Intrinsic value of Tivity Health - TVTY

Previous Close

$34.95

  Intrinsic Value

$38.01

stock screener

  Rating & Target

hold

+9%

Previous close

$34.95

 
Intrinsic value

$38.01

 
Up/down potential

+9%

 
Rating

hold

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 1.4

 

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
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.45
  5.40
  5.36
  5.32
  5.29
Revenue, $m
  501
  557
  616
  678
  742
  810
  880
  953
  1,029
  1,108
  1,189
  1,275
  1,363
  1,455
  1,551
  1,650
  1,754
  1,862
  1,974
  2,091
  2,213
  2,341
  2,474
  2,613
  2,757
  2,909
  3,067
  3,233
  3,406
  3,588
  3,778
Variable operating expenses, $m
 
  441
  484
  529
  576
  625
  677
  730
  786
  843
  903
  932
  997
  1,064
  1,134
  1,207
  1,282
  1,361
  1,443
  1,529
  1,618
  1,711
  1,809
  1,910
  2,016
  2,127
  2,243
  2,364
  2,491
  2,623
  2,762
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
  441
  484
  529
  576
  625
  677
  730
  786
  843
  903
  932
  997
  1,064
  1,134
  1,207
  1,282
  1,361
  1,443
  1,529
  1,618
  1,711
  1,809
  1,910
  2,016
  2,127
  2,243
  2,364
  2,491
  2,623
  2,762
Operating income, $m
  95
  116
  132
  149
  166
  184
  203
  223
  243
  264
  286
  343
  367
  391
  417
  444
  472
  501
  531
  562
  595
  629
  665
  702
  741
  782
  825
  869
  916
  965
  1,016
EBITDA, $m
  126
  153
  170
  187
  204
  223
  242
  262
  283
  305
  327
  351
  375
  401
  427
  454
  483
  512
  543
  576
  609
  644
  681
  719
  759
  801
  844
  890
  938
  987
  1,040
Interest expense (income), $m
  0
  7
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
  26
  29
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  59
  63
  67
  71
  75
  79
  84
Earnings before tax, $m
  78
  109
  123
  139
  154
  171
  188
  206
  225
  244
  264
  318
  340
  363
  386
  411
  436
  462
  490
  519
  549
  580
  612
  646
  682
  719
  758
  799
  841
  886
  932
Tax expense, $m
  22
  29
  33
  37
  42
  46
  51
  56
  61
  66
  71
  86
  92
  98
  104
  111
  118
  125
  132
  140
  148
  157
  165
  175
  184
  194
  205
  216
  227
  239
  252
Net income, $m
  -129
  80
  90
  101
  113
  125
  137
  150
  164
  178
  193
  232
  248
  265
  282
  300
  318
  338
  358
  379
  400
  423
  447
  472
  498
  525
  553
  583
  614
  646
  680

