Intrinsic value of Amedisys - AMED

Previous Close

$116.73

  Intrinsic Value

$57.53

stock screener

  Rating & Target

str. sell

-51%

Previous close

$116.73

 
Intrinsic value

$57.53

 
Up/down potential

-51%

 
Rating

str. sell

We calculate the intrinsic value of AMED 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 2017), $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 4.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
Revenue, $m
  1,637
  1,744
  1,855
  1,971
  2,091
  2,217
  2,347
  2,484
  2,626
  2,775
  2,930
  3,092
  3,262
  3,439
  3,624
  3,818
  4,021
  4,234
  4,456
  4,689
  4,933
  5,189
  5,457
  5,738
  6,033
  6,342
  6,666
  7,006
  7,362
  7,736
Variable operating expenses, $m
  1,274
  1,355
  1,439
  1,527
  1,618
  1,713
  1,812
  1,915
  2,022
  2,135
  2,216
  2,338
  2,466
  2,600
  2,740
  2,887
  3,040
  3,201
  3,369
  3,546
  3,730
  3,924
  4,126
  4,339
  4,562
  4,795
  5,040
  5,297
  5,567
  5,850
Fixed operating expenses, $m
  270
  276
  282
  288
  294
  301
  307
  314
  321
  328
  335
  343
  350
  358
  366
  374
  382
  391
  399
  408
  417
  426
  435
  445
  455
  465
  475
  486
  496
  507
Total operating expenses, $m
  1,544
  1,631
  1,721
  1,815
  1,912
  2,014
  2,119
  2,229
  2,343
  2,463
  2,551
  2,681
  2,816
  2,958
  3,106
  3,261
  3,422
  3,592
  3,768
  3,954
  4,147
  4,350
  4,561
  4,784
  5,017
  5,260
  5,515
  5,783
  6,063
  6,357
Operating income, $m
  93
  113
  134
  156
  179
  203
  228
  255
  283
  312
  379
  411
  445
  481
  518
  557
  598
  642
  687
  736
  786
  839
  895
  954
  1,016
  1,082
  1,150
  1,223
  1,299
  1,379
EBITDA, $m
  170
  193
  217
  242
  268
  295
  324
  354
  385
  418
  453
  489
  527
  567
  609
  653
  699
  748
  799
  853
  910
  970
  1,032
  1,098
  1,168
  1,241
  1,318
  1,399
  1,484
  1,574
Interest expense (income), $m
  3
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
Earnings before tax, $m
  88
  107
  127
  148
  169
  192
  216
  241
  268
  295
  361
  391
  424
  457
  493
  530
  569
  610
  654
  699
  747
  798
  851
  907
  966
  1,029
  1,094
  1,163
  1,236
  1,312
Tax expense, $m
  24
  29
  34
  40
  46
  52
  58
  65
  72
  80
  97
  106
  114
  123
  133
  143
  154
  165
  176
  189
  202
  215
  230
  245
  261
  278
  295
  314
  334
  354
Net income, $m
  64
  78
  93
  108
  124
  140
  158
  176
  195
  216
  263
  286
  309
  334
  360
  387
  415
  445
  477
  511
  546
  583
  621
  662
  705
  751
  799
  849
  902
  958

