Intrinsic value of U.S. Physical Therapy - USPH

Previous Close

$100.30

  Intrinsic Value

$92.03

stock screener

  Rating & Target

hold

-8%

Previous close

$100.30

 
Intrinsic value

$92.03

 
Up/down potential

-8%

 
Rating

hold

We calculate the intrinsic value of USPH 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, %
  7.85
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
Revenue, $m
  357
  481
  553
  630
  713
  800
  892
  990
  1,092
  1,199
  1,310
  1,426
  1,547
  1,673
  1,804
  1,940
  2,081
  2,228
  2,381
  2,539
  2,705
  2,876
  3,055
  3,241
  3,435
  3,637
  3,848
  4,068
  4,298
  4,538
  4,788
Variable operating expenses, $m
 
  409
  466
  526
  591
  660
  732
  809
  889
  972
  1,060
  1,119
  1,214
  1,313
  1,416
  1,522
  1,633
  1,748
  1,868
  1,993
  2,122
  2,257
  2,397
  2,543
  2,696
  2,854
  3,020
  3,192
  3,372
  3,561
  3,757
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
  307
  409
  466
  526
  591
  660
  732
  809
  889
  972
  1,060
  1,119
  1,214
  1,313
  1,416
  1,522
  1,633
  1,748
  1,868
  1,993
  2,122
  2,257
  2,397
  2,543
  2,696
  2,854
  3,020
  3,192
  3,372
  3,561
  3,757
Operating income, $m
  50
  71
  87
  104
  121
  140
  160
  181
  203
  226
  250
  307
  333
  360
  388
  418
  448
  480
  513
  547
  582
  619
  658
  698
  740
  783
  828
  876
  925
  977
  1,031
EBITDA, $m
  59
  140
  161
  183
  207
  233
  259
  288
  317
  348
  381
  415
  450
  486
  524
  564
  605
  648
  692
  738
  786
  836
  888
  942
  999
  1,057
  1,119
  1,183
  1,249
  1,319
  1,392
Interest expense (income), $m
  1
  3
  5
  7
  9
  12
  14
  17
  19
  22
  25
  28
  32
  35
  38
  42
  46
  50
  54
  58
  63
  67
  72
  77
  82
  88
  93
  99
  105
  112
  118
Earnings before tax, $m
  38
  68
  82
  96
  112
  129
  146
  164
  184
  204
  225
  279
  302
  325
  350
  376
  402
  430
  459
  489
  520
  552
  586
  621
  657
  695
  735
  777
  820
  865
  912
Tax expense, $m
  12
  18
  22
  26
  30
  35
  39
  44
  50
  55
  61
  75
  81
  88
  94
  101
  109
  116
  124
  132
  140
  149
  158
  168
  177
  188
  198
  210
  221
  234
  246
Net income, $m
  21
  50
  60
  70
  82
  94
  107
  120
  134
  149
  164
  203
  220
  237
  255
  274
  294
  314
  335
  357
  379
  403
  428
  453
  480
  508
  537
  567
  599
  632
  666