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
  604
  667
  734
  804
  877
  953
  1,032
  1,114
  1,200
  1,289
  1,381
  1,477
  1,577
  1,680
  1,788
  1,900
  2,017
  2,139
  2,266
  2,398
  2,536
  2,680
  2,830
  2,988
  3,152
  3,323
  3,503
  3,691
  3,887
  4,093
Adjusted assets (=assets-cash), $m
  543
  604
  667
  734
  804
  877
  953
  1,032
  1,114
  1,200
  1,289
  1,381
  1,477
  1,577
  1,680
  1,788
  1,900
  2,017
  2,139
  2,266
  2,398
  2,536
  2,680
  2,830
  2,988
  3,152
  3,323
  3,503
  3,691
  3,887
  4,093
Revenue / Adjusted assets
  0.923
  0.922
  0.924
  0.924
  0.923
  0.924
  0.923
  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
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
  0.923
Average production assets, $m
  39
  43
  47
  52
  57
  62
  68
  73
  79
  85
  92
  98
  105
  112
  119
  127
  135
  143
  152
  161
  170
  180
  190
  201
  212
  224
  236
  249
  262
  276
  291
Working capital, $m
  -74
  -33
  -37
  -41
  -45
  -49
  -53
  -57
  -62
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -105
  -112
  -118
  -125
  -133
  -140
  -148
  -157
  -165
  -175
  -184
  -194
  -204
  -215
  -227
Total debt, $m
  210
  248
  289
  333
  378
  426
  475
  527
  581
  636
  694
  754
  817
  882
  950
  1,020
  1,093
  1,169
  1,249
  1,331
  1,418
  1,508
  1,601
  1,699
  1,802
  1,909
  2,021
  2,138
  2,260
  2,388
  2,522
Total liabilities, $m
  355
  394
  435
  479
  524
  572
  621
  673
  727
  782
  840
  900
  963
  1,028
  1,096
  1,166
  1,239
  1,315
  1,395
  1,477
  1,564
  1,654
  1,747
  1,845
  1,948
  2,055
  2,167
  2,284
  2,406
  2,534
  2,668
Total equity, $m
  189
  210
  232
  256
  280
  305
  332
  359
  388
  418
  448
  481
  514
  549
  585
  622
  661
  702
  744
  789
  835
  883
  933
  985
  1,040
  1,097
  1,157
  1,219
  1,284
  1,353
  1,424
Total liabilities and equity, $m
  544
  604
  667
  735
  804
  877
  953
  1,032
  1,115
  1,200
  1,288
  1,381
  1,477
  1,577
  1,681
  1,788
  1,900
  2,017
  2,139
  2,266
  2,399
  2,537
  2,680
  2,830
  2,988
  3,152
  3,324
  3,503
  3,690
  3,887
  4,092
Debt-to-equity ratio
  1.111
  1.180
  1.240
  1.300
  1.350
  1.400
  1.430
  1.470
  1.500
  1.520
  1.550
  1.570
  1.590
  1.610
  1.620
  1.640
  1.650
  1.670
  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
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
  90
  101
  113
  125
  137
  150
  164
  178
  193
  232
  248
  265
  282
  300
  318
  338
  358
  379
  400
  423
  447
  472
  498
  525
  553
  583
  614
  646
  680
Depreciation, amort., depletion, $m
  31
  37
  37
  38
  38
  39
  39
  40
  40
  41
  41
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Funds from operations, $m
  27
  117
  128
  139
  151
  163
  176
  190
  204
  219
  234
  241
  257
  274
  292
  310
  329
  349
  370
  392
  415
  438
  463
  488
  515
  543
  573
  604
  636
  669
  704
Change in working capital, $m
  -13
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
Cash from operations, $m
  40
  120
  131
  143
  155
  167
  181
  194
  209
  223
  239
  246
  262
  280
  297
  316
  336
  356
  377
  399
  422
  446
  471
  497
  524
  553
  582
  613
  646
  680
  716
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
New CAPEX, $m
  -14
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
Cash from investing activities, $m
  -39
  -7
  -9
  -9
  -9
  -10
  -10
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -19
  -19
  -21
  -22
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
Free cash flow, $m
  1
  112
  123
  134
  146
  158
  170
  183
  197
  211
  225
  232
  247
  264
  281
  299
  317
  336
  356
  377
  399
  422
  446
  470
  496
  523
  552
  581
  612
  644
  678
Issuance/(repayment) of debt, $m
  -11
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
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
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
  79
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
Total cash flow (excl. dividends), $m
  1
  152
  165
  178
  191
  205
  220
  235
  250
  266
  283
  292
  310
  329
  348
  369
  390
  413
  436
  460
  485
  512
  539
  568
  599
  630
  663
  698
  735
  773
  813
Retained Cash Flow (-), $m
  92
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -72
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
  142
  154
  167
  180
  193
  207
  222
  237
  252
  260
  277
  294
  312
  331
  351
  372
  393
  416
  439
  464
  489
  516
  544
  573
  604
  636
  669
  704
  741
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
  122
  121
  119
  115
  110
  104
  97
  90
  82
  71
  63
  55
  47
  39
  33
  27
  21
  16
  13
  9
  7
  5
  3
  2
  1
  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., formerly Healthways, Inc., is focused targeted population health for those aged 50 and older. The Company offers three programs: SilverSneakers senior fitness, Prime fitness and WholeHealth Living. The SilverSneakers senior fitness program is offered to members of Medicare Advantage, Medicare Supplement, and Group Retiree plans. The Company also offers Prime fitness, a fitness facility access program, through commercial health plans, employers and insurance exchanges. Its national network of fitness centers delivers both SilverSneakers and Prime fitness. As of December 31, 2016, the Company's fitness networks encompassed approximately 16,000 participating locations and more than 1,000 alternative locations that provide classes outside of traditional fitness centers. As of December 31, 2016, the Company's WholeHealth Living network included over 88,000 complementary, alternative, and physical medicine practitioners to serve individuals through health plans.

FINANCIAL RATIOS  of  Tivity Health (TVTY)

Valuation Ratios
P/E Ratio -10.5
Price to Sales 2.7
Price to Book 7.2
Price to Tangible Book
Price to Cash Flow 34
Price to Free Cash Flow 52.3
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 11.2% 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 39.32 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 $1.4 billion.

RELATED COMPANIES Price Int.Val. Rating
TVTY Tivity Health 34.95 38.01  hold
CRVL Corvel 54.30 43.70  sell
INFU InfuSystems Ho 2.10 0.66  str.sell
PINC Premier 28.11 60.33  str.buy
UNH UnitedHealth G 210.25 193.22  hold

COMPANY NEWS

▶ Activist investor divests from Franklin health care company   [Nov-15-17 11:29AM  American City Business Journals]
▶ Tivity Health Comments on UnitedHealthcare Relationship   [Nov-06-17 06:09PM  GlobeNewswire]
▶ Stocks To Watch: Tivity Health Sees RS Rating Jump To 95   [03:00AM  Investor's Business Daily]
▶ Healthways tops 3Q profit forecasts   [Oct-26-17 07:24PM  Associated Press]
▶ These 3 Stocks Would Have Tripled Your Money   [Jun-12-17 01:33PM  Motley Fool]
▶ ETFs with exposure to Tivity Health, Inc. : June 8, 2017   [Jun-08-17 01:59PM  Capital Cube]
▶ 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]
Financial statements 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.

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