Intrinsic value of Utah Medical Products - UTMD

Previous Close

$75.35

  Intrinsic Value

$50.43

stock screener

  Rating & Target

sell

-33%

  Value-price divergence*

-11%

Previous close

$75.35

 
Intrinsic value

$50.43

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence*

-11%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of UTMD 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 0.3

 

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, %
  -2.50
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
Revenue, $m
  39
  43
  47
  51
  56
  60
  65
  70
  75
  81
  86
  92
  98
  104
  111
  118
  125
  132
  140
  148
  156
  165
  174
  184
  194
  204
  215
  227
  239
  251
  264
Variable operating expenses, $m
 
  26
  29
  31
  34
  36
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  73
  77
  81
  86
  91
  96
  101
  107
  113
  119
  125
  132
  139
  146
  154
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
  23
  26
  29
  31
  34
  36
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  73
  77
  81
  86
  91
  96
  101
  107
  113
  119
  125
  132
  139
  146
  154
Operating income, $m
  16
  17
  18
  20
  22
  24
  26
  28
  30
  32
  35
  38
  41
  44
  46
  49
  52
  55
  59
  62
  65
  69
  73
  77
  81
  85
  90
  95
  100
  105
  111
EBITDA, $m
  19
  20
  22
  24
  26
  28
  31
  33
  35
  38
  41
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  78
  82
  86
  91
  96
  101
  107
  112
  118
  124
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
Earnings before tax, $m
  16
  17
  18
  20
  22
  24
  26
  28
  30
  32
  34
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  94
  99
  104
  109
Tax expense, $m
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  29
Net income, $m
  12
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  55
  58
  62
  65
  68
  72
  76
  80

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  26
  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
  77
  56
  61
  67
  73
  79
  85
  92
  98
  105
  113
  120
  128
  136
  145
  154
  163
  173
  183
  193
  204
  216
  228
  240
  253
  267
  281
  296
  312
  328
  346
Adjusted assets (=assets-cash), $m
  51
  56
  61
  67
  73
  79
  85
  92
  98
  105
  113
  120
  128
  136
  145
  154
  163
  173
  183
  193
  204
  216
  228
  240
  253
  267
  281
  296
  312
  328
  346
Revenue / Adjusted assets
  0.765
  0.768
  0.770
  0.761
  0.767
  0.759
  0.765
  0.761
  0.765
  0.771
  0.761
  0.767
  0.766
  0.765
  0.766
  0.766
  0.767
  0.763
  0.765
  0.767
  0.765
  0.764
  0.763
  0.767
  0.767
  0.764
  0.765
  0.767
  0.766
  0.765
  0.763
Average production assets, $m
  30
  32
  36
  39
  42
  46
  49
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
  106
  112
  118
  125
  132
  139
  147
  154
  163
  171
  180
  190
  200
Working capital, $m
  32
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
Total debt, $m
  0
  1
  2
  3
  3
  4
  5
  6
  7
  9
  10
  11
  12
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
Total liabilities, $m
  7
  9
  10
  11
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
Total equity, $m
  69
  47
  52
  56
  61
  66
  72
  77
  83
  89
  95
  101
  108
  115
  122
  130
  137
  146
  154
  163
  172
  182
  192
  203
  214
  225
  237
  250
  263
  277
  291
Total liabilities and equity, $m
  76
  56
  62
  67
  72
  78
  85
  91
  98
  106
  113
  120
  128
  136
  145
  154
  163
  173
  183
  193
  204
  216
  228
  241
  254
  267
  281
  297
  312
  329
  345
Debt-to-equity ratio
  0.000
  0.020
  0.030
  0.040
  0.060
  0.070
  0.070
  0.080
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
Adjusted equity ratio
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  55
  58
  62
  65
  68
  72
  76
  80
Depreciation, amort., depletion, $m
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Funds from operations, $m
  15
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
  52
  55
  58
  62
  65
  69
  72
  76
  80
  84
  89
  93
Change in working capital, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  15
  15
  16
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  64
  67
  71
  74
  78
  83
  87
  91
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
New CAPEX, $m
  -3
  -3
  -3
  -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
Cash from investing activities, $m
  -3
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -8
  -10
  -10
  -10
  -11
  -11
  -13
  -13
  -13
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
  -21
  -23
Free cash flow, $m
  12
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  23
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  55
  58
  62
  65
  68
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
Total cash flow (excl. dividends), $m
  7
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
Retained Cash Flow (-), $m
  1
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
Prev. year cash balance distribution, $m
 
