Intrinsic value of NxStage Medical - NXTM

Previous Close

$27.51

  Intrinsic Value

$2.66

stock screener

  Rating & Target

str. sell

-90%

Previous close

$27.51

 
Intrinsic value

$2.66

 
Up/down potential

-90%

 
Rating

str. sell

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
  4.30
  4.37
  4.43
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.89
  4.91
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
Revenue, $m
  366
  382
  398
  416
  435
  455
  475
  497
  521
  545
  571
  598
  627
  657
  688
  722
  757
  793
  832
  873
  916
  961
  1,008
  1,058
  1,110
  1,165
  1,223
  1,283
  1,347
  1,414
  1,484
Variable operating expenses, $m
 
  254
  265
  277
  289
  302
  316
  330
  345
  361
  378
  392
  411
  430
  451
  473
  496
  520
  545
  572
  600
  630
  661
  693
  727
  763
  801
  841
  882
  926
  972
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
  387
  402
  417
  432
  449
  467
  485
  503
  523
  544
  563
  586
  609
  635
  661
  689
  718
  748
  780
  813
  848
  885
  922
  962
  1,004
  1,048
  1,094
  1,142
  1,192
  1,245
Operating income, $m
  -4
  -6
  -4
  -1
  2
  5
  9
  13
  17
  21
  26
  36
  41
  47
  54
  60
  68
  76
  84
  93
  103
  113
  124
  135
  148
  161
  174
  189
  205
  221
  239
EBITDA, $m
  29
  18
  22
  25
  29
  33
  38
  43
  48
  54
  60
  67
  74
  82
  90
  98
  108
  117
  128
  139
  151
  163
  177
  191
  206
  222
  238
  256
  275
  295
  317
Interest expense (income), $m
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  24
Earnings before tax, $m
  -6
  -7
  -5
  -2
  0
  3
  6
  9
  13
  17
  21
  30
  35
  41
  46
  53
  59
  66
  74
  82
  91
  100
  110
  120
  131
  143
  156
  169
  184
  199
  215
Tax expense, $m
  1
  0
  0
  0
  0
  1
  2
  3
  4
  5
  6
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  27
  30
  32
  35
  39
  42
  46
  50
  54
  58
Net income, $m
  -5
  -7
  -5
  -2
  0
  2
  4
  7
  10
  12
  16
  22
  26
  30
  34
  38
  43
  48
  54
  60
  66
  73
  80
  88
  96
  105
  114
  124
  134
  145
  157

