Intrinsic value of Providence Service - PRSC

Previous Close

$49.40

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$49.40

 
Intrinsic value premium content
 
Up/down potential premium content
 
Rating premium content
 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of PRSC 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 0.7

 

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, %
  6.83
  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
  4.87
  4.89
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
Revenue, $m
  1,579
  1,650
  1,725
  1,804
  1,888
  1,976
  2,069
  2,167
  2,270
  2,379
  2,493
  2,614
  2,740
  2,873
  3,013
  3,161
  3,315
  3,478
  3,649
  3,829
  4,018
  4,216
  4,425
  4,644
  4,874
  5,116
  5,369
  5,636
  5,916
  6,211
  6,520
Variable operating expenses, $m
 
  1,536
  1,605
  1,678
  1,755
  1,837
  1,923
  2,013
  2,108
  2,209
  2,314
  2,413
  2,530
  2,653
  2,783
  2,919
  3,061
  3,212
  3,370
  3,536
  3,710
  3,893
  4,086
  4,288
  4,500
  4,724
  4,958
  5,205
  5,463
  5,735
  6,020
Fixed operating expenses, $m
 
  106
  108
  111
  114
  117
  119
  122
  125
  129
  132
  135
  139
  142
  146
  149
  153
  157
  161
  165
  169
  173
  177
  182
  186
  191
  196
  201
  206
  211
  216
Total operating expenses, $m
  1,570
  1,642
  1,713
  1,789
  1,869
  1,954
  2,042
  2,135
  2,233
  2,338
  2,446
  2,548
  2,669
  2,795
  2,929
  3,068
  3,214
  3,369
  3,531
  3,701
  3,879
  4,066
  4,263
  4,470
  4,686
  4,915
  5,154
  5,406
  5,669
  5,946
  6,236
Operating income, $m
  9
  9
  12
  15
  19
  23
  27
  32
  36
  42
  47
  65
  71
  78
  85
  93
  101
  110
  119
  129
  139
  150
  162
  174
  187
  201
  216
  231
  248
  265
  283
EBITDA, $m
  57
  29
  33
  37
  41
  45
  50
  55
  60
  66
  72
  79
  86
  93
  101
  109
  118
  128
  138
  149
  160
  172
  185
  198
  212
  227
  243
  260
  278
  297
  317
Interest expense (income), $m
  10
  0
  1
  2
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
  27
  29
  31
  34
  36
  39
  42
  45
  49
  52
  55
  59
Earnings before tax, $m
  -2
  9
  11
  13
  16
  19
  22
  25
  29
  33
  37
  53
  58
  63
  69
  74
  81
  87
  94
  102
  110
  119
  128
  137
  148
  159
  170
  183
  196
  209
  224
Tax expense, $m
  17
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  43
  46
  49
  53
  57
  61
Net income, $m
  92
  6
  8
  10
  12
  14
  16
  18
  21
  24
  27
  39
  42
  46
  50
  54
  59
  64
  69
  75
  80
  87
  93
  100
  108
  116
  124
  133
  143
  153
  164