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
  868
  925
  984
  1,045
  1,109
  1,176
  1,245
  1,318
  1,393
  1,472
  1,554
  1,640
  1,730
  1,824
  1,923
  2,026
  2,133
  2,246
  2,364
  2,488
  2,617
  2,753
  2,895
  3,044
  3,200
  3,364
  3,536
  3,717
  3,906
  4,104
Adjusted assets (=assets-cash), $m
  868
  925
  984
  1,045
  1,109
  1,176
  1,245
  1,318
  1,393
  1,472
  1,554
  1,640
  1,730
  1,824
  1,923
  2,026
  2,133
  2,246
  2,364
  2,488
  2,617
  2,753
  2,895
  3,044
  3,200
  3,364
  3,536
  3,717
  3,906
  4,104
Revenue / Adjusted assets
  1.886
  1.885
  1.885
  1.886
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.886
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
  1.885
Average production assets, $m
  411
  438
  466
  495
  525
  556
  589
  623
  659
  697
  735
  776
  819
  863
  910
  958
  1,009
  1,063
  1,118
  1,177
  1,238
  1,302
  1,370
  1,440
  1,514
  1,592
  1,673
  1,758
  1,848
  1,942
Working capital, $m
  -28
  -30
  -32
  -33
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -55
  -58
  -62
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -113
  -119
  -125
  -132
Total debt, $m
  109
  130
  151
  174
  197
  222
  247
  274
  302
  331
  361
  392
  425
  460
  496
  534
  573
  615
  658
  703
  751
  801
  853
  908
  965
  1,025
  1,088
  1,154
  1,224
  1,297
Total liabilities, $m
  319
  339
  361
  384
  407
  432
  457
  484
  511
  540
  570
  602
  635
  670
  706
  743
  783
  824
  868
  913
  960
  1,010
  1,062
  1,117
  1,175
  1,235
  1,298
  1,364
  1,433
  1,506
Total equity, $m
  550
  586
  623
  662
  702
  744
  788
  834
  882
  932
  984
  1,038
  1,095
  1,155
  1,217
  1,282
  1,350
  1,422
  1,496
  1,575
  1,657
  1,743
  1,833
  1,927
  2,026
  2,130
  2,239
  2,353
  2,472
  2,598
Total liabilities and equity, $m
  869
  925
  984
  1,046
  1,109
  1,176
  1,245
  1,318
  1,393
  1,472
  1,554
  1,640
  1,730
  1,825
  1,923
  2,025
  2,133
  2,246
  2,364
  2,488
  2,617
  2,753
  2,895
  3,044
  3,201
  3,365
  3,537
  3,717
  3,905
  4,104
Debt-to-equity ratio
  0.200
  0.220
  0.240
  0.260
  0.280
  0.300
  0.310
  0.330
  0.340
  0.350
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.420
  0.430
  0.440
  0.450
  0.450
  0.460
  0.470
  0.470
  0.480
  0.480
  0.490
  0.490
  0.490
  0.500
Adjusted equity ratio
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633
  0.633

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  64
  78
  93
  108
  124
  140
  158
  176
  195
  216
  263
  286
  309
  334
  360
  387
  415
  445
  477
  511
  546
  583
  621
  662
  705
  751
  799
  849
  902
  958
Depreciation, amort., depletion, $m
  78
  80
  83
  86
  89
  92
  96
  99
  103
  106
  74
  78
  82
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
  185
  194
Funds from operations, $m
  142
  158
  176
  194
  213
  233
  253
  275
  298
  322
  337
  363
  391
  420
  451
  483
  516
  552
  589
  628
  669
  713
  758
  806
  857
  910
  966
  1,025
  1,087
  1,152
Change in working capital, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Cash from operations, $m
  144
  160
  178
  196
  215
  235
  256
  277
  300
  324
  340
  366
  394
  423
  454
  486
  520
  555
  593
  632
  674
  717
  763
  811
  862
  915
  972
  1,031
  1,093
  1,158
Maintenance CAPEX, $m
  -38
  -41
  -44
  -47
  -49
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -167
  -176
  -185
New CAPEX, $m
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -81
  -85
  -89
  -94
Cash from investing activities, $m
  -64
  -68
  -72
  -76
  -79
  -84
  -89
  -93
  -98
  -103
  -109
  -115
  -121
  -126
  -133
  -140
  -147
  -154
  -162
  -170
  -179
  -188
  -197
  -208
  -218
  -229
  -240
  -252
  -265
  -279
Free cash flow, $m
  79
  92
  106
  120
  135
  151
  167
  184
  202
  221
  231
  252
  274
  297
  321
  346
  373
  401
  431
  462
  495
  529
  565
  604
  644
  686
  731
  778
  828
  880
Issuance/(repayment) of debt, $m
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  38
  40
  41
  43
  45
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
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  
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  38
  40
  41
  43
  45
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
Total cash flow (excl. dividends), $m
  99
  113
  128
  143
  159
  175
  193
  211
  230
  250
  261
  283
  307
  331
  357
  384
  413
  442
  474
  507
  542
  579
  618
  658
  701
  746
  794
  844
  897
  953
Retained Cash Flow (-), $m
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -126
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
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
  70
  73
  77
  81
Cash available for distribution, $m
  65
  77
  90
  104
  118
  133
  149
  165
  182
  200
  209
  229
  250
  272
  295
  319
  344
  371
  399
  429
  460
  493
  528
  564
  602
  643
  685
  730
  777
  827
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
  62
  71
  79
  86
  92
  97
  100
  103
  105
  105
  99
  98
  95
  91
  87
  81
  75
  68
  61
  55
  48
  41
  35
  29
  23
  19
  15
  11
  8
  6
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

