Intrinsic value of Tivity Health - TVTY

Previous Close

$38.05

  Intrinsic Value

$35.93

stock screener

  Rating & Target

hold

-6%

Previous close

$38.05

 
Intrinsic value

$35.93

 
Up/down potential

-6%

 
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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
Revenue, $m
  501
  553
  608
  665
  724
  786
  850
  917
  987
  1,059
  1,134
  1,212
  1,293
  1,378
  1,465
  1,557
  1,652
  1,751
  1,854
  1,962
  2,074
  2,192
  2,314
  2,442
  2,576
  2,716
  2,862
  3,016
  3,176
  3,344
  3,519
Variable operating expenses, $m
 
  438
  478
  519
  563
  608
  655
  704
  755
  808
  863
  886
  946
  1,007
  1,071
  1,138
  1,208
  1,280
  1,356
  1,435
  1,517
  1,603
  1,692
  1,786
  1,884
  1,986
  2,093
  2,205
  2,322
  2,445
  2,573
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
  438
  478
  519
  563
  608
  655
  704
  755
  808
  863
  886
  946
  1,007
  1,071
  1,138
  1,208
  1,280
  1,356
  1,435
  1,517
  1,603
  1,692
  1,786
  1,884
  1,986
  2,093
  2,205
  2,322
  2,445
  2,573
Operating income, $m
  95
  115
  130
  145
  161
  178
  195
  213
  232
  251
  271
  326
  348
  370
  394
  419
  444
  471
  499
  528
  558
  589
  622
  657
  693
  730
  770
  811
  854
  899
  946
EBITDA, $m
  126
  152
  167
  183
  199
  216
  234
  252
  272
  291
  312
  334
  356
  379
  403
  428
  455
  482
  510
  540
  571
  603
  637
  672
  709
  748
  788
  830
  874
  920
  969
Interest expense (income), $m
  0
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  78
Earnings before tax, $m
  78
  108
  121
  135
  150
  165
  181
  197
  214
  232
  250
  303
  323
  344
  365
  387
  411
  435
  460
  487
  514
  543
  573
  605
  637
  672
  708
  745
  784
  826
  869
Tax expense, $m
  22
  29
  33
  37
  40
  45
  49
  53
  58
  63
  68
  82
  87
  93
  99
  105
  111
  117
  124
  131
  139
  147
  155
  163
  172
  181
  191
  201
  212
  223
  235
Net income, $m
  -129
  79
  89
  99
  109
  120
  132
  144
  156
  169
  183
  221
  236
  251
  266
  283
  300
  318
  336
  355
  375
  396
  418
  441
  465
  490
  517
  544
  573
  603
  634

