Intrinsic value of WellCare Health Plans - WCG

Previous Close

$173.56

  Intrinsic Value

$1,154

stock screener

  Rating & Target

str. buy

+565%

  Value-price divergence*

+131%

Previous close

$173.56

 
Intrinsic value

$1,154

 
Up/down potential

+565%

 
Rating

str. buy

 
Value-price divergence*

+131%

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

We calculate the intrinsic value of WCG 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 7.7

 

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
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  0
  15,903
  17,657
  19,498
  21,425
  23,438
  25,537
  27,724
  29,998
  32,363
  34,821
  37,376
  40,031
  42,790
  45,658
  48,641
  51,744
  54,973
  58,336
  61,840
  65,491
  69,299
  73,272
  77,419
  81,750
  86,274
  91,003
  95,947
  101,118
  106,529
  112,191
Variable operating expenses, $m
 
  7,056
  7,830
  8,643
  9,493
  10,381
  11,307
  12,272
  13,276
  14,319
  15,404
  16,492
  17,663
  18,880
  20,146
  21,462
  22,831
  24,256
  25,740
  27,286
  28,897
  30,578
  32,331
  34,160
  36,071
  38,068
  40,154
  42,336
  44,617
  47,005
  49,503
Fixed operating expenses, $m
 
  7,764
  7,958
  8,157
  8,361
  8,570
  8,785
  9,004
  9,229
  9,460
  9,697
  9,939
  10,188
  10,442
  10,703
  10,971
  11,245
  11,526
  11,814
  12,110
  12,413
  12,723
  13,041
  13,367
  13,701
  14,044
  14,395
  14,755
  15,123
  15,502
  15,889
Total operating expenses, $m
  13,708
  14,820
  15,788
  16,800
  17,854
  18,951
  20,092
  21,276
  22,505
  23,779
  25,101
  26,431
  27,851
  29,322
  30,849
  32,433
  34,076
  35,782
  37,554
  39,396
  41,310
  43,301
  45,372
  47,527
  49,772
  52,112
  54,549
  57,091
  59,740
  62,507
  65,392
Operating income, $m
  530
  1,082
  1,868
  2,698
  3,571
  4,487
  5,445
  6,447
  7,493
  8,584
  9,721
  10,945
  12,180
  13,467
  14,809
  16,208
  17,667
  19,191
  20,781
  22,444
  24,181
  25,999
  27,901
  29,892
  31,978
  34,163
  36,454
  38,857
  41,377
  44,023
  46,799
EBITDA, $m
  618
  1,145
  1,934
  2,766
  3,642
  4,561
  5,523
  6,528
  7,577
  8,672
  9,812
  11,001
  12,240
  13,531
  14,877
  16,281
  17,745
  19,273
  20,869
  22,536
  24,280
  26,103
  28,011
  30,008
  32,100
  34,293
  36,591
  39,001
  41,529
  44,182
  46,967
Interest expense (income), $m
  57
  52
  77
  104
  132
  161
  191
  223
  256
  291
  327
  364
  403
  443
  485
  529
  574
  621
  670
  721
  774
  829
  887
  947
  1,010
  1,076
  1,145
  1,216
  1,291
  1,370
  1,452
Earnings before tax, $m
  530
  1,030
  1,791
  2,594
  3,439
  4,326
  5,254
  6,224
  7,237
  8,293
  9,394
  10,581
  11,777
  13,024
  14,324
  15,679
  17,093
  18,570
  20,112
  21,723
  23,407
  25,170
  27,014
  28,945
  30,967
  33,087
  35,310
  37,641
  40,086
  42,653
  45,347
Tax expense, $m
  288
  278
  484
  700
  929
  1,168
  1,419
  1,680
  1,954
  2,239
  2,536
  2,857
  3,180
  3,516
  3,867
  4,233
  4,615
  5,014
  5,430
  5,865
  6,320
  6,796
  7,294
  7,815
  8,361
  8,934
  9,534
  10,163
  10,823
  11,516
  12,244
Net income, $m
  242
  752
  1,307
  1,894
  2,511
  3,158
  3,835
  4,543
  5,283
  6,054
  6,858
  7,724
  8,597
  9,507
  10,456
  11,446
  12,478
  13,556
  14,682
  15,858
  17,087
  18,374
  19,720
  21,130
  22,606
  24,154
  25,776
  27,478
  29,263
  31,137
  33,104

