Intrinsic value of Tivity Health - TVTY

Previous Close

$29.00

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$29.00

 
Intrinsic value

$36.33

 
Up/down potential

+25%

 
Rating

buy

 
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 1.2

 

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
  10.60
  10.04
  9.54
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
Revenue, $m
  501
  554
  610
  668
  729
  792
  858
  926
  997
  1,071
  1,148
  1,227
  1,310
  1,397
  1,486
  1,580
  1,677
  1,778
  1,884
  1,994
  2,108
  2,228
  2,353
  2,484
  2,620
  2,763
  2,912
  3,069
  3,232
  3,403
  3,582
Variable operating expenses, $m
 
  439
  479
  522
  566
  612
  660
  710
  762
  816
  873
  897
  958
  1,021
  1,087
  1,155
  1,226
  1,300
  1,377
  1,458
  1,542
  1,629
  1,721
  1,816
  1,916
  2,020
  2,129
  2,244
  2,363
  2,488
  2,619
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
  439
  479
  522
  566
  612
  660
  710
  762
  816
  873
  897
  958
  1,021
  1,087
  1,155
  1,226
  1,300
  1,377
  1,458
  1,542
  1,629
  1,721
  1,816
  1,916
  2,020
  2,129
  2,244
  2,363
  2,488
  2,619
Operating income, $m
  95
  115
  130
  146
  162
  179
  197
  215
  235
  254
  275
  330
  352
  376
  400
  425
  451
  478
  506
  536
  567
  599
  633
  668
  705
  743
  783
  825
  869
  915
  963
EBITDA, $m
  126
  153
  168
  184
  201
  218
  236
  255
  274
  295
  316
  338
  361
  384
  409
  435
  462
  489
  518
  549
  580
  613
  648
  684
  721
  761
  802
  845
  890
  937
  986
Interest expense (income), $m
  0
  7
  9
  10
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
Earnings before tax, $m
  78
  108
  122
  136
  151
  166
  183
  199
  217
  235
  254
  307
  327
  348
  370
  393
  417
  442
  468
  495
  523
  552
  583
  615
  648
  683
  720
  758
  798
  840
  884
Tax expense, $m
  22
  29
  33
  37
  41
  45
  49
  54
  59
  63
  68
  83
  88
  94
  100
  106
  113
  119
  126
  134
  141
  149
  157
  166
  175
  184
  194
  205
  216
  227
  239
Net income, $m
  -129
  79
  89
  99
  110
  122
  133
  146
  158
  171
  185
  224
  239
  254
  270
  287
  304
  322
  341
  361
  382
  403
  425
  449
  473
  499
  525
  553
  583
  613
  645