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
  268
  280
  292
  305
  319
  334
  349
  366
  383
  401
  420
  440
  461
  483
  507
  531
  557
  584
  613
  643
  675
  708
  743
  780
  818
  859
  901
  946
  993
  1,042
Adjusted assets (=assets-cash), $m
  257
  268
  280
  292
  305
  319
  334
  349
  366
  383
  401
  420
  440
  461
  483
  507
  531
  557
  584
  613
  643
  675
  708
  743
  780
  818
  859
  901
  946
  993
  1,042
Revenue / Adjusted assets
  1.424
  1.425
  1.421
  1.425
  1.426
  1.426
  1.422
  1.424
  1.423
  1.423
  1.424
  1.424
  1.425
  1.425
  1.424
  1.424
  1.426
  1.424
  1.425
  1.424
  1.425
  1.424
  1.424
  1.424
  1.423
  1.424
  1.424
  1.424
  1.424
  1.424
  1.424
Average production assets, $m
  96
  100
  104
  109
  114
  119
  125
  130
  136
  143
  150
  157
  164
  172
  180
  189
  198
  208
  218
  229
  240
  252
  264
  277
  291
  305
  320
  336
  353
  370
  389
Working capital, $m
  96
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
Total debt, $m
  13
  16
  21
  27
  33
  39
  45
  52
  59
  67
  75
  83
  92
  102
  112
  122
  133
  144
  156
  169
  183
  197
  211
  227
  243
  260
  278
  297
  317
  338
  360
Total liabilities, $m
  116
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  205
  215
  225
  236
  247
  259
  272
  286
  300
  314
  330
  346
  363
  381
  400
  420
  441
  463
Total equity, $m
  201
  149
  156
  162
  170
  177
  186
  194
  203
  213
  223
  233
  245
  256
  269
  282
  295
  310
  325
  341
  358
  375
  394
  413
  433
  455
  477
  501
  526
  552
  579
Total liabilities and equity, $m
  317
  268
  280
  292
  306
  319
  334
  349
  365
  383
  401
  419
  440
  461
  484
  507
  531
  557
  584
  613
  644
  675
  708
  743
  779
  818
  858
  901
  946
  993
  1,042
Debt-to-equity ratio
  0.065
  0.110
  0.140
  0.160
  0.190
  0.220
  0.240
  0.270
  0.290
  0.310
  0.340
  0.360
  0.380
  0.400
  0.420
  0.430
  0.450
  0.470
  0.480
  0.500
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
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
  -7
  -5
  -2
  0
  2
  4
  7
  10
  12
  16
  22
  26
  30
  34
  38
  43
  48
  54
  60
  66
  73
  80
  88
  96
  105
  114
  124
  134
  145
  157
Depreciation, amort., depletion, $m
  33
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
Funds from operations, $m
  -28
  18
  21
  24
  27
  30
  34
  37
  41
  45
  50
  53
  59
  64
  70
  76
  83
  90
  98
  106
  114
  123
  133
  143
  154
  166
  178
  191
  205
  219
  235
Change in working capital, $m
  -33
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Cash from operations, $m
  5
  16
  19
  22
  25
  28
  31
  35
  39
  43
  47
  51
  56
  61
  67
  73
  79
  86
  94
  101
  110
  119
  128
  138
  149
  160
  172
  185
  198
  212
  227
Maintenance CAPEX, $m
  0
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -71
  -74
New CAPEX, $m
  -9
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
Cash from investing activities, $m
  -9
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -36
  -37
  -38
  -41
  -42
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -62
  -66
  -69
  -72
  -76
  -80
  -84
  -89
  -92
Free cash flow, $m
  -4
  -7
  -6
  -4
  -1
  0
  2
  4
  7
  9
  12
  14
  17
  20
  24
  28
  32
  37
  42
  47
  53
  59
  65
  72
  80
  87
  96
  105
  114
  124
  135
Issuance/(repayment) of debt, $m
  -2
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $m
  6
  13
  11
  9
  7
  6
  4
  2
  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
  18
  16
  15
  13
  12
  10
  9
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Total cash flow (excl. dividends), $m
  1
  11
  11
  11
  12
  12
  12
  13
  14
  17
  20
  22
  26
  30
  34
  38
  43
  48
  54
  60
  66
  73
  80
  88
  96
  105
  114
  124
  134
  145
  157
Retained Cash Flow (-), $m
  -9
  -13
  -11
  -9
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
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
 
  56
  0
  2
  4
  4
  4
  4
  5
  7
  10
  11
  15
  18
  21
  25
  29
  34
  39
  44
  49
  55
  62
  68
  75
  83
  91
  100
  109
  119
  129
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
 
  53
  0
  2
  4
  3
  3
  3
  3
  4
  5
  5
  6
  7
  7
  7
  7
  7
  7
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  99.0
  98.2
  97.6
  97.1
  96.7
  96.5
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4
  96.4

NxStage Medical, Inc. is a medical technology company. The Company develops, manufactures and markets products and services for patients suffering from chronic or acute kidney failure. It operates through three segments. The System One segment includes revenues from the sale and rental of the System One and PureFlow SL dialysate preparation equipment and the sale of disposable products in the home and critical care markets. The In-Center segment includes revenues from the sale of blood tubing sets and needles for hemodialysis, primarily for the treatment of end-stage renal disease patients at dialysis clinics, and needles for apheresis. It markets extracorporeal disposable products under the Medisystems brand. The Services segment includes revenues from dialysis services provided to patients at its NxStage Kidney Care dialysis centers. Its product offerings include Home Dialysis, Next-Generation Hemodialysis System, Critical Care, Next-Generation Critical Care System and In-Center.

FINANCIAL RATIOS  of  NxStage Medical (NXTM)

Valuation Ratios
P/E Ratio -357.4
Price to Sales 4.9
Price to Book 8.9
Price to Tangible Book
Price to Cash Flow 357.4
Price to Free Cash Flow -446.7
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 4.3% 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 4.2 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 66.158 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
FMS Fresenius Medi 48.89 138.81  str.buy
RMTI Rockwell Medic 7.09 0.25  str.sell
BAX Baxter Interna 63.59 11.18  str.sell
CGNT Cogentix Medic 2.89 0.80  str.sell

COMPANY NEWS

▶ The Market In 5 Minutes   [Aug-22-17 09:02AM  Benzinga]
▶ 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]
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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