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  6,153
  6,872
  7,630
  8,426
  9,259
  10,129
  11,036
  11,981
  12,964
  13,986
  15,048
  16,152
  17,299
  18,492
  19,731
  21,020
  22,361
  23,757
  25,210
  26,724
  28,302
  29,948
  31,665
  33,457
  35,328
  37,284
  39,327
  41,464
  43,699
  46,037
  48,484
Adjusted assets (=assets-cash), $m
  6,153
  6,872
  7,630
  8,426
  9,259
  10,129
  11,036
  11,981
  12,964
  13,986
  15,048
  16,152
  17,299
  18,492
  19,731
  21,020
  22,361
  23,757
  25,210
  26,724
  28,302
  29,948
  31,665
  33,457
  35,328
  37,284
  39,327
  41,464
  43,699
  46,037
  48,484
Revenue / Adjusted assets
  0.000
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
  2.314
Average production assets, $m
  215
  239
  265
  292
  321
  352
  383
  416
  450
  485
  522
  561
  600
  642
  685
  730
  776
  825
  875
  928
  982
  1,039
  1,099
  1,161
  1,226
  1,294
  1,365
  1,439
  1,517
  1,598
  1,683
Working capital, $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
Total debt, $m
  998
  1,484
  1,996
  2,533
  3,095
  3,682
  4,294
  4,932
  5,596
  6,285
  7,003
  7,748
  8,522
  9,327
  10,164
  11,034
  11,939
  12,881
  13,862
  14,884
  15,949
  17,060
  18,219
  19,428
  20,692
  22,011
  23,391
  24,833
  26,342
  27,920
  29,572
Total liabilities, $m
  4,153
  4,639
  5,151
  5,688
  6,250
  6,837
  7,449
  8,087
  8,751
  9,440
  10,158
  10,903
  11,677
  12,482
  13,319
  14,189
  15,094
  16,036
  17,017
  18,039
  19,104
  20,215
  21,374
  22,583
  23,847
  25,166
  26,546
  27,988
  29,497
  31,075
  32,727
Total equity, $m
  2,000
  2,234
  2,480
  2,738
  3,009
  3,292
  3,587
  3,894
  4,213
  4,545
  4,891
  5,249
  5,622
  6,010
  6,413
  6,832
  7,267
  7,721
  8,193
  8,685
  9,198
  9,733
  10,291
  10,873
  11,482
  12,117
  12,781
  13,476
  14,202
  14,962
  15,757
Total liabilities and equity, $m
  6,153
  6,873
  7,631
  8,426
  9,259
  10,129
  11,036
  11,981
  12,964
  13,985
  15,049
  16,152
  17,299
  18,492
  19,732
  21,021
  22,361
  23,757
  25,210
  26,724
  28,302
  29,948
  31,665
  33,456
  35,329
  37,283
  39,327
  41,464
  43,699
  46,037
  48,484
Debt-to-equity ratio
  0.499
  0.660
  0.800
  0.920
  1.030
  1.120
  1.200
  1.270
  1.330
  1.380
  1.430
  1.480
  1.520
  1.550
  1.580
  1.620
  1.640
  1.670
  1.690
  1.710
  1.730
  1.750
  1.770
  1.790
  1.800
  1.820
  1.830
  1.840
  1.850
  1.870
  1.880
Adjusted equity ratio
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325
  0.325

