Intrinsic value of Tivity Health - TVTY

Previous Close

$33.20

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$33.20

 
Intrinsic value

$39.82

 
Up/down potential

+20%

 
Rating

hold

 
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 TVTY 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 1.3

 

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, %
  10.84
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
Revenue, $m
  501
  561
  623
  689
  759
  831
  906
  985
  1,067
  1,152
  1,240
  1,332
  1,427
  1,526
  1,630
  1,737
  1,848
  1,964
  2,085
  2,211
  2,342
  2,479
  2,621
  2,770
  2,926
  3,088
  3,258
  3,435
  3,621
  3,815
  4,018
Variable operating expenses, $m
 
  443
  489
  538
  588
  641
  696
  754
  813
  875
  940
  974
  1,044
  1,116
  1,191
  1,270
  1,351
  1,436
  1,524
  1,616
  1,712
  1,812
  1,917
  2,026
  2,139
  2,258
  2,382
  2,512
  2,647
  2,789
  2,938
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
  406
  443
  489
  538
  588
  641
  696
  754
  813
  875
  940
  974
  1,044
  1,116
  1,191
  1,270
  1,351
  1,436
  1,524
  1,616
  1,712
  1,812
  1,917
  2,026
  2,139
  2,258
  2,382
  2,512
  2,647
  2,789
  2,938
Operating income, $m
  95
  117
  134
  152
  170
  190
  210
  231
  253
  276
  300
  358
  384
  410
  438
  467
  497
  528
  561
  594
  630
  666
  705
  745
  787
  830
  876
  924
  974
  1,026
  1,080
EBITDA, $m
  126
  154
  172
  190
  209
  229
  249
  271
  294
  317
  341
  367
  393
  420
  448
  478
  509
  541
  574
  609
  645
  682
  722
  762
  805
  850
  897
  946
  997
  1,050
  1,106
Interest expense (income), $m
  0
  7
  9
  10
  12
  14
  15
  17
  19
  21
  23
  26
  28
  30
  33
  35
  38
  41
  43
  46
  50
  53
  56
  60
  63
  67
  71
  75
  80
  84
  89
Earnings before tax, $m
  78
  110
  125
  142
  159
  176
  195
  214
  234
  255
  277
  333
  356
  380
  405
  432
  459
  488
  517
  548
  580
  614
  649
  685
  723
  763
  805
  848
  894
  941
  991
Tax expense, $m
  22
  30
  34
  38
  43
  48
  53
  58
  63
  69
  75
  90
  96
  103
  109
  117
  124
  132
  140
  148
  157
  166
  175
  185
  195
  206
  217
  229
  241
  254
  268
Net income, $m
  -129
  80
  92
  103
  116
  129
  142
  156
  171
  186
  202
  243
  260
  278
  296
  315
  335
  356
  378
  400
  424
  448
  474
  500
  528
  557
  587
  619
  652
  687
  724