  26
  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
 
  33
  8
  8
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
  34
  36
  39
  41
  43
  46
  48
  51
  54
  57
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
 
  31
  7
  7
  8
  8
  8
  9
  9
  9
  9
  8
  8
  8
  7
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  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
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Utah Medical Products, Inc. (UTMD) is engaged in the business of producing medical devices that are disposable and for hospital use. The Company's product categories include labor and delivery/obstetrics, including fetal monitoring accessories, Vacuum-Assisted Delivery Systems (VAD), and other labor and delivery tools; neonatal intensive care, including DISPOSA-HOOD, DELTRAN PLUS and GESCO; gynecology/urology/electrosurgery, including LETZ System, FINESSE+ Generator, EPITOME, PATHFINDER PLUS, HOLMIUM LASER FIBRES, LIBERTY System, ENDOCURETTE, TVUS/HSG-Cath and LUMIN, and blood pressure monitoring, including DELTRAN Disposable Pressure Transducer (DPT), and pressure monitoring accessories, components and other molded parts. UTMD markets a range of medical devices used in critical care areas, especially the neonatal intensive care unit, the labor and delivery department and the women's health center in hospitals, as well as products sold to outpatient clinics and physician's offices.

FINANCIAL RATIOS  of  Utah Medical Products (UTMD)

Valuation Ratios
P/E Ratio 23.3
Price to Sales 7.2
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 18.6
Price to Free Cash Flow 23.3
Growth Rates
Sales Growth Rate -2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
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 15.4%
Ret/ On Assets - 3 Yr. Avg. 14.7%
Return On Total Capital 17.3%
Ret/ On T. Cap. - 3 Yr. Avg. 16.7%
Return On Equity 17.3%
Return On Equity - 3 Yr. Avg. 17.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 61.5%
Gross Margin - 3 Yr. Avg. 60.8%
EBITDA Margin 48.7%
EBITDA Margin - 3 Yr. Avg. 49.2%
Operating Margin 41%
Oper. Margin - 3 Yr. Avg. 39.2%
Pre-Tax Margin 41%
Pre-Tax Margin - 3 Yr. Avg. 40%
Net Profit Margin 30.8%
Net Profit Margin - 3 Yr. Avg. 29.2%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 27.1%
Payout Ratio 33.3%

UTMD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UTMD stock intrinsic value calculation we used $39 million for the last fiscal year's total revenue generated by Utah Medical Products. The default revenue input number comes from 2016 income statement of Utah Medical Products. 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 UTMD stock valuation model: a) initial revenue growth rate of 10% 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 UTMD is calculated based on our internal credit rating of Utah Medical Products, 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 Utah Medical Products.
    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 UTMD stock the variable cost ratio is equal to 61.5%.

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 UTMD 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 Utah Medical Products.

Corporate tax rate of 27% is the nominal tax rate for Utah Medical Products. 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 UTMD 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 UTMD are equal to 75.6%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Utah Medical Products 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 UTMD is equal to 15.4%. 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 - $69 million for Utah Medical Products - 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 3.73 million for Utah Medical Products 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 Utah Medical Products at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Utah Medical posts 2Q profit   [Jul-26-17 12:36AM  Associated Press]
▶ Utah Medical posts 1Q profit   [Apr-25-17 09:16AM  Associated Press]
▶ Utah Medical Products, Inc. Announces Quarterly Dividend   [Feb-07-17 10:00AM  Marketwired]
▶ Utah Medical posts 4Q profit   [09:06AM  Associated Press]
▶ Is Xerium Technologies, Inc. (XRM) A Good Stock To Buy?   [Dec-11  10:42AM  Insider Monkey]
▶ China XD Plastics Co Ltd (CXDC) Hedge Funds Are Snapping Up   [Nov-28  09:35AM  at Insider Monkey]
▶ 10-Q for Utah Medical Products, Inc.   [Aug-09  08:13PM  at Company Spotlight]
▶ 10-Q for Utah Medical Products, Inc.   [May-08  08:09PM  at Company Spotlight]
▶ 10-K for Utah Medical Products, Inc.   [May-06  08:12PM  at Company Spotlight]
▶ 10-Q for Utah Medical Products, Inc.   [Nov-06  07:08PM  Company Spotlight]
▶ Utah Medical Products, Inc. Announces Quarterly Dividend   [Feb-11  10:00AM  GlobeNewswire]
Financial statements of UTMD
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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