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  72
  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
  685
  641
  670
  700
  733
  767
  803
  841
  881
  924
  968
  1,015
  1,064
  1,115
  1,170
  1,227
  1,287
  1,350
  1,417
  1,486
  1,560
  1,637
  1,718
  1,803
  1,892
  1,986
  2,084
  2,188
  2,297
  2,411
  2,531
Adjusted assets (=assets-cash), $m
  613
  641
  670
  700
  733
  767
  803
  841
  881
  924
  968
  1,015
  1,064
  1,115
  1,170
  1,227
  1,287
  1,350
  1,417
  1,486
  1,560
  1,637
  1,718
  1,803
  1,892
  1,986
  2,084
  2,188
  2,297
  2,411
  2,531
Revenue / Adjusted assets
  2.576
  2.574
  2.575
  2.577
  2.576
  2.576
  2.577
  2.577
  2.577
  2.575
  2.575
  2.575
  2.575
  2.577
  2.575
  2.576
  2.576
  2.576
  2.575
  2.577
  2.576
  2.575
  2.576
  2.576
  2.576
  2.576
  2.576
  2.576
  2.576
  2.576
  2.576
Average production assets, $m
  83
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  142
  149
  157
  164
  172
  181
  190
  199
  209
  219
  230
  241
  253
  266
  279
  293
  308
  323
  339
Working capital, $m
  60
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
Total debt, $m
  4
  16
  31
  46
  62
  79
  97
  116
  136
  157
  179
  202
  227
  252
  280
  308
  338
  369
  402
  437
  474
  512
  552
  595
  639
  686
  735
  787
  841
  898
  957
Total liabilities, $m
  308
  319
  334
  349
  365
  382
  400
  419
  439
  460
  482
  505
  530
  555
  583
  611
  641
  672
  705
  740
  777
  815
  855
  898
  942
  989
  1,038
  1,090
  1,144
  1,201
  1,260
Total equity, $m
  378
  322
  336
  352
  368
  385
  403
  422
  442
  464
  486
  509
  534
  560
  587
  616
  646
  678
  711
  746
  783
  822
  862
  905
  950
  997
  1,046
  1,098
  1,153
  1,210
  1,271
Total liabilities and equity, $m
  686
  641
  670
  701
  733
  767
  803
  841
  881
  924
  968
  1,014
  1,064
  1,115
  1,170
  1,227
  1,287
  1,350
  1,416
  1,486
  1,560
  1,637
  1,717
  1,803
  1,892
  1,986
  2,084
  2,188
  2,297
  2,411
  2,531
Debt-to-equity ratio
  0.011
  0.050
  0.090
  0.130
  0.170
  0.210
  0.240
  0.270
  0.310
  0.340
  0.370
  0.400
  0.420
  0.450
  0.480
  0.500
  0.520
  0.540
  0.570
  0.590
  0.610
  0.620
  0.640
  0.660
  0.670
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
Adjusted equity ratio
  0.499
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502
  0.502

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  92
  6
  8
  10
  12
  14
  16
  18
  21
  24
  27
  39
  42
  46
  50
  54
  59
  64
  69
  75
  80
  87
  93
  100
  108
  116
  124
  133
  143
  153
  164
Depreciation, amort., depletion, $m
  48
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
Funds from operations, $m
  26
  27
  29
  31
  33
  36
  39
  42
  45
  48
  52
  52
  57
  61
  66
  71
  76
  82
  88
  94
  101
  109
  116
  125
  133
  142
  152
  163
  174
  185
  198
Change in working capital, $m
  -15
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  41
  27
  29
  32
  34
  36
  39
  42
  45
  49
  53
  53
  57
  62
  67
  72
  77
  83
  89
  95
  102
  110
  118
  126
  135
  144
  154
  164
  175
  187
  199
Maintenance CAPEX, $m
  0
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
New CAPEX, $m
  -41
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Cash from investing activities, $m
  324
  -11
  -13
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -18
  -19
  -21
  -21
  -22
  -24
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
Free cash flow, $m
  365
  16
  17
  18
  20
  22
  24
  26
  29
  31
  34
  34
  37
  41
  44
  48
  53
  57
  62
  67
  73
  79
  85
  91
  98
  106
  114
  122
  131
  141
  151
Issuance/(repayment) of debt, $m
  -306
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
Issuance/(repurchase) of shares, $m
  -66
  7
  7
  6
  5
  3
  2
  1
  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  
  -373
  21
  22
  21
  21
  20
  20
  20
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
Total cash flow (excl. dividends), $m
  -9
  37
  38
  40
  41
  43
  44
  46
  49
  52
  56
  57
  62
  66
  71
  77
  83
  89
  95
  102
  109
  117
  125
  134
  143
  153
  163
  174
  186
  198
  211
Retained Cash Flow (-), $m
  -10
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
Prev. year cash balance distribution, $m
 
  70
  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
 
  93
  23
  24
  25
  25
  26
  27
  29
  31
  34
  34
  37
  40
  44
  48
  52
  57
  62
  67
  72
  78
  84
  91
  98
  106
  114
  122
  131
  140
  151
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
 