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  545
  607
  675
  747
  822
  900
  982
  1,067
  1,156
  1,248
  1,343
  1,443
  1,546
  1,654
  1,765
  1,882
  2,002
  2,128
  2,259
  2,395
  2,537
  2,686
  2,840
  3,002
  3,170
  3,346
  3,530
  3,722
  3,923
  4,133
  4,353
Adjusted assets (=assets-cash), $m
  543
  607
  675
  747
  822
  900
  982
  1,067
  1,156
  1,248
  1,343
  1,443
  1,546
  1,654
  1,765
  1,882
  2,002
  2,128
  2,259
  2,395
  2,537
  2,686
  2,840
  3,002
  3,170
  3,346
  3,530
  3,722
  3,923
  4,133
  4,353
Revenue / Adjusted assets
  0.923
  0.924
  0.923
  0.922
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.924
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
Average production assets, $m
  39
  43
  48
  53
  58
  64
  70
  76
  82
  89
  95
  103
  110
  118
  125
  134
  142
  151
  161
  170
  180
  191
  202
  213
  225
  238
  251
  265
  279
  294
  309
Working capital, $m
  -74
  -34
  -37
  -41
  -46
  -50
  -54
  -59
  -64
  -69
  -74
  -80
  -86
  -92
  -98
  -104
  -111
  -118
  -125
  -133
  -141
  -149
  -157
  -166
  -176
  -185
  -195
  -206
  -217
  -229
  -241
Total debt, $m
  210
  250
  294
  341
  390
  441
  494
  550
  607
  667
  730
  795
  862
  932
  1,005
  1,081
  1,160
  1,242
  1,327
  1,416
  1,508
  1,605
  1,706
  1,811
  1,921
  2,036
  2,155
  2,281
  2,412
  2,549
  2,692
Total liabilities, $m
  355
  396
  440
  487
  536
  587
  640
  696
  753
  813
  876
  941
  1,008
  1,078
  1,151
  1,227
  1,306
  1,388
  1,473
  1,562
  1,654
  1,751
  1,852
  1,957
  2,067
  2,182
  2,301
  2,427
  2,558
  2,695
  2,838
Total equity, $m
  189
  211
  235
  260
  286
  313
  342
  371
  402
  434
  468
  502
  538
  576
  614
  655
  697
  741
  786
  834
  883
  935
  988
  1,045
  1,103
  1,164
  1,228
  1,295
  1,365
  1,438
  1,515
Total liabilities and equity, $m
  544
  607
  675
  747
  822
  900
  982
  1,067
  1,155
  1,247
  1,344
  1,443
  1,546
  1,654
  1,765
  1,882
  2,003
  2,129
  2,259
  2,396
  2,537
  2,686
  2,840
  3,002
  3,170
  3,346
  3,529
  3,722
  3,923
  4,133
  4,353
Debt-to-equity ratio
  1.111
  1.180
  1.250
  1.310
  1.360
  1.410
  1.450
  1.480
  1.510
  1.540
  1.560
  1.580
  1.600
  1.620
  1.640
  1.650
  1.660
  1.680
  1.690
  1.700
  1.710
  1.720
  1.730
  1.730
  1.740
  1.750
  1.750
  1.760
  1.770
  1.770
  1.780
Adjusted equity ratio
  0.344
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -129
  80
  92
  103
  116
  129
  142
  156
  171
  186
  202
  243
  260
  278
  296
  315
  335
  356
  378
  400
  424
  448
  474
  500
  528
  557
  587
  619
  652
  687
  724
Depreciation, amort., depletion, $m
  31
  37
  37
  38
  38
  39
  39
  40
  40
  41
  41
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
Funds from operations, $m
  27
  117
  129
  141
  154
  167
  181
  196
  211
  227
  243
  251
  269
  287
  306
  326
  347
  368
  391
  414
  438
  464
  490
  518
  547
  577
  608
  641
  675
  711
  749
Change in working capital, $m
  -13
  -4
  -4
  -4
  -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
Cash from operations, $m
  40
  119
  133
  145
  158
  172
  186
  201
  216
  232
  249
  257
  275
  293
  313
  333
  354
  375
  398
  422
  446
  472
  499
  527
  556
  586
  618
  652
  687
  723
  761
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
New CAPEX, $m
  -14
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
Cash from investing activities, $m
  -39
  -8
  -9
  -9
  -9
  -11
  -11
  -12
  -12
  -14
  -14
  -15
  -15
  -17
  -18
  -18
  -20
  -21
  -21
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -36
  -38
  -40
Free cash flow, $m
  1
  112
  124
  136
  148
  161
  175
  189
  203
  219
  234
  242
  259
  277
  295
  314
  334
  355
  376
  399
  422
  447
  472
  499
  526
  555
  586
  617
  650
  685
  721
Issuance/(repayment) of debt, $m
  -11
  42
  44
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  144
Issuance/(repurchase) of shares, $m
  10
  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 from financing (excl. dividends), $m  
  1
  42
  44
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  144
Total cash flow (excl. dividends), $m
  1
  154
  169
  183
  197
  212
  228
  244
  261
  279
  297
  307
  326
  347
  368
  390
  413
  437
  462
  488
  515
  543
  573
  604
  636
  670
  706
  743
  782
  822
  865
Retained Cash Flow (-), $m
  92
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
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
 
