Intrinsic value of Addus HomeCare Corporation - ADUS

Previous Close

$70.12

  Intrinsic Value

$367.94

stock screener

  Rating & Target

str. buy

+425%

Previous close

$70.12

 
Intrinsic value

$367.94

 
Up/down potential

+425%

 
Rating

str. buy

We calculate the intrinsic value of ADUS 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 0.9

 

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, %
  26.70
  24.53
  22.58
  20.82
  19.24
  17.81
  16.53
  15.38
  14.34
  13.41
  12.57
  11.81
  11.13
  10.52
  9.96
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
Revenue, $m
  540
  672
  824
  995
  1,187
  1,398
  1,630
  1,880
  2,150
  2,438
  2,744
  3,068
  3,410
  3,768
  4,144
  4,536
  4,946
  5,372
  5,815
  6,277
  6,756
  7,254
  7,772
  8,310
  8,869
  9,451
  10,056
  10,686
  11,341
  12,024
Variable operating expenses, $m
  299
  372
  456
  551
  656
  773
  901
  1,039
  1,188
  1,347
  1,516
  1,695
  1,883
  2,082
  2,289
  2,506
  2,732
  2,967
  3,212
  3,467
  3,732
  4,007
  4,293
  4,590
  4,899
  5,220
  5,555
  5,902
  6,265
  6,642
Fixed operating expenses, $m
  171
  174
  178
  182
  186
  190
  194
  199
  203
  208
  212
  217
  222
  226
  231
  237
  242
  247
  253
  258
  264
  270
  275
  282
  288
  294
  301
  307
  314
  321
Total operating expenses, $m
  470
  546
  634
  733
  842
  963
  1,095
  1,238
  1,391
  1,555
  1,728
  1,912
  2,105
  2,308
  2,520
  2,743
  2,974
  3,214
  3,465
  3,725
  3,996
  4,277
  4,568
  4,872
  5,187
  5,514
  5,856
  6,209
  6,579
  6,963
Operating income, $m
  70
  126
  190
  263
  344
  435
  534
  642
  758
  883
  1,016
  1,157
  1,305
  1,460
  1,624
  1,794
  1,972
  2,158
  2,351
  2,552
  2,761
  2,978
  3,204
  3,438
  3,683
  3,937
  4,201
  4,476
  4,763
  5,062
EBITDA, $m
  75
  132
  197
  272
  355
  447
  549
  659
  777
  904
  1,039
  1,182
  1,333
  1,492
  1,658
  1,832
  2,013
  2,202
  2,399
  2,604
  2,817
  3,038
  3,268
  3,508
  3,757
  4,015
  4,285
  4,565
  4,858
  5,162
Interest expense (income), $m
  2
  6
  9
  12
  16
  21
  26
  32
  38
  45
  52
  60
  68
  77
  86
  96
  106
  117
  128
  140
  152
  164
  177
  191
  205
  219
  234
  250
  267
  284
  301
Earnings before tax, $m
  65
  117
  178
  246
  323
  409
  502
  604
  714
  831
  956
  1,088
  1,228
  1,374
  1,527
  1,688
  1,855
  2,030
  2,211
  2,400
  2,596
  2,801
  3,013
  3,234
  3,463
  3,702
  3,951
  4,210
  4,479
  4,760
Tax expense, $m
  17
  32
  48
  67
  87
  110
  136
  163
  193
  224
  258
  294
  331
  371
  412
  456
  501
  548
  597
  648
  701
  756
  813
  873
  935
  1,000
  1,067
  1,137
  1,209
  1,285
Net income, $m
  47
  85
  130
  180
  236
  298
  367
  441
  521
  606
  698
  794
  896
  1,003
  1,115
  1,232
  1,354
  1,482
  1,614
  1,752
  1,895
  2,044
  2,199
  2,361
  2,528
  2,703
  2,884
  3,073
  3,270
  3,475

