Intrinsic value of Brookdale Senior Living Inc. - BKD

Previous Close

$6.52

  Intrinsic Value

$1.09

stock screener

  Rating & Target

str. sell

-83%

Previous close

$6.52

 
Intrinsic value

$1.09

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of BKD 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 1.2

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  4,622
  4,728
  4,849
  4,986
  5,137
  5,303
  5,483
  5,679
  5,890
  6,116
  6,357
  6,615
  6,890
  7,182
  7,492
  7,820
  8,168
  8,535
  8,924
  9,334
  9,766
  10,223
  10,703
  11,210
  11,744
  12,306
  12,897
  13,520
  14,174
  14,863
Variable operating expenses, $m
  3,540
  3,621
  3,713
  3,817
  3,932
  4,058
  4,196
  4,345
  4,505
  4,677
  4,841
  5,037
  5,246
  5,469
  5,705
  5,955
  6,219
  6,499
  6,795
  7,107
  7,437
  7,784
  8,150
  8,536
  8,942
  9,370
  9,821
  10,294
  10,793
  11,317
Fixed operating expenses, $m
  1,425
  1,456
  1,488
  1,521
  1,554
  1,588
  1,623
  1,659
  1,696
  1,733
  1,771
  1,810
  1,850
  1,890
  1,932
  1,975
  2,018
  2,062
  2,108
  2,154
  2,202
  2,250
  2,299
  2,350
  2,402
  2,455
  2,509
  2,564
  2,620
  2,678
Total operating expenses, $m
  4,965
  5,077
  5,201
  5,338
  5,486
  5,646
  5,819
  6,004
  6,201
  6,410
  6,612
  6,847
  7,096
  7,359
  7,637
  7,930
  8,237
  8,561
  8,903
  9,261
  9,639
  10,034
  10,449
  10,886
  11,344
  11,825
  12,330
  12,858
  13,413
  13,995
Operating income, $m
  -343
  -349
  -352
  -352
  -349
  -344
  -336
  -325
  -311
  -295
  -254
  -232
  -206
  -177
  -145
  -109
  -70
  -26
  21
  72
  128
  189
  254
  324
  400
  481
  568
  661
  761
  868
EBITDA, $m
  126
  131
  139
  152
  170
  191
  217
  247
  281
  319
  362
  410
  462
  520
  582
  650
  723
  802
  887
  978
  1,076
  1,180
  1,292
  1,412
  1,539
  1,675
  1,819
  1,973
  2,136
  2,310
Interest expense (income), $m
  350
  253
  259
  266
  274
  283
  293
  304
  317
  330
  344
  359
  375
  393
  411
  431
  451
  474
  497
  522
  548
  575
  604
  635
  667
  701
  737
  775
  815
  856
  900
Earnings before tax, $m
  -596
  -607
  -618
  -626
  -633
  -637
  -640
  -642
  -641
  -638
  -613
  -607
  -599
  -588
  -576
  -561
  -543
  -523
  -501
  -475
  -447
  -416
  -381
  -343
  -302
  -256
  -207
  -153
  -95
  -33
Tax expense, $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
Net income, $m
  -596
  -607
  -618
  -626
  -633
  -637
  -640
  -642
  -641
  -638
  -613
  -607
  -599
  -588
  -576
  -561
  -543
  -523
  -501
  -475
  -447
  -416
  -381
  -343
  -302
  -256
  -207
  -153
  -95
  -33

