Intrinsic value of Staar Surgical - STAA

Previous Close

$11.90

  Intrinsic Value

$0.23

stock screener

  Rating & Target

str. sell

-98%

  Value-price divergence*

-75%

Previous close

$11.90

 
Intrinsic value

$0.23

 
Up/down potential

-98%

 
Rating

str. sell

 
Value-price divergence*

-75%

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

We calculate the intrinsic value of STAA 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 0.5

 

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, %
  6.49
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  82
  87
  93
  99
  105
  111
  117
  124
  131
  139
  147
  155
  163
  172
  181
  191
  201
  212
  223
  234
  247
  259
  273
  287
  301
  317
  333
  350
  368
  387
  406
Variable operating expenses, $m
 
  93
  99
  105
  111
  118
  125
  132
  139
  147
  155
  164
  173
  182
  192
  202
  213
  224
  236
  248
  261
  274
  289
  304
  319
  335
  353
  371
  389
  409
  430
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
  95
  93
  99
  105
  111
  118
  125
  132
  139
  147
  155
  164
  173
  182
  192
  202
  213
  224
  236
  248
  261
  274
  289
  304
  319
  335
  353
  371
  389
  409
  430
Operating income, $m
  -13
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -22
  -23
  -24
EBITDA, $m
  -10
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
Earnings before tax, $m
  -12
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Tax expense, $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
  0
Net income, $m
  -12
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  14
  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
  65
  54
  58
  61
  65
  69
  73
  77
  82
  86
  91
  96
  101
  107
  113
  119
  125
  132
  138
  146
  153
  161
  170
  178
  187
  197
  207
  218
  229
  240
  253
Adjusted assets (=assets-cash), $m
  51
  54
  58
  61
  65
  69
  73
  77
  82
  86
  91
  96
  101
  107
  113
  119
  125
  132
  138
  146
  153
  161
  170
  178
  187
  197
  207
  218
  229
  240
  253
Revenue / Adjusted assets
  1.608
  1.611
  1.603
  1.623
  1.615
  1.609
  1.603
  1.610
  1.598
  1.616
  1.615
  1.615
  1.614
  1.607
  1.602
  1.605
  1.608
  1.606
  1.616
  1.603
  1.614
  1.609
  1.606
  1.612
  1.610
  1.609
  1.609
  1.606
  1.607
  1.613
  1.605
Average production assets, $m
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  44
  47
  49
  51
  54
  57
Working capital, $m
  29
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  67
  70
  74
  77
  81
  85
  90
  94
  99
Total debt, $m
  7
  3
  5
  6
  8
  10
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  74
  79
  84
  89
Total liabilities, $m
  28
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  94
  99
  104
  109
Total equity, $m
  38
  31
  33
  35
  37
  39
  42
  44
  46
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  96
  101
  107
  112
  118
  124
  130
  137
  144
Total liabilities and equity, $m
  66
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  96
  102
  107
  113
  119
  125
  132
  139
  146
  153
  162
  169
  178
  188
  197
  207
  218
  229
  241
  253
Debt-to-equity ratio
  0.184
  0.110
  0.150
  0.180
  0.220
  0.250
  0.280
  0.300
  0.330
  0.350
  0.370
  0.390
  0.410
  0.430
  0.450
  0.460
  0.480
  0.490
  0.500
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.600
  0.610
  0.620
Adjusted equity ratio
  0.549
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -12
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Depreciation, amort., depletion, $m
  3
  1
  2
  2
  2
  2
  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
Funds from operations, $m
  3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
Change in working capital, $m
  2
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
Cash from operations, $m
  1
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
New CAPEX, $m
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Cash from investing activities, $m
  -3
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
Free cash flow, $m
  -2
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
Issuance/(repayment) of debt, $m
  0
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
Issuance/(repurchase) of shares, $m
  2
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  30
  32
  34
Cash from financing (excl. dividends), $m  
  3
  8
  9
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  19
  19
  20
  21
  22
  23
  24
  26
  28
  29
  30
  32
  34
  35
  37
  39
Total cash flow (excl. dividends), $m
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
Retained Cash Flow (-), $m
  1
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
Prev. year cash balance distribution, $m
 
  9
  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
 
  3
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
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
 
  3
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.5
  95.2
  92.9
  90.6
  88.4
  86.3
  84.2
  82.2
  80.2
  78.2
  76.4
  74.6
  72.8
  71.1
  69.4
  67.7
  66.1
  64.6
  63.0
  61.5
  60.0
  58.6
  57.2
  55.8
  54.5
  53.2
  51.9
  50.7
  49.5
  48.3

