Intrinsic value of Spectranetics - SPNC

Previous Close

$38.45

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-146%

Previous close

$38.45

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-146%

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

We calculate the intrinsic value of SPNC 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 1.6

 

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, %
  10.16
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  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
Revenue, $m
  271
  301
  333
  366
  400
  436
  474
  513
  554
  596
  640
  685
  733
  782
  833
  886
  942
  999
  1,060
  1,122
  1,188
  1,256
  1,327
  1,401
  1,479
  1,560
  1,645
  1,734
  1,827
  1,924
  2,025
Variable operating expenses, $m
 
  393
  432
  474
  517
  562
  610
  659
  710
  763
  818
  860
  919
  981
  1,045
  1,112
  1,182
  1,254
  1,330
  1,408
  1,491
  1,576
  1,665
  1,759
  1,856
  1,958
  2,064
  2,176
  2,292
  2,414
  2,542
Fixed operating expenses, $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
Total operating expenses, $m
  314
  393
  432
  474
  517
  562
  610
  659
  710
  763
  818
  860
  919
  981
  1,045
  1,112
  1,182
  1,254
  1,330
  1,408
  1,491
  1,576
  1,665
  1,759
  1,856
  1,958
  2,064
  2,176
  2,292
  2,414
  2,542
Operating income, $m
  -44
  -92
  -100
  -108
  -117
  -126
  -136
  -146
  -156
  -167
  -178
  -175
  -187
  -199
  -212
  -226
  -240
  -255
  -270
  -286
  -303
  -320
  -338
  -357
  -377
  -398
  -419
  -442
  -466
  -491
  -517
EBITDA, $m
  -17
  -62
  -68
  -75
  -82
  -90
  -97
  -105
  -114
  -122
  -131
  -141
  -151
  -161
  -171
  -182
  -193
  -205
  -218
  -231
  -244
  -258
  -273
  -288
  -304
  -321
  -338
  -356
  -375
  -395
  -416
Interest expense (income), $m
  12
  12
  14
  15
  17
  19
  21
  22
  24
  27
  29
  31
  33
  36
  38
  41
  44
  46
  49
  52
  56
  59
  63
  66
  70
  74
  78
  82
  87
  92
  97
Earnings before tax, $m
  -57
  -104
  -113
  -123
  -134
  -145
  -156
  -168
  -181
  -193
  -207
  -206
  -220
  -235
  -251
  -267
  -284
  -301
  -320
  -339
  -359
  -379
  -401
  -424
  -447
  -472
  -498
  -525
  -553
  -582
  -613
Tax expense, $m
  1
  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
Net income, $m
  -58
  -104
  -113
  -123
  -134
  -145
  -156
  -168
  -181
  -193
  -207
  -206
  -220
  -235
  -251
  -267
  -284
  -301
  -320
  -339
  -359
  -379
  -401
  -424
  -447
  -472
  -498
  -525
  -553
  -582
  -613