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
  332
  413
  507
  612
  730
  860
  1,002
  1,156
  1,322
  1,499
  1,688
  1,887
  2,097
  2,318
  2,549
  2,790
  3,042
  3,304
  3,576
  3,860
  4,155
  4,461
  4,780
  5,111
  5,455
  5,812
  6,185
  6,572
  6,975
  7,395
Adjusted assets (=assets-cash), $m
  332
  413
  507
  612
  730
  860
  1,002
  1,156
  1,322
  1,499
  1,688
  1,887
  2,097
  2,318
  2,549
  2,790
  3,042
  3,304
  3,576
  3,860
  4,155
  4,461
  4,780
  5,111
  5,455
  5,812
  6,185
  6,572
  6,975
  7,395
Revenue / Adjusted assets
  1.627
  1.627
  1.625
  1.626
  1.626
  1.626
  1.627
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
  1.626
Average production assets, $m
  71
  88
  108
  130
  155
  183
  213
  246
  282
  319
  360
  402
  447
  494
  543
  594
  648
  704
  762
  822
  885
  950
  1,018
  1,089
  1,162
  1,238
  1,317
  1,400
  1,486
  1,575
Working capital, $m
  62
  77
  94
  113
  135
  159
  186
  214
  245
  278
  313
  350
  389
  430
  472
  517
  564
  612
  663
  716
  770
  827
  886
  947
  1,011
  1,077
  1,146
  1,218
  1,293
  1,371
Total debt, $m
  67
  94
  126
  162
  201
  246
  294
  346
  402
  462
  526
  594
  665
  740
  818
  900
  985
  1,074
  1,166
  1,263
  1,363
  1,466
  1,574
  1,687
  1,803
  1,924
  2,051
  2,182
  2,319
  2,461
Total liabilities, $m
  113
  140
  172
  208
  247
  292
  340
  392
  448
  508
  572
  640
  711
  786
  864
  946
  1,031
  1,120
  1,212
  1,309
  1,409
  1,512
  1,620
  1,733
  1,849
  1,970
  2,097
  2,228
  2,365
  2,507
Total equity, $m
  219
  273
  335
  405
  483
  568
  662
  764
  874
  991
  1,116
  1,247
  1,386
  1,532
  1,685
  1,844
  2,010
  2,184
  2,364
  2,552
  2,746
  2,949
  3,159
  3,378
  3,606
  3,842
  4,088
  4,344
  4,611
  4,888
Total liabilities and equity, $m
  332
  413
  507
  613
  730
  860
  1,002
  1,156
  1,322
  1,499
  1,688
  1,887
  2,097
  2,318
  2,549
  2,790
  3,041
  3,304
  3,576
  3,861
  4,155
  4,461
  4,779
  5,111
  5,455
  5,812
  6,185
  6,572
  6,976
  7,395
Debt-to-equity ratio
  0.300
  0.340
  0.380
  0.400
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
  0.500
Adjusted equity ratio
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  47
  85
  130
  180
  236
  298
  367
  441
  521
  606
  698
  794
  896
  1,003
  1,115
  1,232
  1,354
  1,482
  1,614
  1,752
  1,895
  2,044
  2,199
  2,361
  2,528
  2,703
  2,884
  3,073
  3,270
  3,475
Depreciation, amort., depletion, $m
  5
  6
  8
  9
  11
  12
  14
  16
  19
  21
  23
  26
  28
  31
  35
  38
  41
  45
  49
  52
  56
  61
  65
  69
  74
  79
  84
  89
  95
  100
Funds from operations, $m
  52
  92
  137
  189
  247
  311
  381
  457
  540
  627
  721
  820
  925
  1,034
  1,150
  1,270
  1,396
  1,526
  1,663
  1,804
  1,952
  2,105
  2,264
  2,430
  2,602
  2,781
  2,968
  3,162
  3,365
  3,575
Change in working capital, $m
  13
  15
  17
  20
  22
  24
  26
  29
  31
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
Cash from operations, $m
  39
  77
  120
  169
  225
  287
  355
  429
  509
  595
  686
  783
  886
  994
  1,107
  1,225
  1,349
  1,478
  1,612
  1,752
  1,897
  2,048
  2,205
  2,369
  2,538
  2,715
  2,899
  3,090
  3,290
  3,498
Maintenance CAPEX, $m
  -4
  -5
  -6
  -7
  -8
  -10
  -12
  -14
  -16
  -18
  -20
  -23
  -26
  -28
  -31
  -35
  -38
  -41
  -45
  -49
  -52
  -56
  -61
  -65
  -69
  -74
  -79
  -84
  -89
  -95
New CAPEX, $m
  -15
  -17
  -20
  -22
  -25
  -28
  -30
  -33
  -35
  -38
  -40
  -42
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -86
  -89
Cash from investing activities, $m
  -19
  -22
  -26
  -29
  -33
  -38
  -42
  -47
  -51
  -56
  -60
  -65
  -71
  -75
  -80
  -86
  -92
  -97
  -103
  -109
  -115
  -121
  -129
  -135
  -142
  -150
  -158
  -166
  -175
  -184
Free cash flow, $m
  21
  55
  94
  140
  191
  249
  313
  382
  458
  539
  626
  718
  815
  918
  1,026
  1,139
  1,257
  1,381
  1,509
  1,643
  1,782
  1,927
  2,077
  2,233
  2,396
  2,565
  2,741
  2,924
  3,115
  3,313
Issuance/(repayment) of debt, $m
  24
  28
  32
  36
  40
  44
  48
  52
  56
  60
  64
  68
  71
  75
  78
  82
  85
  89
  92
  96
  100
  104
  108
  112
  117
  121
  126
  131
  137
  142
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
Cash from financing (excl. dividends), $m  
  24
  28
  32
  36
  40
  44
  48
  52
  56
  60
  64
  68
  71
  75
  78
  82
  85
  89
  92
  96
  100
  104
  108
  112
  117
  121
  126
  131
  137
  142
Total cash flow (excl. dividends), $m
  45
  82
  126
  176
  231
  293
  361
  435
  514
  599
  689
  785
  887
  993
  1,104
  1,221
  1,343
  1,470
  1,602
  1,739
  1,882
  2,030
  2,185
  2,345
  2,512
  2,686
  2,867
  3,055
  3,251
  3,456
Retained Cash Flow (-), $m
  -46
  -54
  -62
  -70
  -78
  -86
  -94
  -102
  -110
  -117
  -125
  -132
  -139
  -146
  -153
  -159
  -166
  -173
  -180
  -188
  -195
  -203
  -210
  -219
  -227
  -236
  -246
  -256
  -267
  -278
Prev. year cash balance distribution, $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
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
  0
  29
  64
  106
  154
  207
  267
  333
  404
  482
  565
  654
  748
  847
  952
  1,062
  1,176
  1,296
  1,421
  1,551
  1,687
  1,828
  1,974
  2,127
  2,285
  2,450
  2,621
  2,799
  2,985
  3,178
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
  0
  26
  56
  87
  119
  150
  180
  208
  232
  253
  268
  279
  284
  284
  279
  270
  256
  239
  219
  197
  174
  152
  129
  108
  89
  71
  56
  43
  33
  24
Current shareholders' claim on cash, %
  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

