Intrinsic value of USANA Health Sciences - USNA

Previous Close

$73.30

  Intrinsic Value

$71.79

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  Rating & Target

hold

-2%

Previous close

$73.30

 
Intrinsic value

$71.79

 
Up/down potential

-2%

 
Rating

hold

We calculate the intrinsic value of USNA 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 1.8

 

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, %
  9.47
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,006
  1,026
  1,050
  1,077
  1,107
  1,141
  1,177
  1,217
  1,261
  1,308
  1,358
  1,412
  1,469
  1,530
  1,595
  1,663
  1,736
  1,813
  1,895
  1,981
  2,072
  2,168
  2,270
  2,376
  2,489
  2,607
  2,732
  2,864
  3,002
  3,147
  3,300
Variable operating expenses, $m
 
  868
  888
  911
  936
  965
  996
  1,030
  1,066
  1,106
  1,148
  1,192
  1,240
  1,292
  1,346
  1,404
  1,466
  1,531
  1,600
  1,673
  1,750
  1,831
  1,916
  2,006
  2,101
  2,201
  2,307
  2,418
  2,534
  2,657
  2,786
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
  867
  868
  888
  911
  936
  965
  996
  1,030
  1,066
  1,106
  1,148
  1,192
  1,240
  1,292
  1,346
  1,404
  1,466
  1,531
  1,600
  1,673
  1,750
  1,831
  1,916
  2,006
  2,101
  2,201
  2,307
  2,418
  2,534
  2,657
  2,786
Operating income, $m
  139
  158
  162
  166
  171
  176
  182
  188
  195
  202
  210
  220
  229
  238
  248
  259
  270
  282
  295
  308
  323
  338
  353
  370
  388
  406
  425
  446
  467
  490
  514
EBITDA, $m
  152
  172
  176
  180
  185
  191
  197
  204
  211
  219
  227
  236
  246
  256
  267
  278
  290
  303
  317
  331
  346
  363
  379
  397
  416
  436
  457
  479
  502
  526
  552
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
Earnings before tax, $m
  139
  158
  162
  166
  170
  175
  181
  187
  194
  201
  208
  218
  227
  236
  246
  256
  267
  279
  291
  304
  318
  332
  347
  364
  381
  398
  417
  437
  458
  480
  503
Tax expense, $m
  39
  43
  44
  45
  46
  47
  49
  50
  52
  54
  56
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
Net income, $m
  100
  115
  118
  121
  124
  128
  132
  136
  141
  146
  152
  159
  165
  172
  179
  187
  195
  203
  212
  222
  232
  242
  254
  265
  278
  291
  305
  319
  334
  350
  367