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  57
  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
  430
  478
  528
  581
  635
  693
  752
  814
  879
  946
  1,015
  1,088
  1,163
  1,241
  1,322
  1,407
  1,495
  1,586
  1,682
  1,781
  1,885
  1,993
  2,106
  2,224
  2,348
  2,476
  2,611
  2,752
  2,899
  3,053
  3,215
Adjusted assets (=assets-cash), $m
  373
  478
  528
  581
  635
  693
  752
  814
  879
  946
  1,015
  1,088
  1,163
  1,241
  1,322
  1,407
  1,495
  1,586
  1,682
  1,781
  1,885
  1,993
  2,106
  2,224
  2,348
  2,476
  2,611
  2,752
  2,899
  3,053
  3,215
Revenue / Adjusted assets
  0.727
  0.630
  0.631
  0.630
  0.630
  0.629
  0.630
  0.630
  0.630
  0.630
  0.631
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
Average production assets, $m
  149
  166
  183
  201
  220
  240
  261
  282
  304
  328
  352
  377
  403
  430
  458
  487
  518
  550
  583
  617
  653
  691
  730
  771
  813
  858
  905
  954
  1,005
  1,058
  1,114
Working capital, $m
  69
  41
  46
  50
  55
  60
  65
  70
  76
  82
  88
  94
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  192
  203
  214
  225
  238
  250
  264
  277
Total debt, $m
  309
  349
  390
  434
  479
  526
  576
  627
  680
  736
  794
  854
  916
  981
  1,048
  1,118
  1,191
  1,267
  1,346
  1,428
  1,514
  1,604
  1,697
  1,795
  1,897
  2,003
  2,115
  2,232
  2,354
  2,481
  2,615
Total liabilities, $m
  356
  396
  437
  481
  526
  573
  623
  674
  727
  783
  841
  901
  963
  1,028
  1,095
  1,165
  1,238
  1,314
  1,393
  1,475
  1,561
  1,651
  1,744
  1,842
  1,944
  2,050
  2,162
  2,279
  2,401
  2,528
  2,662
Total equity, $m
  74
  82
  91
  100
  109
  119
  129
  140
  151
  163
  175
  187
  200
  213
  227
  242
  257
  273
  289
  306
  324
  343
  362
  383
  404
  426
  449
  473
  499
  525
  553
Total liabilities and equity, $m
  430
  478
  528
  581
  635
  692
  752
  814
  878
  946
  1,016
  1,088
  1,163
  1,241
  1,322
  1,407
  1,495
  1,587
  1,682
  1,781
  1,885
  1,994
  2,106
  2,225
  2,348
  2,476
  2,611
  2,752
  2,900
  3,053
  3,215
Debt-to-equity ratio
  4.176
  4.240
  4.300
  4.340
  4.380
  4.420
  4.450
  4.480
  4.500
  4.520
  4.540
  4.560
  4.580
  4.590
  4.610
  4.620
  4.630
  4.640
  4.650
  4.660
  4.670
  4.680
  4.680
  4.690
  4.700
  4.700
  4.710
  4.710
  4.720
  4.720
  4.730
Adjusted equity ratio
  0.113
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -58
  -104
  -113
  -123
  -134
  -145
  -156
  -168
  -181
  -193
  -207
  -206
  -220
  -235
  -251
  -267
  -284
  -301
  -320
  -339
  -359
  -379
  -401
  -424
  -447
  -472
  -498
  -525
  -553
  -582
  -613
Depreciation, amort., depletion, $m
  27
  30
  31
  33
  35
  37
  38
  40
  42
  44
  47
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  82
  86
  91
  95
  100
Funds from operations, $m
  -32
  -74
  -82
  -90
  -99
  -108
  -118
  -128
  -138
  -149
  -160
  -172
  -184
  -196
  -209
  -223
  -237
  -252
  -267
  -283
  -300
  -317
  -335
  -354
  -374
  -395
  -416
  -439
  -462
  -487
  -513
Change in working capital, $m
  -8
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  -24
  -78
  -86
  -95
  -104
  -113
  -123
  -133
  -144
  -155
  -166
  -178
  -190
  -203
  -216
  -230
  -245
  -260
  -275
  -292
  -309
  -326
  -345
  -364
  -385
  -406
  -428
  -451
  -475
  -500
  -527
Maintenance CAPEX, $m
  0
  -13
  -15
  -16
  -18
  -20
  -22
  -23
  -25
  -27
  -30
  -32
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -82
  -86
  -91
  -95
New CAPEX, $m
  -5
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
Cash from investing activities, $m
  -5
  -30
  -32
  -34
  -37
  -40
  -43
  -44
  -47
  -50
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -79
  -83
  -87
  -92
  -97
  -101
  -107
  -112
  -118
  -124
  -131
  -137
  -144
  -151
Free cash flow, $m
  -29
  -108
  -119
  -130
  -141
  -153
  -165
  -178
  -192
  -205
  -220
  -235
  -250
  -266
  -283
  -301
  -319
  -338
  -358
  -379
  -400
  -423
  -446
  -471
  -497
  -524
  -552
  -581
  -612
  -644
  -678
Issuance/(repayment) of debt, $m
  0
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
Issuance/(repurchase) of shares, $m
  5
  112
  122
  132
  143
  155
  167
  179
  192
  205
  219
  218
  233
  249
  265
  281
  299
  317
  336
  356
  376
  398
  420
  444
  468
  494
  521
  549
  578
  609
  641
Cash from financing (excl. dividends), $m  
  2
  152
  164
  175
  188
  202
  216
  230
  245
  260
  277
  278
  295
  314
  332
  351
  372
  393
  415
  438
  462
  488
  514
  542
  570
  601
  633
  666
  700
  737
  775
Total cash flow (excl. dividends), $m
  -27
  44
  45
  46
  48
  49
  51
  52
  53
  55
  57
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
Retained Cash Flow (-), $m
  43
  -112
  -122
  -132
  -143
  -155
  -167
  -179
  -192
  -205
  -219
  -218
  -233
  -249
  -265
  -281
  -299
  -317
  -336
  -356
  -376
  -398
  -420
  -444
  -468
  -494
  -521
  -549
  -578
  -609
  -641
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
 
  -68
  -77
  -86
  -96
  -106
  -116
  -127
  -138
  -150
  -162
  -175
  -188
  -202
  -216
  -231
  -246
  -262
  -279
  -296
  -314
  -333
  -353
  -373
  -395
  -417
  -440
  -465
  -490
  -517
  -544
Discount rate, %
 
