
Return On Assets -1.2%
Ret/ On Assets - 3 Yr. Avg. -4.4%
Return On Total Capital -2.4%
Ret/ On T. Cap. - 3 Yr. Avg. -7.3%
Return On Equity -2.5%
Return On Equity - 3 Yr. Avg. -7.6%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 41.5%
Gross Margin - 3 Yr. Avg. 39.6%
EBITDA Margin 7.7%
EBITDA Margin - 3 Yr. Avg. 4.9%
Operating Margin -1.4%
Oper. Margin - 3 Yr. Avg. -4.4%
Pre-Tax Margin -1.6%
Pre-Tax Margin - 3 Yr. Avg. -4.6%
Net Profit Margin -1.4%
Net Profit Margin - 3 Yr. Avg. -4.6%
Effective Tax Rate -16.7%
Eff/ Tax Rate - 3 Yr. Avg. -9.2%
Payout Ratio 0%

NXTM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NXTM stock intrinsic value calculation we used $366 million for the last fiscal year's total revenue generated by NxStage Medical. The default revenue input number comes from 2016 income statement of NxStage 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 NXTM stock valuation model: a) initial revenue growth rate of 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 NXTM is calculated based on our internal credit rating of NxStage 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 NxStage 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 NXTM stock the variable cost ratio is equal to 66.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $130 million in the base year in the intrinsic value calculation for NXTM 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 7.1% for NxStage Medical.

Corporate tax rate of 27% is the nominal tax rate for NxStage 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 NXTM 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 NXTM are equal to 26.2%.

Life of production assets of 10 years is the average useful life of capital assets used in NxStage 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 NXTM is equal to 10.4%. 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 - $201 million for NxStage 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 62.82 million for NxStage 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 NxStage Medical at the current share price and the inputted number of shares is $1.8 billion.

RELATED COMPANIES Price Int.Val. Rating
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CGNT Cogentix Medic 2.20 0.81  str.sell

COMPANY NEWS

▶ Company News For August 08, 2017   [09:35AM  Zacks]
▶ NxStage reports 2Q loss   [12:00AM  Associated Press]
▶ Fresenius to buy Lawrence-based NxStage Medical for $2B   [03:11PM  American City Business Journals]
▶ [$$] Fresenius/NxStage: dialysis analysis   [11:26AM  Financial Times]
▶ Dow on track for 9th record in a row   [07:25AM  MarketWatch]
▶ Fresenius Pays an Arm, and Maybe a Leg   [06:29AM  Bloomberg]
▶ Dow industrials shape up for record No.9   [05:52AM  MarketWatch]
▶ NxStage reports 2Q loss   [05:02AM  Associated Press]
▶ 3 Stocks That Could Be Life-Changers   [Jun-25-17 10:27AM  Motley Fool]
▶ Why NxStage Medical, Inc. Got Hammered Today   [May-09-17 01:02PM  Motley Fool]
▶ NxStage reports 1Q loss   [08:29AM  Associated Press]
▶ Why Nxstage Medical, Inc. Slumped Today   [May-03-17 04:55PM  Motley Fool]
▶ NxStage® to Report First Quarter 2017 Financial Results   [Apr-06-17 08:00AM  PR Newswire]
▶ NxStage reports 4Q loss   [08:27AM  Associated Press]
▶ NxStage Announces Appointment of Chief Medical Officer   [Feb-03-17 08:00AM  PR Newswire]
Stock chart of NXTM Financial statements of NXTM
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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