Intrinsic value of Amedisys - AMED

Previous Close

$130.30

  Intrinsic Value

$87.92

stock screener

  Rating & Target

sell

-33%

Previous close

$130.30

 
Intrinsic value

$87.92

 
Up/down potential

-33%

 
Rating

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 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 4.1

 

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, %
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  1,684
  1,841
  2,005
  2,175
  2,352
  2,536
  2,728
  2,927
  3,134
  3,349
  3,572
  3,805
  4,047
  4,298
  4,560
  4,833
  5,118
  5,415
  5,725
  6,048
  6,386
  6,739
  7,107
  7,493
  7,896
  8,318
  8,760
  9,222
  9,707
  10,214
Variable operating expenses, $m
  1,305
  1,423
  1,546
  1,675
  1,808
  1,947
  2,091
  2,241
  2,397
  2,559
  2,690
  2,865
  3,048
  3,237
  3,435
  3,640
  3,855
  4,078
  4,311
  4,555
  4,809
  5,075
  5,353
  5,643
  5,947
  6,265
  6,597
  6,946
  7,311
  7,693
Fixed operating expenses, $m
  275
  281
  287
  293
  300
  307
  313
  320
  327
  334
  342
  349
  357
  365
  373
  381
  389
  398
  407
  416
  425
  434
  444
  453
  463
  474
  484
  495
  506
  517
Total operating expenses, $m
  1,580
  1,704
  1,833
  1,968
  2,108
  2,254
  2,404
  2,561
  2,724
  2,893
  3,032
  3,214
  3,405
  3,602
  3,808
  4,021
  4,244
  4,476
  4,718
  4,971
  5,234
  5,509
  5,797
  6,096
  6,410
  6,739
  7,081
  7,441
  7,817
  8,210
Operating income, $m
  104
  137
  171
  207
  244
  283
  324
  366
  410
  456
  540
  590
  642
  696
  753
  812
  874
  939
  1,006
  1,077
  1,152
  1,229
  1,311
  1,396
  1,486
  1,580
  1,678
  1,782
  1,891
  2,005
EBITDA, $m
  151
  185
  220
  257
  295
  335
  377
  420
  466
  513
  562
  613
  667
  722
  781
  842
  905
  972
  1,041
  1,114
  1,190
  1,270
  1,354
  1,442
  1,534
  1,630
  1,732
  1,838
  1,950
  2,067
Interest expense (income), $m
  3
  5
  7
  8
  10
  12
  14
  16
  18
  20
  22
  24
  27
  29
  32
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  82
  87
  92
Earnings before tax, $m
  99
  130
  163
  197
  232
  269
  308
  348
  390
  434
  516
  563
  613
  664
  718
  775
  834
  896
  960
  1,028
  1,098
  1,173
  1,250
  1,332
  1,417
  1,507
  1,601
  1,700
  1,803
  1,912
Tax expense, $m
  27
  35
  44
  53
  63
  73
  83
  94
  105
  117
  139
  152
  165
  179
  194
  209
  225
  242
  259
  277
  297
  317
  338
  360
  383
  407
  432
  459
  487
  516
Net income, $m
  72
  95
  119
  144
  170
  197
  225
  254
  285
  317
  377
  411
  447
  485
  524
  566
  609
  654
  701
  750
  802
  856
  913
  972
  1,035
  1,100
  1,169
  1,241
  1,317
  1,396