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
  599
  658
  720
  784
  851
  921
  994
  1,069
  1,147
  1,229
  1,313
  1,401
  1,493
  1,588
  1,687
  1,790
  1,897
  2,009
  2,126
  2,248
  2,375
  2,507
  2,646
  2,791
  2,943
  3,101
  3,267
  3,441
  3,623
  3,813
Adjusted assets (=assets-cash), $m
  543
  599
  658
  720
  784
  851
  921
  994
  1,069
  1,147
  1,229
  1,313
  1,401
  1,493
  1,588
  1,687
  1,790
  1,897
  2,009
  2,126
  2,248
  2,375
  2,507
  2,646
  2,791
  2,943
  3,101
  3,267
  3,441
  3,623
  3,813
Revenue / Adjusted assets
  0.923
  0.923
  0.924
  0.924
  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
  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
  51
  56
  61
  65
  71
  76
  82
  87
  93
  100
  106
  113
  120
  127
  135
  143
  151
  160
  169
  178
  188
  198
  209
  220
  232
  245
  257
  271
Working capital, $m
  -74
  -33
  -36
  -40
  -43
  -47
  -51
  -55
  -59
  -64
  -68
  -73
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -118
  -124
  -132
  -139
  -147
  -155
  -163
  -172
  -181
  -191
  -201
  -211
Total debt, $m
  210
  245
  283
  323
  365
  409
  455
  502
  551
  602
  655
  710
  768
  827
  889
  954
  1,021
  1,091
  1,164
  1,240
  1,319
  1,402
  1,489
  1,579
  1,674
  1,773
  1,876
  1,984
  2,097
  2,216
  2,340
Total liabilities, $m
  355
  391
  429
  469
  511
  555
  601
  648
  697
  748
  801
  856
  914
  973
  1,035
  1,100
  1,167
  1,237
  1,310
  1,386
  1,465
  1,548
  1,635
  1,725
  1,820
  1,919
  2,022
  2,130
  2,243
  2,362
  2,486
Total equity, $m
  189
  209
  229
  251
  273
  296
  321
  346
  372
  399
  428
  457
  488
  519
  552
  587
  623
  660
  699
  740
  782
  826
  873
  921
  971
  1,024
  1,079
  1,137
  1,197
  1,261
  1,327
Total liabilities and equity, $m
  544
  600
  658
  720
  784
  851
  922
  994
  1,069
  1,147
  1,229
  1,313
  1,402
  1,492
  1,587
  1,687
  1,790
  1,897
  2,009
  2,126
  2,247
  2,374
  2,508
  2,646
  2,791
  2,943
  3,101
  3,267
  3,440
  3,623
  3,813
Debt-to-equity ratio
  1.111
  1.170
  1.240
  1.290
  1.340
  1.380
  1.420
  1.450
  1.480
  1.510
  1.530
  1.550
  1.570
  1.590
  1.610
  1.620
  1.640
  1.650
  1.660
  1.680
  1.690
  1.700
  1.710
  1.720
  1.720
  1.730
  1.740
  1.750
  1.750
  1.760
  1.760
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
  79
  89
  99
  109
  120
  132
  144
  156
  169
  183
  221
  236
  251
  266
  283
  300
  318
  336
  355
  375
  396
  418
  441
  465
  490
  517
  544
  573
  603
  634
Depreciation, amort., depletion, $m
  31
  37
  37
  38
  38
  39
  39
  39
  40
  40
  41
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  27
  116
  126
  136
  147
  159
  171
  183
  196
  210
  223
  229
  244
  260
  276
  293
  310
  329
  348
  368
  389
  410
  433
  457
  482
  508
  535
  563
  593
  624
  657
Change in working capital, $m
  -13
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  40
  119
  129
  140
  151
  163
  175
  187
  200
  214
  228
  234
  249
  265
  281
  298
  316
  335
  354
  374
  395
  417
  441
  465
  490
  516
  544
  572
  602
  634
  667
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -14
  -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
  -13
  -14
Cash from investing activities, $m
  -39
  -7
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
Free cash flow, $m
  1
  112
  121
  132
  142
  153
  165
  177
  189
  202
  215
  220
  235
  250
  266
  282
  299
  317
  335
  354
  374
  395
  417
  440
  464
  489
  515
  542
  571
  601
  632
Issuance/(repayment) of debt, $m
  -11
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  90
  95
  99
  103
  108
  113
  119
  124
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
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  90
  95
  99
  103
  108
  113
  119
  124
Total cash flow (excl. dividends), $m
  1
  148
  160
  172
  184
  197
  210
  224
  238
  253
  268
  275
  292
  309
  328
  346
  366
  387
  408
  430
  454
  478
  504
  530
  558
  588
  618
  650
  684
  719
  756
Retained Cash Flow (-), $m
  92
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
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
 
  129
  139
  150
  162
  174
  186
  199
  212
  226
  240
  246
  262
  278
  294
  312
  330
  349
  369
  390
  411
  434
  457
  482
  508
  535
  563
  593
  624
  656
  690
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
 
  120
  119
  118
  115
  111
  106
  100
  93
  86
  78
  67
  59
  52
  44
  37
  31
  25
  20
  15
  12
  9
  6
  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 -11.5
Price to Sales 3
Price to Book 7.8
Price to Tangible Book
Price to Cash Flow 37
Price to Free Cash Flow 57
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 10.4% 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 39.945 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 $1.5 billion.

RELATED COMPANIES Price Int.Val. Rating
TVTY Tivity Health 38.05 35.93  hold
CRVL Corvel 48.65 38.84  sell
INFU InfuSystems Ho 2.28 0.56  str.sell
PINC Premier 32.11 35.21  buy
UNH UnitedHealth G 227.09 191.21  hold

COMPANY NEWS

▶ Healthways beats Street 4Q forecasts   [Feb-22-18 07:17PM  Associated Press]
▶ Stocks With Rising Relative Strength: Tivity Health   [03:00AM  Investor's Business Daily]
▶ Stocks Showing Improved Relative Strength: Tivity Health   [03:00AM  Investor's Business Daily]
▶ 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]
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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