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  20
  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
  351
  486
  559
  638
  721
  810
  903
  1,002
  1,105
  1,213
  1,326
  1,444
  1,566
  1,693
  1,826
  1,963
  2,107
  2,255
  2,410
  2,570
  2,737
  2,911
  3,092
  3,280
  3,477
  3,681
  3,895
  4,118
  4,350
  4,593
  4,846
Adjusted assets (=assets-cash), $m
  331
  486
  559
  638
  721
  810
  903
  1,002
  1,105
  1,213
  1,326
  1,444
  1,566
  1,693
  1,826
  1,963
  2,107
  2,255
  2,410
  2,570
  2,737
  2,911
  3,092
  3,280
  3,477
  3,681
  3,895
  4,118
  4,350
  4,593
  4,846
Revenue / Adjusted assets
  1.079
  0.990
  0.989
  0.987
  0.989
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
Average production assets, $m
  52
  362
  417
  475
  537
  603
  673
  746
  823
  904
  988
  1,075
  1,167
  1,261
  1,360
  1,463
  1,569
  1,680
  1,795
  1,915
  2,039
  2,169
  2,303
  2,444
  2,590
  2,742
  2,901
  3,067
  3,241
  3,421
  3,610
Working capital, $m
  41
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
Total debt, $m
  52
  95
  133
  173
  215
  261
  308
  359
  411
  467
  524
  584
  647
  712
  780
  850
  923
  999
  1,078
  1,160
  1,246
  1,334
  1,427
  1,523
  1,623
  1,728
  1,837
  1,951
  2,070
  2,194
  2,323
Total liabilities, $m
  164
  249
  286
  326
  369
  414
  462
  512
  565
  620
  678
  738
  800
  865
  933
  1,003
  1,076
  1,152
  1,231
  1,313
  1,399
  1,488
  1,580
  1,676
  1,777
  1,881
  1,990
  2,104
  2,223
  2,347
  2,476
Total equity, $m
  188
  238
  274
  312
  353
  396
  442
  490
  540
  593
  648
  706
  766
  828
  893
  960
  1,030
  1,103
  1,178
  1,257
  1,339
  1,424
  1,512
  1,604
  1,700
  1,800
  1,905
  2,013
  2,127
  2,246
  2,370
Total liabilities and equity, $m
  352
  487
  560
  638
  722
  810
  904
  1,002
  1,105
  1,213
  1,326
  1,444
  1,566
  1,693
  1,826
  1,963
  2,106
  2,255
  2,409
  2,570
  2,738
  2,912
  3,092
  3,280
  3,477
  3,681
  3,895
  4,117
  4,350
  4,593
  4,846
Debt-to-equity ratio
  0.277
  0.400
  0.480
  0.550
  0.610
  0.660
  0.700
  0.730
  0.760
  0.790
  0.810
  0.830
  0.840
  0.860
  0.870
  0.890
  0.900
  0.910
  0.910
  0.920
  0.930
  0.940
  0.940
  0.950
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
  0.980
Adjusted equity ratio
  0.508
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489
  0.489

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  50
  60
  70
  82
  94
  107
  120
  134
  149
  164
  203
  220
  237
  255
  274
  294
  314
  335
  357
  379
  403
  428
  453
  480
  508
  537
  567
  599
  632
  666
Depreciation, amort., depletion, $m
  9
  68
  74
  80
  86
  92
  99
  107
  114
  122
  131
  108
  117
  126
  136
  146
  157
  168
  180
  191
  204
  217
  230
  244
  259
  274
  290
  307
  324
  342
  361
Funds from operations, $m
  49
  118
  133
  150
  168
  186
  206
  227
  248
  271
  295
  311
  337
  364
  391
  420
  451
  482
  514
  548
  583
  620
  658
  698
  739
  782
  827
  874
  923
  974
  1,027
Change in working capital, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  51
  118
  134
  150
  168
  187
  206
  227
  249
  272
  295
  312
  337
  364
  392
  421
  451
  483
  515
  549
  584
  621
  659
  698
  740
  783
  828
  875
  924
  975
  1,028
Maintenance CAPEX, $m
  0
  -31
  -36
  -42
  -48
  -54
  -60
  -67
  -75
  -82
  -90
  -99
  -108
  -117
  -126
  -136
  -146
  -157
  -168
  -180
  -191
  -204
  -217
  -230
  -244
  -259
  -274
  -290
  -307
  -324
  -342
New CAPEX, $m
  -8
  -50
  -54
  -58
  -62
  -66
  -70
  -73
  -77
  -80
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -115
  -120
  -124
  -129
  -135
  -140
  -146
  -152
  -159
  -166
  -173
  -181
  -189
Cash from investing activities, $m
  -32
  -81
  -90
  -100
  -110
  -120
  -130
  -140
  -152
  -162
  -174
  -187
  -199
  -212
  -225
  -239
  -253
  -268
  -283
  -300
  -315
  -333
  -352
  -370
  -390
  -411
  -433
  -456
  -480
  -505
  -531
Free cash flow, $m
  19
  37
  43
  50
  58
  67
  76
  87
  97
  109
  121
  125
  139
  153
  167
  183
  198
  215
  232
  250
  268
  287
  307
  328
  349
  371
  395
  419
  444
  470
  497
Issuance/(repayment) of debt, $m
  1
  35
  37
  40
  43
  45
  48
  50
  53
  55
  58
  60
  63
  65
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
  105
  109
  114
  119
  124
  130
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -5
  35
  37
  40
  43
  45
  48
  50
  53
  55
  58
  60
  63
  65
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
  105
  109
  114
  119
  124
  130
Total cash flow (excl. dividends), $m
  13
  72
  80
  90
  101
  112
  124
  137
  150
  164
  179
  185
  201
  218
  235
  253
  271
  291
  311
  332
  354
  376
  400
  424
  450
  476
  504
  533
  563
  594
  627
Retained Cash Flow (-), $m
  -17
  -33
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -88
  -92
  -96
  -100
  -104
  -109
  -114
  -119
  -124
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
 
