Intrinsic value of AAC Holdings - AAC

Previous Close

$2.36

  Intrinsic Value

$4.44

stock screener

  Rating & Target

str. buy

+88%

Previous close

$2.36

 
Intrinsic value

$4.44

 
Up/down potential

+88%

 
Rating

str. buy

We calculate the intrinsic value of AAC 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 0001), $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 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.45
  5.40
  5.36
  5.32
  5.29
Revenue, $m
  353
  391
  430
  471
  513
  558
  604
  652
  702
  754
  808
  864
  923
  983
  1,046
  1,112
  1,180
  1,252
  1,326
  1,403
  1,484
  1,568
  1,656
  1,748
  1,844
  1,945
  2,050
  2,160
  2,275
  2,395
Variable operating expenses, $m
  322
  354
  388
  424
  461
  500
  540
  582
  625
  670
  703
  752
  803
  855
  910
  967
  1,027
  1,089
  1,153
  1,221
  1,291
  1,364
  1,441
  1,521
  1,604
  1,692
  1,783
  1,879
  1,979
  2,083
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
  322
  354
  388
  424
  461
  500
  540
  582
  625
  670
  703
  752
  803
  855
  910
  967
  1,027
  1,089
  1,153
  1,221
  1,291
  1,364
  1,441
  1,521
  1,604
  1,692
  1,783
  1,879
  1,979
  2,083
Operating income, $m
  32
  36
  42
  47
  52
  58
  64
  71
  77
  84
  105
  112
  120
  128
  136
  145
  154
  163
  172
  183
  193
  204
  215
  227
  240
  253
  267
  281
  296
  312
EBITDA, $m
  64
  71
  78
  85
  93
  101
  109
  118
  127
  137
  146
  156
  167
  178
  189
  201
  214
  227
  240
  254
  269
  284
  300
  317
  334
  352
  371
  391
  412
  434
Interest expense (income), $m
  5
  18
  21
  23
  26
  29
  32
  35
  38
  42
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  89
  95
  101
  106
  113
  119
  126
  133
  140
  148
  156
Earnings before tax, $m
  13
  16
  18
  21
  23
  26
  29
  32
  35
  38
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
  127
  134
  141
  148
  155
Tax expense, $m
  4
  4
  5
  6
  6
  7
  8
  9
  10
  10
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  33
  34
  36
  38
  40
  42
Net income, $m
  10
  11
  13
  15
  17
  19
  21
  23
  26
  28
  41
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  113

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
Total assets, $m
  475
  526
  578
  633
  691
  751
  813
  878
  945
  1,015
  1,088
  1,163
  1,242
  1,323
  1,408
  1,497
  1,589
  1,685
  1,785
  1,889
  1,997
  2,111
  2,229
  2,353
  2,482
  2,617
  2,759
  2,907
  3,061
  3,223
Adjusted assets (=assets-cash), $m
  475
  526
  578
  633
  691
  751
  813
  878
  945
  1,015
  1,088
  1,163
  1,242
  1,323
  1,408
  1,497
  1,589
  1,685
  1,785
  1,889
  1,997
  2,111
  2,229
  2,353
  2,482
  2,617
  2,759
  2,907
  3,061
  3,223
Revenue / Adjusted assets
  0.743
  0.743
  0.744
  0.744
  0.742
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
Average production assets, $m
  243
  269
  296
  324
  353
  384
  416
  449
  483
  519
  556
  595
  635
  677
  720
  765
  812
  861
  912
  966
  1,021
  1,079
  1,140
  1,203
  1,269
  1,338
  1,410
  1,486
  1,565
  1,648
Working capital, $m
  47
  52
  57
  63
  68
  74
  80
  87
  93
  100
  107
  115
  123
  131
  139
  148
  157
  166
  176
  187
  197
  209
  220
  233
  245
  259
  273
  287
  303
  319
Total debt, $m
  256
  289
  323
  358
  395
  434
  474
  516
  560
  605
  652
  701
  752
  805
  860
  917
  976
  1,038
  1,103
  1,170
  1,241
  1,314
  1,391
  1,471
  1,554
  1,642
  1,733
  1,829
  1,929
  2,034
Total liabilities, $m
  308
  340
  374
  410
  447
  486
  526
  568
  611
  657
  704
  753
  803
  856
  911
  968
  1,028
  1,090
  1,155
  1,222
  1,292
  1,366
  1,442
  1,522
  1,606
  1,693
  1,785
  1,881
  1,981
  2,086
Total equity, $m
  168
  186
  204
  224
  244
  265
  287
  310
  334
  358
  384
  411
  438
  467
  497
  528
  561
  595
  630
  667
  705
  745
  787
  831
  876
  924
  974
  1,026
  1,081
  1,138
Total liabilities and equity, $m
  476
  526
  578
  634
  691
  751
  813
  878
  945
  1,015
  1,088
  1,164
  1,241
  1,323
  1,408
  1,496
  1,589
  1,685
  1,785
  1,889
  1,997
  2,111
  2,229
  2,353
  2,482
  2,617
  2,759
  2,907
  3,062
  3,224
Debt-to-equity ratio
  1.530
  1.550
  1.580
  1.600
  1.620
  1.640
  1.650
  1.670
  1.680
  1.690
  1.700
  1.710
  1.720
  1.720
  1.730
  1.740
  1.740
  1.750
  1.750
  1.760
  1.760
  1.760
  1.770
  1.770
  1.770
  1.780
  1.780
  1.780
  1.790
  1.790
Adjusted equity ratio
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353
  0.353