Amedisys, Inc. is a healthcare services company. The Company's segments are Home Health, Hospice, Personal Care and Other. The Company is a provider of home health, hospice and personal care services. As of December 31, 2016, the Company owned and operated 327 Medicare-certified home healthcare centers, 79 Medicare-certified hospice care centers and 14 personal-care care centers in 34 states within the United States and the District of Columbia. The Company's Home Health segment provides compassionate healthcare to help its patients recover from surgery or illness, live with chronic diseases, and prevent avoidable hospital readmissions. The Hospice segment provides support for those who are dealing with a terminal illness. The Personal care segment provides patients with assistance with the essential activities of daily living.

FINANCIAL RATIOS  of  Amedisys (AMED)

Valuation Ratios
P/E Ratio 106
Price to Sales 2.7
Price to Book 8.5
Price to Tangible Book
Price to Cash Flow 63.3
Price to Free Cash Flow 85.3
Growth Rates
Sales Growth Rate 12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.8%
Cap. Spend. - 3 Yr. Gr. Rate -17.6%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 19.1%
Total Debt to Equity 20.2%
Interest Coverage 22
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 3.7%
Asset Turnover 2
Profitability Ratios
Gross Margin 42%
Gross Margin - 3 Yr. Avg. 42.6%
EBITDA Margin 5.9%
EBITDA Margin - 3 Yr. Avg. 4.2%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 38.7%
Eff/ Tax Rate - 3 Yr. Avg. 25.6%
Payout Ratio 0%

AMED stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMED stock intrinsic value calculation we used $1534 million for the last fiscal year's total revenue generated by Amedisys. The default revenue input number comes from 2017 income statement of Amedisys. 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 AMED stock valuation model: a) initial revenue growth rate of 6.7% 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 AMED is calculated based on our internal credit rating of Amedisys, 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 Amedisys.
    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 AMED stock the variable cost ratio is equal to 78%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $264 million in the base year in the intrinsic value calculation for AMED 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 5.5% for Amedisys.

Corporate tax rate of 27% is the nominal tax rate for Amedisys. 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 AMED stock is equal to 1.1%.

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 AMED are equal to 25.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Amedisys 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 AMED is equal to -1.7%. 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 - $515 million for Amedisys - 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 34 million for Amedisys 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 Amedisys at the current share price and the inputted number of shares is $4.0 billion.

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COMPANY NEWS

▶ Amedisys, Inc. to Host Earnings Call   [09:00AM  ACCESSWIRE]
▶ Amedisys: 2Q Earnings Snapshot   [Jul-31-18 05:39PM  Associated Press]
▶ Bet on These 5 Low Leverage Stocks for Safe Returns   [Jul-23-18 12:26PM  InvestorPlace]
▶ Buy These 5 Low Leverage Stocks on Chances of Rate Hike   [Jul-06-18 12:40PM  InvestorPlace]
▶ 5 Knockout Stocks to Play the World Cup Fever   [Jun-28-18 12:50PM  InvestorPlace]
▶ Is Amedisys (AMED) a Great Growth Stock?   [Jun-27-18 08:54AM  Zacks]
▶ Is Amedisys Inc (NASDAQ:AMED) A Financially Strong Company?   [Jun-21-18 01:12PM  Simply Wall St.]
▶ 5 Stocks to Snap Up on Explosive Relative Price Strength   [Jun-11-18 12:30PM  InvestorPlace]
▶ Amedisys to Repurchase 50% of Shares Held by KKR   [Jun-04-18 04:30PM  GlobeNewswire]
▶ Amedisys to Present at June Investor Conferences   [May-29-18 11:00AM  GlobeNewswire]
▶ Amedisys: Quantitative Buy and Strong Charts   [May-08-18 03:01PM  TheStreet.com]
▶ Amedisys: 1Q Earnings Snapshot   [May-07-18 05:50PM  Associated Press]
▶ Amedisys, Inc. to Host Earnings Call   [09:00AM  ACCESSWIRE]
▶ Amedisys reports 4Q loss   [05:03AM  Associated Press]
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