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  30
  32
  35
  37
  39
  41
  44
  46
  49
  52
  54
Cash available for distribution, $m
 
  39
  45
  52
  60
  69
  78
  89
  100
  111
  124
  128
  141
  155
  170
  186
  202
  218
  235
  253
  272
  291
  311
  332
  354
  376
  399
  424
  449
  475
  503
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
 
  37
  41
  45
  49
  53
  57
  60
  62
  64
  65
  61
  60
  59
  57
  54
  51
  47
  43
  39
  35
  30
  26
  22
  18
  15
  12
  9
  7
  5
  4
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

U.S. Physical Therapy, Inc., through its subsidiaries, operates outpatient physical therapy clinics that provide pre-and post-operative care, and treatment for orthopedic-related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. The Company's segment is made up of various clinics within partnerships. The Company primarily operates through subsidiary clinic partnerships, in which it owns a general partnership interest and a limited partnership interest, and the managing therapists of the clinics owns the remaining limited partnership interest in the clinics. The Company operates 562 physical therapy clinics in 42 states. There are approximately 380 clinics operated under Clinic Partnerships and over 100 operated as Company-owned Facilities. In addition to its owned clinics, it also manages physical therapy facilities for third parties, primarily physicians, with over 29 third-party facilities under management.

FINANCIAL RATIOS  of  U.S. Physical Therapy (USPH)

Valuation Ratios
P/E Ratio 59.8
Price to Sales 3.5
Price to Book 6.7
Price to Tangible Book
Price to Cash Flow 24.6
Price to Free Cash Flow 29.2
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio 20
Current Ratio 0.2
LT Debt to Equity 27.1%
Total Debt to Equity 27.7%
Interest Coverage 39
Management Effectiveness
Return On Assets 6.6%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 11.7%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 23%
Gross Margin - 3 Yr. Avg. 23.9%
EBITDA Margin 13.4%
EBITDA Margin - 3 Yr. Avg. 14.4%
Operating Margin 14%
Oper. Margin - 3 Yr. Avg. 14.4%
Pre-Tax Margin 10.6%
Pre-Tax Margin - 3 Yr. Avg. 11.7%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 6.2%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 42.9%

USPH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USPH stock intrinsic value calculation we used $414 million for the last fiscal year's total revenue generated by U.S. Physical Therapy. The default revenue input number comes from 2016 income statement of U.S. Physical Therapy. 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 USPH stock valuation model: a) initial revenue growth rate of 16.1% 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 USPH is calculated based on our internal credit rating of U.S. Physical Therapy, 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 U.S. Physical Therapy.
    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 USPH stock the variable cost ratio is equal to 86.2%.

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 USPH 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 5.4% for U.S. Physical Therapy.

Corporate tax rate of 27% is the nominal tax rate for U.S. Physical Therapy. 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 USPH stock is equal to 1.2%.

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 USPH are equal to 75.4%.

Life of production assets of 10 years is the average useful life of capital assets used in U.S. Physical Therapy 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 USPH is equal to -0.5%. 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 - $205 million for U.S. Physical Therapy - 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 13 million for U.S. Physical Therapy 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 U.S. Physical Therapy at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Is It Time To Buy US Physical Therapy Inc (NYSE:USPH)?   [Jun-21-18 11:25AM  Simply Wall St.]
▶ U.S. Physical Therapy: 1Q Earnings Snapshot   [May-03-18 09:19AM  Associated Press]
▶ U.S. Physical Therapy posts 4Q profit   [08:45AM  Associated Press]
▶ U.S. Physical Therapy Adds to Executive Team   [Mar-02-18 08:30AM  Business Wire]
▶ U.S. Physical Therapy misses 3Q profit forecasts   [Nov-02-17 09:16AM  Associated Press]
▶ U.S. Physical Therapy posts 2Q profit   [Aug-03-17 09:55AM  Associated Press]
▶ U.S. Physical Therapy posts 1Q profit   [Jun-29-17 11:16PM  Associated Press]
▶ U.S. Physical Therapy posts 4Q profit   [08:26AM  Associated Press]
▶ U.S. Physical Therapy Reports 2016 Results   [08:00AM  Business Wire]
▶ U.S. Physical Therapy Announces Acquisition   [Jun-01-17 08:00AM  Business Wire]
Financial statements of USPH
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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