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
  600
  661
  724
  789
  858
  929
  1,003
  1,080
  1,160
  1,243
  1,330
  1,420
  1,513
  1,610
  1,711
  1,817
  1,926
  2,041
  2,160
  2,284
  2,414
  2,550
  2,691
  2,839
  2,994
  3,155
  3,325
  3,502
  3,687
  3,881
Adjusted assets (=assets-cash), $m
  543
  600
  661
  724
  789
  858
  929
  1,003
  1,080
  1,160
  1,243
  1,330
  1,420
  1,513
  1,610
  1,711
  1,817
  1,926
  2,041
  2,160
  2,284
  2,414
  2,550
  2,691
  2,839
  2,994
  3,155
  3,325
  3,502
  3,687
  3,881
Revenue / Adjusted assets
  0.923
  0.923
  0.923
  0.923
  0.924
  0.923
  0.924
  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
  0.923
  0.923
  0.923
  0.923
Average production assets, $m
  39
  43
  47
  51
  56
  61
  66
  71
  77
  82
  88
  95
  101
  108
  114
  122
  129
  137
  145
  154
  162
  172
  181
  191
  202
  213
  224
  236
  249
  262
  276
Working capital, $m
  -74
  -33
  -37
  -40
  -44
  -48
  -51
  -56
  -60
  -64
  -69
  -74
  -79
  -84
  -89
  -95
  -101
  -107
  -113
  -120
  -127
  -134
  -141
  -149
  -157
  -166
  -175
  -184
  -194
  -204
  -215
Total debt, $m
  210
  245
  285
  326
  369
  413
  460
  508
  558
  610
  665
  721
  780
  841
  904
  970
  1,039
  1,110
  1,185
  1,262
  1,343
  1,428
  1,516
  1,609
  1,705
  1,806
  1,911
  2,022
  2,137
  2,258
  2,384
Total liabilities, $m
  355
  391
  431
  472
  515
  559
  606
  654
  704
  756
  811
  867
  926
  987
  1,050
  1,116
  1,185
  1,256
  1,331
  1,408
  1,489
  1,574
  1,662
  1,755
  1,851
  1,952
  2,057
  2,168
  2,283
  2,404
  2,530
Total equity, $m
  189
  209
  230
  252
  275
  299
  323
  349
  376
  404
  433
  463
  494
  527
  560
  596
  632
  670
  710
  752
  795
  840
  887
  937
  988
  1,042
  1,098
  1,157
  1,219
  1,283
  1,351
Total liabilities and equity, $m
  544
  600
  661
  724
  790
  858
  929
  1,003
  1,080
  1,160
  1,244
  1,330
  1,420
  1,514
  1,610
  1,712
  1,817
  1,926
  2,041
  2,160
  2,284
  2,414
  2,549
  2,692
  2,839
  2,994
  3,155
  3,325
  3,502
  3,687
  3,881
Debt-to-equity ratio
  1.111
  1.170
  1.240
  1.290
  1.340
  1.380
  1.420
  1.460
  1.490
  1.510
  1.540
  1.560
  1.580
  1.600
  1.610
  1.630
  1.640
  1.660
  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
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
  110
  122
  133
  146
  158
  171
  185
  224
  239
  254
  270
  287
  304
  322
  341
  361
  382
  403
  425
  449
  473
  499
  525
  553
  583
  613
  645
Depreciation, amort., depletion, $m
  31
  37
  37
  38
  38
  39
  39
  39
  40
  40
  41
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
Funds from operations, $m
  27
  116
  126
  137
  148
  160
  172
  185
  198
  212
  226
  232
  247
  263
  280
  297
  315
  334
  353
  374
  395
  417
  440
  465
  490
  516
  544
  573
  603
  635
  668
Change in working capital, $m
  -13
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  40
  118
  130
  141
  152
  164
  176
  189
  202
  216
  231
  237
  252
  268
  285
  303
  321
  340
  360
  380
  402
  424
  448
  472
  498
  525
  553
  582
  613
  645
  679
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -4
  -5
  -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
New CAPEX, $m
  -14
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
Cash from investing activities, $m
  -39
  -7
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -19
  -19
  -20
  -22
  -22
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
Free cash flow, $m
  1
  110
  122
  132
  143
  154
  166
  178
  191
  204
  218
  223
  238
  253
  269
  286
  303
  321
  340
  360
  380
  402
  424
  447
  472
  497
  524
  552
  581
  612
  644
Issuance/(repayment) of debt, $m
  -11
  37
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  88
  92
  96
  101
  105
  110
  115
  121
  127
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
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  88
  92
  96
  101
  105
  110
  115
  121
  127
Total cash flow (excl. dividends), $m
  1
  148
  161
  173
  186
  199
  213
  227
  241
  256
  272
  279
  296
  314
  333
  352
  372
  393
  415
  438
  461
  486
  512
  540
  568
  598
  629
  662
  696
  732
  770
Retained Cash Flow (-), $m
  92
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
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
 
  128
  140
  151
  163
  175
  188
  201
  214
  229
  243
  249
  265
  282
  299
  317
  335
  355
  375
  396
  418
  441
  465
  490
  517
  544
  573
  603
  635
  668
  702
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
 
  119
  120
  119
  116
  112
  107
  101
  94
  87
  79
  68
  60
  52
  45
  38
  31
  25
  20
  16
  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., 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 companyÂ’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 -8.8
Price to Sales 2.3
Price to Book 6
Price to Tangible Book
Price to Cash Flow 28.2
Price to Free Cash Flow 43.4
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 10.6% 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 39.863 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 $1.2 billion.


Premium access subscription - $499/yr

please register and log in before paying

COMPANY NEWS

▶ 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
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.