STAAR Surgical Company, together with its subsidiaries, designs, develops, manufactures, and sells implantable lenses for the eye, and delivery systems to deliver the lenses into the eye. The company offers Visian implantable collamer lenses (ICLs) to treat visual disorders, such as myopia, hyperopia, astigmatism, and presbyopia; and Hyperopic ICL, which treats far-sightedness. It also provides minimally invasive intraocular lenses (IOLs), including foldable IOLs for use in minimally invasive cataract surgical procedures; aspheric IOLs that produce a clearer image than traditional spherical lenses; nanoFLEX IOL, a single piece collamer aspheric optic; and Toric IOLs for cataract patients, as well as preloaded injectors for use in cataract surgery. In addition, the company sells surgical products, and other related instruments and devices, as well as injector parts; and manufactures AquaFlow devices for the treatment of glaucoma. It markets its products to health care providers, including surgical centers, hospitals, managed care providers, health organizations, group purchasing organizations, and government facilities primarily under the STAAR, Visian, Collamer, CentraFLOW, AquaPORT, nanoFLEX, nanoPOINT, Epiphany, and AquaFlow trademarks. The company sells products directly through its sales representatives in the United States, Canada, Japan, Germany, the United Kingdom, and Spain, as well as through independent distributors in approximately 60 countries. STAAR Surgical Company was founded in 1982 and is headquartered in Monrovia, California.

FINANCIAL RATIOS  of  Staar Surgical (STAA)

Valuation Ratios
P/E Ratio -40.4
Price to Sales 5.9
Price to Book 12.8
Price to Tangible Book
Price to Cash Flow 484.7
Price to Free Cash Flow -242.3
Growth Rates
Sales Growth Rate 6.5%
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 3
Current Ratio 0
LT Debt to Equity 5.3%
Total Debt to Equity 18.4%
Interest Coverage 0
Management Effectiveness
Return On Assets -18.8%
Ret/ On Assets - 3 Yr. Avg. -14.5%
Return On Total Capital -27%
Ret/ On T. Cap. - 3 Yr. Avg. -20.6%
Return On Equity -31.2%
Return On Equity - 3 Yr. Avg. -23.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 70.7%
Gross Margin - 3 Yr. Avg. 68.3%
EBITDA Margin -11%
EBITDA Margin - 3 Yr. Avg. -8.5%
Operating Margin -15.9%
Oper. Margin - 3 Yr. Avg. -11%
Pre-Tax Margin -14.6%
Pre-Tax Margin - 3 Yr. Avg. -11.5%
Net Profit Margin -14.6%
Net Profit Margin - 3 Yr. Avg. -11.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.9%
Payout Ratio 0%

STAA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STAA stock intrinsic value calculation we used $82 million for the last fiscal year's total revenue generated by Staar Surgical. The default revenue input number comes from 2016 income statement of Staar Surgical. 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 STAA stock valuation model: a) initial revenue growth rate of 6.5% 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 STAA is calculated based on our internal credit rating of Staar Surgical, 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 Staar Surgical.
    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 STAA stock the variable cost ratio is equal to 106.1%.

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 STAA 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 Staar Surgical.

Corporate tax rate of 27% is the nominal tax rate for Staar Surgical. 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 STAA 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 STAA are equal to 14%.

Life of production assets of 10 years is the average useful life of capital assets used in Staar Surgical 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 STAA is equal to 24.4%. 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 - $38 million for Staar Surgical - 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 39.809 million for Staar Surgical 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 Staar Surgical at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Staar Surgical reports 2Q loss   [Aug-03-17 12:23AM  Associated Press]
▶ STAAR Surgical Reports Second Quarter 2017 Results   [Aug-02-17 04:01PM  PR Newswire]
▶ ETFs with exposure to STAAR Surgical Co. : May 8, 2017   [May-08-17 05:16PM  Capital Cube]
▶ Staar Surgical reports 1Q loss   [May-03-17 05:06PM  Associated Press]
▶ STAAR Surgical Names Deborah Andrews Interim CFO   [Apr-05-17 07:00AM  PR Newswire]
▶ Staar Surgical posts 4Q loss   [04:21PM  Associated Press]
▶ The Shuman Law Firm Investigates STAAR Surgical Company   [Jun-09-16 02:00PM  Business Wire]
Stock chart of STAA Financial statements of STAA
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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