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
  6,584
  6,735
  6,908
  7,102
  7,318
  7,554
  7,811
  8,090
  8,390
  8,712
  9,056
  9,424
  9,815
  10,231
  10,672
  11,140
  11,635
  12,158
  12,712
  13,296
  13,912
  14,562
  15,247
  15,969
  16,729
  17,530
  18,372
  19,259
  20,191
  21,172
Adjusted assets (=assets-cash), $m
  6,584
  6,735
  6,908
  7,102
  7,318
  7,554
  7,811
  8,090
  8,390
  8,712
  9,056
  9,424
  9,815
  10,231
  10,672
  11,140
  11,635
  12,158
  12,712
  13,296
  13,912
  14,562
  15,247
  15,969
  16,729
  17,530
  18,372
  19,259
  20,191
  21,172
Revenue / Adjusted assets
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
Average production assets, $m
  5,874
  6,009
  6,164
  6,337
  6,529
  6,740
  6,969
  7,218
  7,486
  7,773
  8,080
  8,408
  8,757
  9,128
  9,522
  9,939
  10,381
  10,848
  11,342
  11,863
  12,413
  12,993
  13,604
  14,248
  14,926
  15,641
  16,392
  17,183
  18,015
  18,891
Working capital, $m
  -148
  -151
  -155
  -160
  -164
  -170
  -175
  -182
  -188
  -196
  -203
  -212
  -220
  -230
  -240
  -250
  -261
  -273
  -286
  -299
  -313
  -327
  -343
  -359
  -376
  -394
  -413
  -433
  -454
  -476
Total debt, $m
  4,619
  4,746
  4,892
  5,056
  5,237
  5,436
  5,653
  5,887
  6,140
  6,411
  6,701
  7,010
  7,340
  7,690
  8,062
  8,455
  8,872
  9,313
  9,779
  10,271
  10,790
  11,337
  11,914
  12,521
  13,161
  13,835
  14,545
  15,291
  16,077
  16,903
Total liabilities, $m
  5,543
  5,671
  5,817
  5,980
  6,161
  6,360
  6,577
  6,811
  7,064
  7,335
  7,625
  7,935
  8,264
  8,614
  8,986
  9,380
  9,797
  10,237
  10,703
  11,195
  11,714
  12,261
  12,838
  13,446
  14,086
  14,760
  15,469
  16,216
  17,001
  17,827
Total equity, $m
  1,040
  1,064
  1,091
  1,122
  1,156
  1,194
  1,234
  1,278
  1,326
  1,376
  1,431
  1,489
  1,551
  1,616
  1,686
  1,760
  1,838
  1,921
  2,008
  2,101
  2,198
  2,301
  2,409
  2,523
  2,643
  2,770
  2,903
  3,043
  3,190
  3,345
Total liabilities and equity, $m
  6,583
  6,735
  6,908
  7,102
  7,317
  7,554
  7,811
  8,089
  8,390
  8,711
  9,056
  9,424
  9,815
  10,230
  10,672
  11,140
  11,635
  12,158
  12,711
  13,296
  13,912
  14,562
  15,247
  15,969
  16,729
  17,530
  18,372
  19,259
  20,191
  21,172
Debt-to-equity ratio
  4.440
  4.460
  4.480
  4.510
  4.530
  4.550
  4.580
  4.610
  4.630
  4.660
  4.680
  4.710
  4.730
  4.760
  4.780
  4.800
  4.830
  4.850
  4.870
  4.890
  4.910
  4.930
  4.950
  4.960
  4.980
  5.000
  5.010
  5.030
  5.040
  5.050
Adjusted equity ratio
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -596
  -607
  -618
  -626
  -633
  -637
  -640
  -642
  -641
  -638
  -613
  -607
  -599
  -588
  -576
  -561
  -543
  -523
  -501
  -475
  -447
  -416
  -381
  -343
  -302
  -256
  -207
  -153
  -95
  -33
Depreciation, amort., depletion, $m
  469
  479
  491
  504
  519
  535
  553
  572
  592
  614
  617
  642
  668
  697
  727
  759
  792
  828
  866
  906
  948
  992
  1,038
  1,088
  1,139
  1,194
  1,251
  1,312
  1,375
  1,442
Funds from operations, $m
  -127
  -128
  -127
  -122
  -114
  -102
  -88
  -70
  -49
  -25
  3
  35
  70
  109
  151
  198
  249
  305
  365
  430
  501
  576
  657
  745
  838
  938
  1,044
  1,158
  1,280
  1,409
Change in working capital, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from operations, $m
  -124
  -125
  -123
  -117
  -109
  -97
  -82
  -64
  -42
  -17
  11
  43
  79
  118
  161
  209
  260
  317
  378
  443
  514
  591
  673
  761
  855
  956
  1,063
  1,178
  1,301
  1,431
Maintenance CAPEX, $m
  -440
  -448
  -459
  -471
  -484
  -498
  -514
  -532
  -551
  -571
  -593
  -617
  -642
  -668
  -697
  -727
  -759
  -792
  -828
  -866
  -906
  -948
  -992
  -1,038
  -1,088
  -1,139
  -1,194
  -1,251
  -1,312
  -1,375
New CAPEX, $m
  -115
  -135
  -154
  -173
  -192
  -211
  -230
  -248
  -268
  -287
  -307
  -328
  -349
  -371
  -394
  -417
  -442
  -467
  -494
  -521
  -550
  -580
  -611
  -644
  -678
  -714
  -752
  -791
  -832
  -875
Cash from investing activities, $m
  -555
  -583
  -613
  -644
  -676
  -709
  -744
  -780
  -819
  -858
  -900
  -945
  -991
  -1,039
  -1,091
  -1,144
  -1,201
  -1,259
  -1,322
  -1,387
  -1,456
  -1,528
  -1,603
  -1,682
  -1,766
  -1,853
  -1,946
  -2,042
  -2,144
  -2,250
Free cash flow, $m
  -679
  -708
  -736
  -761
  -785
  -806
  -826
  -844
  -861
  -876
  -890
  -902
  -912
  -922
  -929
  -935
  -940
  -943
  -944
  -944
  -941
  -937
  -930
  -922
  -911
  -898
  -882
  -864
  -843
  -819
Issuance/(repayment) of debt, $m
  104
  127
  146
  164
  181
  199
  217
  234
  253
  271
  290
  309
  330
  350
  372
  394
  417
  441
  466
  492
  519
  547
  577
  608
  640
  674
  709
  746
  785
  826
Issuance/(repurchase) of shares, $m
  617
  631
  645
  657
  667
  675
  681
  686
  688
  689
  668
  665
  661
  654
  645
  634
  621
  606
  588
  568
  544
  518
  489
  457
  422
  383
  340
  293
  243
  188
Cash from financing (excl. dividends), $m  
  721
  758
  791
  821
  848
  874
  898
  920
  941
  960
  958
  974
  991
  1,004
  1,017
  1,028
  1,038
  1,047
  1,054
  1,060
  1,063
  1,065
  1,066
  1,065
  1,062
  1,057
  1,049
  1,039
  1,028
  1,014
Total cash flow (excl. dividends), $m
  42
  51
  55
  59
  63
  67
  72
  76
  80
  84
  68
  73
  78
  82
  88
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
Retained Cash Flow (-), $m
  -617
  -631
  -645
  -657
  -667
  -675
  -681
  -686
  -688
  -689
  -668
  -665
  -661
  -654
  -645
  -634
  -621
  -606
  -588
  -568
  -544
  -518
  -489
  -457
  -422
  -383
  -340
  -293
  -243
  -188
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
  -575
  -581
  -590
  -598
  -603
  -607
  -609
  -610
  -608
  -605
  -600
  -592
  -583
  -571
  -558
  -542
  -523
  -502
  -478
  -452
  -422
  -389
  -353
  -314
  -271
  -224
  -173
  -118
  -58
  7
Discount rate, %
  11.50
  12.08
  12.68
  13.31
  13.98
  14.68
  15.41
  16.18
  16.99
  17.84
  18.73
  19.67
  20.65
  21.68
  22.77
  23.91
  25.10
  26.36
  27.68
  29.06
  30.51
  32.04
  33.64
  35.32
  37.09
  38.94
  40.89
  42.93
  45.08
  47.34
PV of cash for distribution, $m
  -515
  -462
  -412
  -362
  -314
  -267
  -223
  -184
  -148
  -117
  -91
  -69
  -51
  -37
  -26
  -18
  -12
  -7
  -5
  -3
  -2
  -1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  66.3
  44.0
  29.2
  19.4
  12.9
  8.7
  5.9
  4.0
  2.8
  1.9
  1.4
  1.0
  0.7
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0