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
  893
  976
  1,063
  1,153
  1,247
  1,345
  1,446
  1,552
  1,662
  1,776
  1,894
  2,017
  2,146
  2,279
  2,418
  2,563
  2,714
  2,871
  3,035
  3,207
  3,386
  3,573
  3,768
  3,973
  4,187
  4,411
  4,645
  4,890
  5,147
  5,416
Adjusted assets (=assets-cash), $m
  893
  976
  1,063
  1,153
  1,247
  1,345
  1,446
  1,552
  1,662
  1,776
  1,894
  2,017
  2,146
  2,279
  2,418
  2,563
  2,714
  2,871
  3,035
  3,207
  3,386
  3,573
  3,768
  3,973
  4,187
  4,411
  4,645
  4,890
  5,147
  5,416
Revenue / Adjusted assets
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.887
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
  1.886
Average production assets, $m
  231
  252
  275
  298
  322
  347
  374
  401
  429
  459
  489
  521
  554
  589
  625
  662
  701
  742
  784
  829
  875
  923
  974
  1,027
  1,082
  1,140
  1,200
  1,263
  1,330
  1,399
Working capital, $m
  22
  24
  26
  28
  31
  33
  35
  38
  41
  44
  46
  49
  53
  56
  59
  63
  67
  70
  74
  79
  83
  88
  92
  97
  103
  108
  114
  120
  126
  133
Total debt, $m
  118
  149
  181
  214
  248
  284
  322
  360
  400
  442
  486
  531
  578
  627
  678
  731
  787
  844
  905
  968
  1,033
  1,102
  1,174
  1,249
  1,327
  1,409
  1,495
  1,585
  1,680
  1,778
Total liabilities, $m
  328
  358
  390
  423
  458
  494
  531
  570
  610
  652
  695
  740
  787
  836
  887
  941
  996
  1,054
  1,114
  1,177
  1,243
  1,311
  1,383
  1,458
  1,537
  1,619
  1,705
  1,795
  1,889
  1,988
Total equity, $m
  565
  618
  673
  730
  789
  851
  916
  982
  1,052
  1,124
  1,199
  1,277
  1,358
  1,443
  1,531
  1,622
  1,718
  1,817
  1,921
  2,030
  2,143
  2,262
  2,385
  2,515
  2,650
  2,792
  2,940
  3,095
  3,258
  3,428
Total liabilities and equity, $m
  893
  976
  1,063
  1,153
  1,247
  1,345
  1,447
  1,552
  1,662
  1,776
  1,894
  2,017
  2,145
  2,279
  2,418
  2,563
  2,714
  2,871
  3,035
  3,207
  3,386
  3,573
  3,768
  3,973
  4,187
  4,411
  4,645
  4,890
  5,147
  5,416
Debt-to-equity ratio
  0.210
  0.240
  0.270
  0.290
  0.310
  0.330
  0.350
  0.370
  0.380
  0.390
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.490
  0.490
  0.500
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
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
  72
  95
  119
  144
  170
  197
  225
  254
  285
  317
  377
  411
  447
  485
  524
  566
  609
  654
  701
  750
  802
  856
  913
  972
  1,035
  1,100
  1,169
  1,241
  1,317
  1,396
Depreciation, amort., depletion, $m
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
Funds from operations, $m
  119
  143
  168
  194
  221
  249
  278
  309
  340
  374
  398
  434
  472
  511
  552
  595
  640
  687
  736
  787
  841
  897
  956
  1,018
  1,083
  1,151
  1,222
  1,297
  1,376
  1,458
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
Cash from operations, $m
  117
  141
  166
  191
  218
  246
  276
  306
  338
  371
  395
  431
  469
  508
  549
  592
  636
  683
  732
  783
  836
  892
  951
  1,013
  1,077
  1,145
  1,216
  1,291
  1,369
  1,452
Maintenance CAPEX, $m
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
New CAPEX, $m
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -69
Cash from investing activities, $m
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -112
  -116
  -122
  -128
Free cash flow, $m
  87
  109
  132
  156
  181
  207
  234
  262
  292
  322
  344
  378
  413
  449
  487
  526
  568
  611
  656
  704
  753
  805
  860
  917
  976
  1,039
  1,105
  1,174
  1,247
  1,323
Issuance/(repayment) of debt, $m
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  99
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  
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  99
Total cash flow (excl. dividends), $m
  116
  140
  164
  189
  215
  243
  271
  301
  332
  364
  388
  423
  460
  498
  538
  579
  623
  669
  717
  767
  819
  874
  931
  992
  1,055
  1,121
  1,191
  1,264
  1,341
  1,422
Retained Cash Flow (-), $m
  -50
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -104
  -109
  -113
  -118
  -124
  -129
  -135
  -142
  -148
  -155
  -163
  -170
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
  67
  87
  109
  132
  156
  181
  207
  234
  262
  292
  313
  345
  378
  413
  450
  488
  528
  569
  613
  658
  706
  755
  808
  862
  920
  980
  1,043
  1,109
  1,179
  1,251
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
  64
  80
  95
  109
  121
  131
  140
  146
  151
  153
  149
  147
  144
  139
  132
  124
  115
  105
  94
  84
  73
  63
  53
  44
  36
  29
  22
  17
  13
  9
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 118.3
Price to Sales 3
Price to Book 9.5
Price to Tangible Book
Price to Cash Flow 70.6
Price to Free Cash Flow 95.2
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 $1533.68 million for the last fiscal year's total revenue generated by Amedisys. The default revenue input number comes from 0001 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 9.8% 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 77.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $269 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 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 AMED are equal to 13.7%.

Life of production assets of 22.5 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 1.3%. 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 - $515.321 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 31.836 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 $4.1 billion.

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