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  176
  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
  471
  301
  308
  316
  325
  334
  345
  357
  370
  383
  398
  414
  431
  449
  468
  488
  509
  532
  556
  581
  608
  636
  666
  697
  730
  765
  801
  840
  880
  923
  968
Adjusted assets (=assets-cash), $m
  295
  301
  308
  316
  325
  334
  345
  357
  370
  383
  398
  414
  431
  449
  468
  488
  509
  532
  556
  581
  608
  636
  666
  697
  730
  765
  801
  840
  880
  923
  968
Revenue / Adjusted assets
  3.410
  3.409
  3.409
  3.408
  3.406
  3.416
  3.412
  3.409
  3.408
  3.415
  3.412
  3.411
  3.408
  3.408
  3.408
  3.408
  3.411
  3.408
  3.408
  3.410
  3.408
  3.409
  3.408
  3.409
  3.410
  3.408
  3.411
  3.410
  3.411
  3.410
  3.409
Average production assets, $m
  131
  133
  136
  140
  144
  148
  153
  158
  164
  170
  177
  183
  191
  199
  207
  216
  226
  236
  246
  258
  269
  282
  295
  309
  324
  339
  355
  372
  390
  409
  429
Working capital, $m
  140
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -63
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -119
Total debt, $m
  0
  3
  6
  10
  15
  20
  25
  31
  37
  44
  51
  59
  67
  76
  85
  95
  106
  117
  129
  142
  155
  169
  183
  199
  215
  232
  251
  270
  290
  311
  333
Total liabilities, $m
  145
  149
  152
  156
  161
  166
  171
  177
  183
  190
  197
  205
  213
  222
  231
  241
  252
  263
  275
  288
  301
  315
  329
  345
  361
  378
  397
  416
  436
  457
  479
Total equity, $m
  325
  152
  155
  159
  164
  169
  174
  180
  187
  194
  201
  209
  218
  227
  236
  246
  257
  269
  281
  293
  307
  321
  336
  352
  369
  386
  405
  424
  445
  466
  489
Total liabilities and equity, $m
  470
  301
  307
  315
  325
  335
  345
  357
  370
  384
  398
  414
  431
  449
  467
  487
  509
  532
  556
  581
  608
  636
  665
  697
  730
  764
  802
  840
  881
  923
  968
Debt-to-equity ratio
  0.000
  0.020
  0.040
  0.060
  0.090
  0.120
  0.140
  0.170
  0.200
  0.230
  0.250
  0.280
  0.310
  0.340
  0.360
  0.390
  0.410
  0.440
  0.460
  0.480
  0.500
  0.530
  0.550
  0.570
  0.580
  0.600
  0.620
  0.640
  0.650
  0.670
  0.680
Adjusted equity ratio
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  100
  115
  118
  121
  124
  128
  132
  136
  141
  146
  152
  159
  165
  172
  179
  187
  195
  203
  212
  222
  232
  242
  254
  265
  278
  291
  305
  319
  334
  350
  367
Depreciation, amort., depletion, $m
  13
  14
  14
  14
  14
  15
  15
  16
  16
  17
  17
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
Funds from operations, $m
  148
  129
  132
  135
  139
  143
  147
  152
  157
  163
  169
  175
  182
  190
  198
  206
  215
  224
  234
  245
  256
  267
  280
  293
  306
  321
  336
  352
  369
  386
  405
Change in working capital, $m
  11
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
Cash from operations, $m
  137
  130
  133
  136
  140
  144
  149
  154
  159
  165
  171
  177
  184
  192
  200
  208
  217
  227
  237
  248
  259
  271
  283
  297
  310
  325
  341
  357
  374
  392
  411
Maintenance CAPEX, $m
  0
  -12
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
New CAPEX, $m
  -33
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -32
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -54
  -56
Free cash flow, $m
  105
  115
  118
  120
  124
  127
  131
  135
  139
  144
  150
  155
  161
  167
  174
  181
  189
  197
  206
  215
  224
  235
  245
  257
  269
  281
  294
  308
  323
  338
  354
Issuance/(repayment) of debt, $m
  0
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $m
  -65
  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  
  -65
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Total cash flow (excl. dividends), $m
  33
  118
  121
  124
  128
  132
  136
  141
  146
  151
  157
  162
  169
  176
  183
  191
  199
  208
  217
  227
  238
  249
  260
  272
  285
  298
  312
  327
  343
  359
  377
Retained Cash Flow (-), $m
  -44
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
Prev. year cash balance distribution, $m
 
  176
  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
 
  291
  118
  120
  123
  127
  131
  135
  139
  144
  149
  155
  161
  167
  174
  181
  189
  197
  205
  215
  224
  234
  245
  256
  268
  281
  294
  308
  322
  338
  354
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
 
  279
  108
  105
  102
  98
  95
  91
  87
  83
  78
  73
  69
  63
  58
  53
  48
  43
  38
  33
  28
  24
  20
  17
  14
  11
  9
  7
  5
  4
  3
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

USANA Health Sciences, Inc. develops and manufactures science-based nutritional and personal care products. The Company operates as a direct selling company in two geographic regions: Americas and Europe, and Asia Pacific, which includes three sub-regions: Southeast Asia Pacific, Greater China and North Asia. Its product lines include USANA Nutritionals Essentials, Optimizers, Foods, Sense-beautiful science and All Other. Its USANA Nutritionals Essentials product line includes vitamin and mineral supplements that provide a foundation of total body nutrition for every age group beginning with children of approximately one year. Its Optimizers product line consists of targeted supplements designed to meet individual health and nutritional needs. Its Sense-beautiful science product line includes science-based, personal care products that support skin and hair by providing topical nourishment, moisturization and protection.