Brookdale Senior Living Inc. operates senior living communities in the United States. The Company operates independent living, assisted living and dementia-care communities, and continuing care retirement centers (CCRCs). It operates through five segments: Retirement Centers; Assisted Living; CCRCs-Rental; Brookdale Ancillary Services and Management Services. The Retirement Centers segment includes owned or leased communities for middle to upper income seniors. The Assisted Living segment includes owned or leased communities that offer housing and round the clock assistance with activities of daily life to mid-acuity frail and elderly residents. The CCRCs-Rental segment includes leased communities that offer living arrangements to accommodate physical ability and health. The Brookdale Ancillary Services segment includes outpatient therapy, home health and hospice services, as well as education and wellness programs. The Management Services segment includes communities operated by it.

FINANCIAL RATIOS  of  Brookdale Senior Living Inc. (BKD)

Valuation Ratios
P/E Ratio -3.1
Price to Sales 0.2
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 3.4
Price to Free Cash Flow 26.9
Growth Rates
Sales Growth Rate 0.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50.5%
Cap. Spend. - 3 Yr. Gr. Rate 1.8%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 280.6%
Total Debt to Equity 290.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.5%
Ret/ On Assets - 3 Yr. Avg. -0.9%
Return On Total Capital -4.7%
Ret/ On T. Cap. - 3 Yr. Avg. -4.1%
Return On Equity -17.8%
Return On Equity - 3 Yr. Avg. -14.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 28.9%
Gross Margin - 3 Yr. Avg. 29.2%
EBITDA Margin 9.7%
EBITDA Margin - 3 Yr. Avg. 10.7%
Operating Margin -0.8%
Oper. Margin - 3 Yr. Avg. -2.2%
Pre-Tax Margin -8%
Pre-Tax Margin - 3 Yr. Avg. -9.2%
Net Profit Margin -8.1%
Net Profit Margin - 3 Yr. Avg. -7.1%
Effective Tax Rate -1.5%
Eff/ Tax Rate - 3 Yr. Avg. 23.4%
Payout Ratio 0%

BKD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BKD stock intrinsic value calculation we used $4531 million for the last fiscal year's total revenue generated by Brookdale Senior Living Inc.. The default revenue input number comes from 0001 income statement of Brookdale Senior Living Inc.. 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 BKD stock valuation model: a) initial revenue growth rate of 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 11.5%, whose default value for BKD is calculated based on our internal credit rating of Brookdale Senior Living Inc., 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 Brookdale Senior Living Inc..
    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 BKD stock the variable cost ratio is equal to 76.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1394 million in the base year in the intrinsic value calculation for BKD 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 5.6% for Brookdale Senior Living Inc..

Corporate tax rate of 27% is the nominal tax rate for Brookdale Senior Living Inc.. 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 BKD 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 BKD are equal to 127.1%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Brookdale Senior Living Inc. 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 BKD is equal to -3.2%. 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 - $1018.903 million for Brookdale Senior Living Inc. - 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 186.490 million for Brookdale Senior Living Inc. 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 Brookdale Senior Living Inc. at the current share price and the inputted number of shares is $1.2 billion.

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