  11.50
  12.08
  12.68
  13.31
  13.98
  14.68
  15.41
  16.18
  16.99
  17.84
  18.73
  19.67
  20.65
  21.68
  22.77
  23.91
  25.10
  26.36
  27.68
  29.06
  30.51
  32.04
  33.64
  35.32
  37.09
  38.94
  40.89
  42.93
  45.08
  47.34
PV of cash for distribution, $m
 
  -61
  -61
  -60
  -58
  -55
  -51
  -47
  -42
  -37
  -31
  -26
  -22
  -18
  -14
  -11
  -8
  -6
  -4
  -3
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  86.9
  75.6
  66.0
  57.7
  50.6
  44.4
  39.0
  34.3
  30.2
  26.6
  23.7
  21.0
  18.7
  16.6
  14.8
  13.2
  11.7
  10.5
  9.3
  8.3
  7.4
  6.6
  5.9
  5.2
  4.7
  4.1
  3.7
  3.3
  2.9
  2.6

The Spectranetics Corporation, together with its subsidiaries, develops, manufactures, markets, and distributes single-use medical devices used in minimally invasive procedures in the cardiovascular system. Its products are used to cross, prepare, and treat arterial blockages in the legs and heart, and to remove pacemaker and defibrillator cardiac leads. The company's vascular intervention (VI) portfolio of VI devices includes laser and aspiration catheters; scoring balloon catheters, which supports catheters; and drug-coated balloon catheters. It also offers laser systems for use in various minimally invasive cardiovascular procedures; and sells, rents, and services its laser systems. Its primary crossing solutions include Quick-Cross, Quick-Cross Select, and Quick-Cross Extreme; the ELCA Laser Ablation Catheter for coronary atherectomy; and QuickCat aspiration catheter for thrombus management. The company's lead management product line comprises excimer laser sheaths, non-laser mechanical sheaths, and cardiac lead management accessories, such as Spectranetics Laser Sheath, and Lead Locking Device for the removal of pacemaker and defibrillator cardiac leads. In addition, it offers the Stellarex DCB platform that is designed to treat peripheral arterial disease. The company sells its products directly, as well as through its distributors in the United States, Canada, Europe, the Middle East, the Asia Pacific, Latin America, and Puerto Rico. The Spectranetics Corporation was founded in 1984 and is headquartered in Colorado Springs, Colorado.

FINANCIAL RATIOS  of  Spectranetics (SPNC)

Valuation Ratios
P/E Ratio -28.7
Price to Sales 6.1
Price to Book 22.5
Price to Tangible Book
Price to Cash Flow -69.4
Price to Free Cash Flow -57.4
Growth Rates
Sales Growth Rate 10.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 383.8%
Total Debt to Equity 417.6%
Interest Coverage -4
Management Effectiveness
Return On Assets -10.2%
Ret/ On Assets - 3 Yr. Avg. -10.9%
Return On Total Capital -14.4%
Ret/ On T. Cap. - 3 Yr. Avg. -14.3%
Return On Equity -60.7%
Return On Equity - 3 Yr. Avg. -42.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 74.9%
Gross Margin - 3 Yr. Avg. 73.5%
EBITDA Margin -6.6%
EBITDA Margin - 3 Yr. Avg. -9.2%
Operating Margin -15.9%
Oper. Margin - 3 Yr. Avg. -21.8%
Pre-Tax Margin -21%
Pre-Tax Margin - 3 Yr. Avg. -21.7%
Net Profit Margin -21.4%
Net Profit Margin - 3 Yr. Avg. -21.8%
Effective Tax Rate -1.8%
Eff/ Tax Rate - 3 Yr. Avg. -0.6%
Payout Ratio 0%

SPNC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPNC stock intrinsic value calculation we used $271 million for the last fiscal year's total revenue generated by Spectranetics. The default revenue input number comes from 2016 income statement of Spectranetics. 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 SPNC stock valuation model: a) initial revenue growth rate of 11.1% 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 11.5%, whose default value for SPNC is calculated based on our internal credit rating of Spectranetics, 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 Spectranetics.
    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 SPNC stock the variable cost ratio is equal to 131%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SPNC 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 3.9% for Spectranetics.

Corporate tax rate of 27% is the nominal tax rate for Spectranetics. 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 SPNC 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 SPNC are equal to 55%.

Life of production assets of 11.1 years is the average useful life of capital assets used in Spectranetics 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 SPNC is equal to 13.7%. 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 - $74 million for Spectranetics - 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 42.732 million for Spectranetics 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 Spectranetics at the current share price and the inputted number of shares is $1.6 billion.

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Stock chart of SPNC Financial statements of SPNC
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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