  131
  145
  158
  171
  185
  200
  215
  230
  247
  264
  272
  290
  309
  329
  349
  371
  393
  416
  440
  465
  492
  519
  548
  578
  609
  642
  676
  712
  749
  788
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  122
  124
  124
  122
  118
  114
  108
  101
  94
  85
  74
  66
  57
  49
  42
  34
  28
  22
  17
  13
  10
  7
  5
  4
  2
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Tivity Health, Inc., together with its subsidiaries, provides network delivered solutions and population health management services to help people to enhance well-being and health. The company offers network solutions, including SilverSneakers senior fitness program to members of medicare advantage, medicare supplement, and group retirees; the Prime Fitness program through commercial health plans, employers, and insurance exchanges; and Physical Medicine access program to individuals through health plans and employers who seek health services, such as physical therapy, occupational therapy, speech therapy, chiropractic care, acupuncture, etc. Its population health technology platform uses its proprietary analytics and predictive models to stratify the population and develop individualized well-being enhancement plans, and deliver targeted action-based solutions for enhancing individual and organizational performance. The company’s intervention services are delivered through its well-being improvement call centers, as well as through various methods, including venue-based face-to-face interactions; print; phone; mobile and remote devices with applications; on-line Web-based portals, such as social networks; and any combination of these methods. Tivity Health, Inc. serves health plans and self-insured employers, including state and municipal government entities; and integrated healthcare systems and hospitals, as well as commercial healthcare businesses and/or government entities in Australia, Brazil, and France. The company was formerly known as Healthways, Inc. and changed its name to Tivity Health, Inc. in January 2017. Tivity Health, Inc. was founded in 1981 and is headquartered in Franklin, Tennessee.

FINANCIAL RATIOS  of  Tivity Health (TVTY)

Valuation Ratios
P/E Ratio -10
Price to Sales 2.6
Price to Book 6.8
Price to Tangible Book
Price to Cash Flow 32.3
Price to Free Cash Flow 49.7
Growth Rates
Sales Growth Rate 10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -19.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 86.8%
Total Debt to Equity 111.1%
Interest Coverage 0
Management Effectiveness
Return On Assets -20.5%
Ret/ On Assets - 3 Yr. Avg. -8.4%
Return On Total Capital -28.3%
Ret/ On T. Cap. - 3 Yr. Avg. -11.7%
Return On Equity -54.9%
Return On Equity - 3 Yr. Avg. -22.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 28.7%
Gross Margin - 3 Yr. Avg. 30.4%
EBITDA Margin 21.8%
EBITDA Margin - 3 Yr. Avg. 26.4%
Operating Margin 19%
Oper. Margin - 3 Yr. Avg. 20.3%
Pre-Tax Margin 15.6%
Pre-Tax Margin - 3 Yr. Avg. 16.3%
Net Profit Margin -25.7%
Net Profit Margin - 3 Yr. Avg. -11.4%
Effective Tax Rate 28.2%
Eff/ Tax Rate - 3 Yr. Avg. 35.5%
Payout Ratio 0%

TVTY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TVTY stock intrinsic value calculation we used $501 million for the last fiscal year's total revenue generated by Tivity Health. The default revenue input number comes from 2016 income statement of Tivity Health. 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 TVTY stock valuation model: a) initial revenue growth rate of 11.9% 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 7.7%, whose default value for TVTY is calculated based on our internal credit rating of Tivity Health, 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 Tivity Health.
    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 TVTY stock the variable cost ratio is equal to 79.8%.

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 TVTY 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 Tivity Health.

Corporate tax rate of 27% is the nominal tax rate for Tivity Health. 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 TVTY 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 TVTY are equal to 7.7%.

Life of production assets of 12.1 years is the average useful life of capital assets used in Tivity Health 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 TVTY is equal to -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 - $189 million for Tivity Health - 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 38.855 million for Tivity Health 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 Tivity Health at the current share price and the inputted number of shares is $1.3 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
TVTY Tivity Health 33.20 prem.  prem.
CRVL Corvel 46.75 prem.  prem.
INFU InfuSystems Ho 1.55 prem.  prem.
PINC Premier 34.92 prem.  prem.
UNH UnitedHealth G 178.05 prem.  prem.

COMPANY NEWS

▶ Tivity Health Names Adam C. Holland Chief Financial Officer   [May-25-17 01:30PM  GlobeNewswire]
▶ Healthways tops Street 1Q forecasts   [Apr-27-17 07:02PM  Associated Press]
▶ SilverSneakers Celebrates 25 Years of Changing Lives   [Apr-19-17 11:00AM  GlobeNewswire]
▶ Ohio communities (Dayton included) lag in well-being index   [Mar-08-17 06:20AM  at bizjournals.com]
▶ Ohio communities (Dayton included) lag in well-being index   [06:20AM  American City Business Journals]
▶ Healthways tops 4Q profit forecasts   [Feb-23-17 06:21PM  Associated Press]
Stock chart of TVTY Financial statements of TVTY Annual reports of TVTY
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.