Addus HomeCare Corporation is a provider of personal care services, which are provided primarily in the home. The Company's personal care services include assistance with bathing, grooming, oral care, skincare, assistance with feeding and dressing, medication reminders, meal planning and preparation, housekeeping and transportation services and other activities of daily living. The Company provides these non-medical services on a long-term, continuous basis. As of December 31, 2016, the Company delivered services to its consumers through 114 individual agencies located in 24 states and three adult day services centers in Illinois. Its services, which include non-medical care, such as personal care services, are provided to consumers who are unable to independently perform some or all of their activities of daily living.

FINANCIAL RATIOS  of  Addus HomeCare Corporation (ADUS)

Valuation Ratios
P/E Ratio 67.4
Price to Sales 2
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow -808.5
Price to Free Cash Flow -269.5
Growth Rates
Sales Growth Rate 19%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 13.8%
Total Debt to Equity 15.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 8.6%
Return On Equity 8%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 26.4%
Gross Margin - 3 Yr. Avg. 26.8%
EBITDA Margin 6.2%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 27%
Payout Ratio 0%

ADUS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADUS stock intrinsic value calculation we used $426 million for the last fiscal year's total revenue generated by Addus HomeCare Corporation. The default revenue input number comes from 0001 income statement of Addus HomeCare Corporation. 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 ADUS stock valuation model: a) initial revenue growth rate of 26.7% 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 4.3%, whose default value for ADUS is calculated based on our internal credit rating of Addus HomeCare Corporation, 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 Addus HomeCare Corporation.
    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 ADUS stock the variable cost ratio is equal to 55.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $167 million in the base year in the intrinsic value calculation for ADUS 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 13% for Addus HomeCare Corporation.

Corporate tax rate of 27% is the nominal tax rate for Addus HomeCare Corporation. 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 ADUS 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 ADUS are equal to 13.1%.

Life of production assets of 15.7 years is the average useful life of capital assets used in Addus HomeCare Corporation 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 ADUS is equal to 11.4%. 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 - $175.08 million for Addus HomeCare Corporation - 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 13.098 million for Addus HomeCare Corporation 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 Addus HomeCare Corporation at the current share price and the inputted number of shares is $0.9 billion.

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