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  11
  13
  15
  17
  19
  21
  23
  26
  28
  41
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  113
Depreciation, amort., depletion, $m
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
Funds from operations, $m
  42
  46
  50
  53
  58
  62
  66
  71
  76
  81
  82
  88
  93
  99
  105
  111
  118
  125
  132
  140
  147
  156
  164
  173
  182
  192
  202
  213
  224
  235
Change in working capital, $m
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Cash from operations, $m
  37
  41
  44
  48
  52
  56
  60
  65
  69
  74
  75
  80
  85
  91
  97
  103
  109
  115
  122
  129
  137
  144
  152
  161
  169
  179
  188
  198
  208
  219
Maintenance CAPEX, $m
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -31
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -94
  -99
  -104
  -110
  -116
New CAPEX, $m
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -76
  -79
  -83
Cash from investing activities, $m
  -40
  -44
  -47
  -50
  -53
  -57
  -60
  -64
  -67
  -72
  -75
  -80
  -84
  -89
  -93
  -98
  -104
  -109
  -115
  -121
  -128
  -134
  -141
  -147
  -155
  -163
  -171
  -180
  -189
  -199
Free cash flow, $m
  -3
  -3
  -3
  -2
  -1
  -1
  0
  1
  2
  2
  -1
  0
  1
  2
  3
  4
  5
  6
  7
  8
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
Issuance/(repayment) of debt, $m
  30
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
Issuance/(repurchase) of shares, $m
  7
  6
  5
  4
  3
  2
  1
  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  
  37
  39
  39
  40
  40
  41
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
Total cash flow (excl. dividends), $m
  34
  36
  37
  38
  39
  40
  41
  43
  45
  48
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  114
  119
  126
Retained Cash Flow (-), $m
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
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
  18
  18
  18
  18
  19
  19
  19
  20
  21
  23
  21
  23
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  65
  68
Discount rate, %
  9.20
  9.66
  10.14
  10.65
  11.18
  11.74
  12.33
  12.95
  13.59
  14.27
  14.99
  15.74
  16.52
  17.35
  18.22
  19.13
  20.08
  21.09
  22.14
  23.25
  24.41
  25.63
  26.91
  28.26
  29.67
  31.15
  32.71
  34.35
  36.07
  37.87
PV of cash for distribution, $m
  16
  15
  14
  12
  11
  10
  8
  7
  7
  6
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  93.7
  89.0
  85.5
  83.0
  81.4
  80.4
  80.1
  80.1
  80.1
  80.1
  80.1
  80.1
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AAC Holdings, Inc. is a provider of inpatient and outpatient substance abuse treatment services for individuals with drug and alcohol addiction. The Company performs drug testing and diagnostics laboratory services and provides physician services to its clients. As of June 30, 2016, the Company operated 12 residential substance abuse treatment facilities located throughout the United States, focused on delivering clinical care and treatment solutions across 1,139 beds, which includes 636 licensed detoxification beds, and 18 standalone outpatient centers. In addition, the Company focuses on expanding The Oxford Centre facility. As of June 30, 2016, the Company's capacity at its Forterus treatment facility was 14 beds. The Company is engaged in deploying research-based treatment programs with structured curricula for detoxification, residential treatment, partial hospitalization and intensive outpatient care. The Company is also an Internet marketer in the addiction treatment industry.