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  242
  752
  1,307
  1,894
  2,511
  3,158
  3,835
  4,543
  5,283
  6,054
  6,858
  7,724
  8,597
  9,507
  10,456
  11,446
  12,478
  13,556
  14,682
  15,858
  17,087
  18,374
  19,720
  21,130
  22,606
  24,154
  25,776
  27,478
  29,263
  31,137
  33,104
Depreciation, amort., depletion, $m
  88
  63
  66
  69
  71
  74
  78
  81
  84
  88
  92
  56
  60
  64
  68
  73
  78
  82
  88
  93
  98
  104
  110
  116
  123
  129
  137
  144
  152
  160
  168
Funds from operations, $m
  1,103
  815
  1,373
  1,962
  2,582
  3,232
  3,913
  4,624
  5,367
  6,142
  6,949
  7,780
  8,657
  9,572
  10,525
  11,519
  12,556
  13,638
  14,769
  15,950
  17,186
  18,478
  19,830
  21,246
  22,729
  24,283
  25,913
  27,622
  29,415
  31,296
  33,272
Change in working capital, $m
  355
  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 operations, $m
  748
  815
  1,373
  1,962
  2,582
  3,232
  3,913
  4,624
  5,367
  6,142
  6,949
  7,780
  8,657
  9,572
  10,525
  11,519
  12,556
  13,638
  14,769
  15,950
  17,186
  18,478
  19,830
  21,246
  22,729
  24,283
  25,913
  27,622
  29,415
  31,296
  33,272
Maintenance CAPEX, $m
  0
  -21
  -24
  -26
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -52
  -56
  -60
  -64
  -68
  -73
  -78
  -82
  -88
  -93
  -98
  -104
  -110
  -116
  -123
  -129
  -137
  -144
  -152
  -160
New CAPEX, $m
  -105
  -24
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
Cash from investing activities, $m
  -27
  -45
  -50
  -54
  -58
  -62
  -66
  -71
  -76
  -80
  -86
  -90
  -96
  -101
  -107
  -113
  -120
  -126
  -132
  -141
  -148
  -155
  -164
  -172
  -181
  -191
  -200
  -211
  -222
  -233
  -245
Free cash flow, $m
  721
  770
  1,323
  1,908
  2,524
  3,170
  3,846
  4,553
  5,291
  6,061
  6,864
  7,690
  8,561
  9,470
  10,417
  11,405
  12,436
  13,512
  14,636
  15,810
  17,038
  18,322
  19,666
  21,074
  22,548
  24,093
  25,712
  27,411
  29,193
  31,064
  33,027
Issuance/(repayment) of debt, $m
  -203
  486
  512
  537
  562
  587
  612
  638
  664
  690
  717
  745
  774
  805
  837
  870
  905
  942
  981
  1,022
  1,065
  1,111
  1,159
  1,210
  1,263
  1,320
  1,379
  1,442
  1,508
  1,578
  1,652
Issuance/(repurchase) of shares, $m
  -7
  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  
  833
  486
  512
  537
  562
  587
  612
  638
  664
  690
  717
  745
  774
  805
  837
  870
  905
  942
  981
  1,022
  1,065
  1,111
  1,159
  1,210
  1,263
  1,320
  1,379
  1,442
  1,508
  1,578
  1,652
Total cash flow (excl. dividends), $m
  1,554
  1,256
  1,835
  2,445
  3,086
  3,757
  4,459
  5,191
  5,955
  6,751
  7,581
  8,435
  9,336
  10,275
  11,254
  12,276
  13,341
  14,454
  15,617
  16,832
  18,103
  19,433
  20,825
  22,283
  23,811
  25,412
  27,092
  28,853
  30,702
  32,642
  34,679
Retained Cash Flow (-), $m
  -272
  -234
  -246
  -259
  -271
  -283
  -295
  -307
  -319
  -332
  -345
  -359
  -373
  -388
  -403
  -419
  -436
  -454
  -472
  -492
  -513
  -535
  -558
  -582
  -608
  -635
  -664
  -694
  -726
  -760
  -795
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
 
  1,022
  1,588
  2,187
  2,815
  3,474
  4,164
  4,884
  5,635
  6,419
  7,236
  8,076
  8,963
  9,887
  10,851
  11,857
  12,906
  14,001
  15,145
  16,340
  17,590
  18,898
  20,267
  21,701
  23,203
  24,777
  26,427
  28,159
  29,975
  31,882
  33,884
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  968
  1,417
  1,827
  2,190
  2,500
  2,752
  2,943
  3,072
  3,139
  3,145
  3,092
  2,991
  2,845
  2,662
  2,449
  2,216
  1,971
  1,723
  1,479
  1,246
  1,030
  835
  662
  514
  390
  289
  209
  147
  101
  67
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

WellCare Health Plans, Inc. provides managed care services for government-sponsored health care programs. It operates through three segments: Medicaid Health Plans, Medicare Health Plans, and Medicare PDPs. The Medicaid Health Plans segment offers plans for beneficiaries of temporary assistance for needy families, supplemental security income, and aged blind and disabled residents; and other state-based programs, such as children's health insurance programs for qualifying families who are not eligible for Medicaid, as well as managed long-term care programs for people with chronic illnesses or who have disabilities and need health and long-term care services. The Medicare Health Plans segment provides Medicare, a federal program that provides eligible persons aged 65 and over, as well as some disabled persons with a range of hospital, medical, and prescription drug benefits; Medicare Advantage, a Medicare’s managed care alternative to the original Medicare program, which offers individuals standard Medicare benefits directly through Centers for Medicare & Medicaid Services; and coordinated care plans that are administered through health maintenance organizations and require members to seek health care services and select a primary care physician from a network of health care providers. The Medicare PDPs segment provides Medicare part D PDP plans to Medicare-eligible beneficiaries. Its PDP plans offer national in-network prescription drug coverage with 69,000 pharmacies, including a preferred pharmacy network. As of December 31, 2015, the company served approximately 3.8 million members in 50 states and the District of Columbia. WellCare Health Plans, Inc. was founded in 1985 and is headquartered in Tampa, Florida.