  90
  21
  21
  20
  20
  19
  18
  18
  18
  18
  16
  16
  15
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
Current shareholders' claim on cash, %
  100
  98.7
  97.6
  96.7
  96.0
  95.5
  95.2
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1
  95.1

The Providence Service Corporation, through its subsidiaries, provides critical healthcare and workforce development services in the United States and internationally. It operates through three segments: Non-Emergency Transportation Services (NET Services), Workforce Development Services (WD Services), and Health Assessment Services (HA Services). The NET Services segment offers covered healthcare related transportation services for individuals with limited mobility and/or people with financial resources that hinder them from accessing necessary healthcare and social services. The WD Services segment offers workforce development and offender rehabilitation services, including employment preparation and placement, apprenticeship and training, and other health related services comprising employee assistance programs for unemployed, disabled, and unskilled individuals, as well as individuals coping with medical illnesses. The HA Services segment provides care optimization and delivery solutions, including comprehensive health assessments, as well as in-home and community-based care management offerings. The company was founded in 1996 and is headquartered in Tucson, Arizona.

FINANCIAL RATIOS  of  Providence Service (PRSC)

Valuation Ratios
P/E Ratio 7.4
Price to Sales 0.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 16.7
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 6.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.1%
Cap. Spend. - 3 Yr. Gr. Rate 32.6%
Financial Strength
Quick Ratio 36
Current Ratio 0.1
LT Debt to Equity 0.5%
Total Debt to Equity 1.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 21.6%
Ret/ On Assets - 3 Yr. Avg. 12.2%
Return On Total Capital 17.5%
Ret/ On T. Cap. - 3 Yr. Avg. 10.9%
Return On Equity 24.7%
Return On Equity - 3 Yr. Avg. 21.4%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 8%
Gross Margin - 3 Yr. Avg. 8%
EBITDA Margin 3.5%
EBITDA Margin - 3 Yr. Avg. 4.9%
Operating Margin 0.6%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin -0.1%
Pre-Tax Margin - 3 Yr. Avg. 0.7%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate -850%
Eff/ Tax Rate - 3 Yr. Avg. -325.3%
Payout Ratio 4.3%

PRSC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PRSC stock intrinsic value calculation we used $1579 million for the last fiscal year's total revenue generated by Providence Service. The default revenue input number comes from 2016 income statement of Providence Service. 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 PRSC stock valuation model: a) initial revenue growth rate of 4.5% 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 4.3%, whose default value for PRSC is calculated based on our internal credit rating of Providence Service, 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 Providence Service.
    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 PRSC stock the variable cost ratio is equal to 93.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $103 million in the base year in the intrinsic value calculation for PRSC 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 6.6% for Providence Service.

Corporate tax rate of 27% is the nominal tax rate for Providence Service. 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 PRSC 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 PRSC are equal to 5.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Providence Service 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 PRSC is equal to -0.6%. 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 - $378 million for Providence Service - 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 13.835 million for Providence Service 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 Providence Service at the current share price and the inputted number of shares is $0.7 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
MMS Maximus 59.00 prem.  prem.
UNH UnitedHealth G 186.85 prem.  prem.

COMPANY NEWS

▶ Matrix Medical Network Achieves HITRUST CSF Certification   [Jun-19-17 10:39AM  GlobeNewswire]
▶ Providence Service reports 1Q loss   [May-09-17 06:54PM  Associated Press]
▶ Providence Service posts 4Q profit   [Mar-09-17 05:56PM  Associated Press]
▶ LogistiCare And Lyft Announce Nationwide Partnership   [Feb-07-17 01:00PM  PR Newswire]
▶ LogistiCare Announces CEO Transition   [05:00PM  GlobeNewswire]
▶ [$$] Deal Close Announcements: Oct. 17-21   [Oct-21-16 05:26PM  at The Wall Street Journal]
▶ [$$] Frazier to Buy Majority Stake in Providence Service Corp. Subsidiary   [Aug-29-16 01:36PM  at The Wall Street Journal]
Stock chart of PRSC Financial statements of PRSC Annual reports of PRSC
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.