Intrinsic value of Addus HomeCare - ADUS

Previous Close

$34.75

  Intrinsic Value

$13.04

stock screener

  Rating & Target

str. sell

-62%

Previous close

$34.75

 
Intrinsic value

$13.04

 
Up/down potential

-62%

 
Rating

str. sell

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

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 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 0.4

 

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, %
  18.99
  3.00
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
Revenue, $m
  401
  413
  426
  441
  456
  473
  491
  510
  531
  553
  576
  601
  628
  655
  685
  716
  749
  783
  820
  859
  899
  942
  987
  1,034
  1,084
  1,137
  1,192
  1,250
  1,311
  1,375
  1,443
Variable operating expenses, $m
 
  393
  406
  419
  434
  450
  466
  484
  504
  524
  546
  562
  587
  613
  640
  669
  700
  732
  766
  802
  840
  880
  922
  967
  1,013
  1,062
  1,114
  1,168
  1,225
  1,285
  1,348
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
  385
  393
  406
  419
  434
  450
  466
  484
  504
  524
  546
  562
  587
  613
  640
  669
  700
  732
  766
  802
  840
  880
  922
  967
  1,013
  1,062
  1,114
  1,168
  1,225
  1,285
  1,348
Operating income, $m
  15
  20
  20
  21
  22
  24
  25
  26
  27
  29
  30
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
EBITDA, $m
  22
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  44
  45
  47
  50
  52
  54
  57
  60
  62
  65
  68
  72
  75
  79
  83
  87
  91
  95
  100
Interest expense (income), $m
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
Earnings before tax, $m
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  32
  33
  34
  35
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  67
Tax expense, $m
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
Net income, $m
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  231
  230
  237
  245
  254
  263
  273
  284
  295
  308
  321
  334
  349
  365
  381
  398
  416
  436
  456
  478
  500
  524
  549
  575
  603
  632
  663
  695
  729
  765
  802
Adjusted assets (=assets-cash), $m
  223
  230
  237
  245
  254
  263
  273
  284
  295
  308
  321
  334
  349
  365
  381
  398
  416
  436
  456
  478
  500
  524
  549
  575
  603
  632
  663
  695
  729
  765
  802
Revenue / Adjusted assets
  1.798
  1.796
  1.797
  1.800
  1.795
  1.798
  1.799
  1.796
  1.800
  1.795
  1.794
  1.799
  1.799
  1.795
  1.798
  1.799
  1.800
  1.796
  1.798
  1.797
  1.798
  1.798
  1.798
  1.798
  1.798
  1.799
  1.798
  1.799
  1.798
  1.797
  1.799
Average production assets, $m
  21
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
Working capital, $m
  81
  78
  81
  84
  87
  90
  93
  97
  101
  105
  110
  114
  119
  125
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  206
  216
  226
  238
  249
  261
  274
Total debt, $m
  25
  24
  26
  29
  31
  34
  37
  41
  44
  48
  52
  56
  61
  66
  71
  76
  82
  88
  94
  101
  108
  115
  123
  131
  139
  148
  158
  168
  178
  189
  201
Total liabilities, $m
  72
  71
  73
  76
  78
  81
  84
  88
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  205
  215
  225
  236
  248
Total equity, $m
  159
  159
  164
  169
  175
  182
  189
  196
  204
  213
  222
  231
  241
  252
  263
  275
  288
  301
  315
  330
  346
  362
  379
  398
  417
  437
  458
  480
  504
  529
  554
Total liabilities and equity, $m
  231
  230
  237
  245
  253
  263
  273
  284
  295
  308
  321
  334
  349
  365
  381
  398
  417
  436
  456
  478
  501
  524
  549
  576
  603
  632
  663
  695
  729
  765
  802
Debt-to-equity ratio
  0.157
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.240
  0.250
  0.260
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
Adjusted equity ratio
  0.677
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
Depreciation, amort., depletion, $m
  7
  9
  9
  9
  9
  9
  9
  9
  9
  10
  10
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Funds from operations, $m
  -30
  21
  22
  22
  23
  23
  24
  24
  25
  26
  27
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  55
Change in working capital, $m
  -29
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
Cash from operations, $m
  -1
  19
  19
  19
  20
  20
  20
  21
  21
  22
  22
  21
  22
  22
  23
  24
  25
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
New CAPEX, $m
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  -22
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
Free cash flow, $m
  -23
  17
  17
  17
  17
  17
  18
  18
  18
  19
  19
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  24
  25
  26
  27
  28
  29
  31
  32
  33
Issuance/(repayment) of debt, $m
  23
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
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  
  26
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
Total cash flow (excl. dividends), $m
  4
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  45
Retained Cash Flow (-), $m
  -17
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
Prev. year cash balance distribution, $m
 
  5
  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
 
  19
  14
  14
  14
  14
  14
  14
  14
  14
  14
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
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
 
  18
  13
  12
  11
  11
  10
  9
  9
  8
  7
  6
  5
  5
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  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
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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 (ADUS)

Valuation Ratios
P/E Ratio 33.4
Price to Sales 1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow -400.7
Price to Free Cash Flow -133.6
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 $401 million for the last fiscal year's total revenue generated by Addus HomeCare. The default revenue input number comes from 2016 income statement of Addus HomeCare. 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 3% 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, 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.
    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 95.3%.

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 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 14.3% for Addus HomeCare.

Corporate tax rate of 27% is the nominal tax rate for Addus HomeCare. 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 5.1%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Addus HomeCare 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 19%. 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 - $159 million for Addus HomeCare - 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 11.624 million for Addus HomeCare 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 at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Addus HomeCare posts 2Q profit   [Aug-07-17 11:57PM  Associated Press]
▶ ETFs with exposure to Addus HomeCare Corp. : July 4, 2017   [Jul-04-17 02:25PM  Capital Cube]
▶ Best Stocks For The Second Half of 2017   [Jul-03-17 11:43AM  Zacks]
▶ New Strong Buy Stocks for June 22nd   [Jun-22-17 10:15AM  Zacks]
▶ ETFs with exposure to Addus HomeCare Corp. : June 8, 2017   [Jun-08-17 01:21PM  Capital Cube]
▶ New Strong Buy Stocks for June 7th   [Jun-07-17 10:10AM  Zacks]
▶ Which Companies Are Now Outperforming 95% Of All Stocks?   [Jun-05-17 11:29AM  Investor's Business Daily]
▶ No. 1-Ranked Home-Care Stock Giving Therapy To New Buy Zone   [Jun-01-17 12:27PM  Investor's Business Daily]
▶ New Strong Buy Stocks for May 25th   [May-25-17 09:20AM  Zacks]
▶ Thinly Traded Health Care Stock Tries To Resuscitate New Breakout   [May-24-17 11:16AM  Investor's Business Daily]
▶ Avoid Market Volatility with 5 Low-Beta Stocks   [May-23-17 09:48AM  Zacks]
▶ New Strong Buy Stocks for May 17th   [May-17-17 10:24AM  Zacks]
▶ Addus HomeCare Bolts Past Buy Zone, Gets IBD Rating Upgrade   [May-12-17 11:01AM  Investor's Business Daily]
▶ Addus HomeCare posts 1Q profit   [May-08-17 04:59PM  Associated Press]
Financial statements of ADUS
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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