FINANCIAL RATIOS  of  AAC Holdings (AAC)

Valuation Ratios
P/E Ratio -53.8
Price to Sales 0.2
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -1.5
Growth Rates
Sales Growth Rate 32.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.8%
Cap. Spend. - 3 Yr. Gr. Rate 23.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 109.1%
Total Debt to Equity 114.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.9%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.7%
Return On Equity -0.7%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 5.7%
EBITDA Margin - 3 Yr. Avg. 9.7%
Operating Margin 0.4%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin -2.5%
Pre-Tax Margin - 3 Yr. Avg. 3.5%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. 3.6%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.7%
Payout Ratio 0%

AAC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AAC stock intrinsic value calculation we used $317.641 million for the last fiscal year's total revenue generated by AAC Holdings. The default revenue input number comes from 0001 income statement of AAC Holdings. 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 AAC stock valuation model: a) initial revenue growth rate of 11.2% 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 9.2%, whose default value for AAC is calculated based on our internal credit rating of AAC Holdings, 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 AAC Holdings.
    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 AAC stock the variable cost ratio is equal to 91.5%.

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 AAC 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 8.1% for AAC Holdings.

Corporate tax rate of 27% is the nominal tax rate for AAC Holdings. 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 AAC 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 AAC are equal to 68.8%.

Life of production assets of 13.5 years is the average useful life of capital assets used in AAC Holdings 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 AAC is equal to 13.3%. 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 - $150.994 million for AAC Holdings - 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 24.597 million for AAC Holdings 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 AAC Holdings at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ AAC Holdings: 3Q Earnings Snapshot   [07:13AM  Associated Press]
▶ Shipt CEO Bill Smith on what hed like to see in Birmingham   [Sep-06-18 01:00PM  American City Business Journals]
▶ AAC Holdings (AAC) Q2 Earnings Lag Estimates   [Aug-01-18 06:15PM  Zacks]
▶ AAC Holdings: 2Q Earnings Snapshot   [05:09PM  Associated Press]
▶ AAC Holdings Group Enters Oversold Territory   [Jun-28-18 06:43AM  Zacks]
▶ AAC Holdings Inc (NYSE:AAC): Time For A Financial Health Check   [Jun-27-18 09:36AM  Simply Wall St.]
▶ 5 Top Stocks to Pull Through the June Swoon   [Jun-13-18 09:50AM  InvestorPlace]
▶ 5 Top Stocks to Pull Through the June Swoon   [Jun-01-18 08:57AM  Zacks]
▶ AAC Holdings: 1Q Earnings Snapshot   [May-02-18 06:51PM  Associated Press]
▶ Townsend Tees Up for the Community   [02:01PM  PR Newswire]
▶ AAC Holdings Completes Acquisition of AdCare, Inc.   [Mar-01-18 04:53PM  PR Newswire]
▶ AAC Holdings, Inc. to Host Earnings Call   [Feb-22-18 09:55AM  ACCESSWIRE]
▶ AAC Holdings reports 4Q loss   [05:01AM  Associated Press]
▶ AAC Holdings, Inc. to Host Earnings Call   [Nov-02-17 09:55AM  ACCESSWIRE]
▶ AAC Holdings beats 3Q profit forecasts   [05:46AM  Associated Press]
▶ AAC Holdings Names Larry Cash to Board of Directors   [Nov-01-17 04:36PM  PR Newswire]
▶ AAC Holdings reports 2Q loss   [Aug-03-17 12:58AM  Associated Press]
▶ AAC Holdings, Inc. Reports Second Quarter 2017 Results   [Aug-02-17 04:15PM  PR Newswire]

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