FINANCIAL RATIOS  of  USANA Health Sciences (USNA)

Valuation Ratios
P/E Ratio 17.9
Price to Sales 1.8
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 13.1
Price to Free Cash Flow 17.3
Growth Rates
Sales Growth Rate 9.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 37.5%
Cap. Spend. - 3 Yr. Gr. Rate 32.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 22.4%
Ret/ On Assets - 3 Yr. Avg. 22.8%
Return On Total Capital 33%
Ret/ On T. Cap. - 3 Yr. Avg. 33.8%
Return On Equity 33%
Return On Equity - 3 Yr. Avg. 33.8%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 82.1%
Gross Margin - 3 Yr. Avg. 82.3%
EBITDA Margin 15.1%
EBITDA Margin - 3 Yr. Avg. 15.9%
Operating Margin 13.8%
Oper. Margin - 3 Yr. Avg. 14.7%
Pre-Tax Margin 13.8%
Pre-Tax Margin - 3 Yr. Avg. 14.7%
Net Profit Margin 9.9%
Net Profit Margin - 3 Yr. Avg. 10%
Effective Tax Rate 28.1%
Eff/ Tax Rate - 3 Yr. Avg. 31.7%
Payout Ratio 0%

USNA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USNA stock intrinsic value calculation we used $1006 million for the last fiscal year's total revenue generated by USANA Health Sciences. The default revenue input number comes from 2016 income statement of USANA Health Sciences. 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 USNA stock valuation model: a) initial revenue growth rate of 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 4.3%, whose default value for USNA is calculated based on our internal credit rating of USANA Health Sciences, 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 USANA Health Sciences.
    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 USNA stock the variable cost ratio is equal to 84.6%.

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 USNA 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 USANA Health Sciences.

Corporate tax rate of 27% is the nominal tax rate for USANA Health Sciences. 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 USNA 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 USNA are equal to 13%.

Life of production assets of 11.3 years is the average useful life of capital assets used in USANA Health Sciences 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 USNA is equal to -3.6%. 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 - $325 million for USANA Health Sciences - 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 24.382 million for USANA Health Sciences 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 USANA Health Sciences at the current share price and the inputted number of shares is $1.8 billion.

RELATED COMPANIES Price Int.Val. Rating
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LFVN Lifevantage 5.20 10.30  str.buy
MTEX Mannatech 14.75 60.10  str.buy
NUS Nu Skin Enterp 67.44 53.96  hold
NATR Nature's S 12.10 8.40  hold
AVP Avon Products 2.18 0.34  str.sell
MED Medifast 73.52 37.80  sell
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COMPANY NEWS

▶ Top 10 Direct Sales Companies in USA   [Nov-02-17 09:45AM  Insider Monkey]
▶ USANA Health posts 3Q profit   [Oct-24-17 05:43PM  Associated Press]
▶ USANA Launches Two New Products in Canada   [Oct-14-17 03:00PM  CNW Group]
▶ USANA Stands Committed to Ethical Business Practices   [Sep-12-17 08:30AM  PR Newswire]
▶ You Are What You Eat (And Drink)   [Sep-07-17 08:07AM  PR Newswire]
▶ USANA Announces New Skincare Line   [Aug-23-17 08:07AM  PR Newswire]
▶ USANA Health posts 2Q profit   [12:33AM  Associated Press]
▶ Herbalifes Earnings Are Expected to Fall in 2Q17   [Jul-21-17 01:39PM  Market Realist]
▶ Two USANA Executives Honored by Utah Business Magazine   [Jun-22-17 03:30PM  PR Newswire]
▶ Get Manly This June for National Men's Health Month   [Jun-15-17 11:58AM  PR Newswire]
▶ USANA Enjoys Continued Success at Best of State Awards   [May-18-17 12:00PM  PR Newswire]
▶ GET YOUR SERVICE ON - #USANAgives & you can too   [May-17-17 08:07AM  PR Newswire]
▶ USANA Health posts 1Q profit   [May-02-17 06:55PM  Associated Press]
▶ USANA Goes Green For Arbor Day   [Apr-28-17 12:30PM  PR Newswire]
▶ Five Small-Caps For The Long-Term Investor   [Apr-12-17 11:13AM  Forbes]
Financial statements of USNA
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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