FINANCIAL RATIOS  of  WellCare Health Plans (WCG)

Valuation Ratios
P/E Ratio 31.8
Price to Sales 0.5
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 10.3
Price to Free Cash Flow 12
Growth Rates
Sales Growth Rate 2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.4%
Cap. Spend. - 3 Yr. Gr. Rate 11.1%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 49.9%
Total Debt to Equity 49.9%
Interest Coverage 10
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 8.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 13%
Return On Equity - 3 Yr. Avg. 8.1%
Asset Turnover 2.5
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 4.7%
EBITDA Margin - 3 Yr. Avg. 3.4%
Operating Margin 3.7%
Oper. Margin - 3 Yr. Avg. 2.5%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 1%
Effective Tax Rate 54.3%
Eff/ Tax Rate - 3 Yr. Avg. 61%
Payout Ratio 0%

WCG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WCG stock intrinsic value calculation we used $14237 million for the last fiscal year's total revenue generated by WellCare Health Plans. The default revenue input number comes from 2016 income statement of WellCare Health Plans. 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 WCG stock valuation model: a) initial revenue growth rate of 11.7% 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 5.6%, whose default value for WCG is calculated based on our internal credit rating of WellCare Health Plans, 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 WellCare Health Plans.
    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 WCG stock the variable cost ratio is equal to 44.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7575 million in the base year in the intrinsic value calculation for WCG 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 5.2% for WellCare Health Plans.

Corporate tax rate of 27% is the nominal tax rate for WellCare Health Plans. 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 WCG 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 WCG are equal to 1.5%.

Life of production assets of 10 years is the average useful life of capital assets used in WellCare Health Plans 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 WCG is equal to 0%. 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 - $2000 million for WellCare Health Plans - 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 44.176 million for WellCare Health Plans 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 WellCare Health Plans at the current share price and the inputted number of shares is $7.7 billion.

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COMPANY NEWS

▶ WellCare tops Street 2Q forecasts   [Aug-04-17 09:13PM  Associated Press]
▶ WellCare is still in the M&A game   [02:50PM  American City Business Journals]
▶ Trumps latest threat would hurt his own supporters   [Aug-03-17 01:23PM  Yahoo Finance Video]
▶ TexanPlus Champions Competition Begins Online Voting   [Jul-31-17 08:30AM  PR Newswire]
▶ WellCare names top doctor   [Jul-13-17 03:05PM  American City Business Journals]
▶ WellCare Names Dr. Mark Leenay Chief Medical Officer   [Jul-11-17 08:54AM  PR Newswire]
▶ Harmony Health Plan Honors CommUnity Health Heroes   [Jul-05-17 08:30AM  PR Newswire]
▶ Tampa Bay's hottest stock market performers for the first half of 2017   [Jul-03-17 02:57PM  American City Business Journals]
▶ WellCares former top lawyer pleads guilty in fraud case   [01:50PM  American City Business Journals]
▶ WellCare: Working Toward a Healthier Kentucky   [Jun-27-17 08:30AM  PR Newswire]
▶ Five Tampa Bay companies make the new Fortune 500 list   [Jun-07-17 02:30PM  American City Business Journals]
▶ 11 Best Insurance Companies to Invest in 2017   [Jun-05-17 11:53AM  Insider Monkey]
▶ Health Insurance Industry Outlook - June 2017   [Jun-01-17 05:37PM  Zacks]
▶ WellCare president after cancer: 'It's real hard to depress me'   [02:50PM  American City Business Journals]
▶ New Strong Buys at New Highs Breaking Out Today   [May-11-17 05:57PM  Zacks]
▶ WellCare beats Street 1Q forecasts   [06:12AM  Associated Press]
▶ Heres what WellCare did not get in the Universal American deal   [Apr-28-17 02:15PM  American City Business Journals]
▶ Former WellCare executives face deadline to repay $26M from fraud scheme   [Apr-26-17 02:25PM  American City Business Journals]
▶ UnitedHealth Seen as Ready to Weather Obamacare Rewrite   [Apr-17-17 05:13PM  TheStreet.com]
▶ Everyone at this major Tampa employer earns at least $16 an hour   [Apr-13-17 08:00AM  American City Business Journals]
▶ Why WellCare gave its CEO a pay hike   [Apr-10-17 11:20AM  American City Business Journals]
▶ WellCare Tests Artificial Intelligence to Help Improve Patient Health   [Apr-07-17 01:38PM  The Wall Street Journal]
Stock chart of WCG Financial statements of WCG
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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