Intrinsic value of Cantel Medical - CMD

Previous Close

$111.51

  Intrinsic Value

$39.88

stock screener

  Rating & Target

str. sell

-64%

Previous close

$111.51

 
Intrinsic value

$39.88

 
Up/down potential

-64%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as CMD.

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

We calculate the intrinsic value of CMD 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  15.79
  13.30
  12.47
  11.72
  11.05
  10.45
  9.90
  9.41
  8.97
  8.57
  8.22
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
Revenue, $m
  770
  872
  981
  1,096
  1,217
  1,345
  1,478
  1,617
  1,762
  1,913
  2,070
  2,233
  2,403
  2,580
  2,763
  2,954
  3,152
  3,358
  3,572
  3,795
  4,028
  4,270
  4,522
  4,785
  5,059
  5,346
  5,645
  5,958
  6,284
  6,626
  6,983
Variable operating expenses, $m
 
  742
  830
  924
  1,023
  1,126
  1,235
  1,348
  1,466
  1,589
  1,717
  1,819
  1,958
  2,101
  2,251
  2,406
  2,567
  2,735
  2,910
  3,092
  3,281
  3,478
  3,684
  3,898
  4,122
  4,355
  4,599
  4,853
  5,119
  5,397
  5,688
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
  660
  742
  830
  924
  1,023
  1,126
  1,235
  1,348
  1,466
  1,589
  1,717
  1,819
  1,958
  2,101
  2,251
  2,406
  2,567
  2,735
  2,910
  3,092
  3,281
  3,478
  3,684
  3,898
  4,122
  4,355
  4,599
  4,853
  5,119
  5,397
  5,688
Operating income, $m
  110
  131
  151
  172
  195
  218
  243
  269
  296
  324
  353
  414
  446
  478
  512
  548
  584
  623
  662
  704
  747
  792
  838
  887
  938
  991
  1,047
  1,104
  1,165
  1,228
  1,295
EBITDA, $m
  143
  177
  199
  222
  247
  272
  299
  328
  357
  388
  419
  453
  487
  523
  560
  599
  639
  680
  724
  769
  816
  865
  916
  970
  1,025
  1,083
  1,144
  1,207
  1,274
  1,343
  1,415
Interest expense (income), $m
  3
  4
  6
  7
  8
  10
  11
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  56
  59
  63
  66
  70
  74
Earnings before tax, $m
  106
  126
  145
  165
  186
  208
  232
  256
  281
  307
  335
  394
  424
  454
  486
  519
  554
  590
  627
  666
  706
  748
  792
  838
  886
  936
  988
  1,042
  1,099
  1,158
  1,220
Tax expense, $m
  35
  34
  39
  45
  50
  56
  63
  69
  76
  83
  90
  106
  114
  123
  131
  140
  150
  159
  169
  180
  191
  202
  214
  226
  239
  253
  267
  281
  297
  313
  330
Net income, $m
  71
  92
  106
  121
  136
  152
  169
  187
  205
  224
  244
  288
  309
  332
  355
  379
  404
  430
  458
  486
  516
  546
  578
  612
  647
  683
  721
  761
  802
  846
  891

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  37
  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
  786
  849
  954
  1,066
  1,184
  1,308
  1,437
  1,573
  1,714
  1,861
  2,014
  2,172
  2,338
  2,509
  2,688
  2,873
  3,066
  3,266
  3,475
  3,692
  3,918
  4,153
  4,399
  4,655
  4,922
  5,200
  5,491
  5,795
  6,113
  6,445
  6,793
Adjusted assets (=assets-cash), $m
  749
  849
  954
  1,066
  1,184
  1,308
  1,437
  1,573
  1,714
  1,861
  2,014
  2,172
  2,338
  2,509
  2,688
  2,873
  3,066
  3,266
  3,475
  3,692
  3,918
  4,153
  4,399
  4,655
  4,922
  5,200
  5,491
  5,795
  6,113
  6,445
  6,793
Revenue / Adjusted assets
  1.028
  1.027
  1.028
  1.028
  1.028
  1.028
  1.029
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
Average production assets, $m
  200
  226
  254
  284
  315
  348
  383
  419
  456
  495
  536
  578
  622
  668
  716
  765
  816
  870
  925
  983
  1,043
  1,106
  1,171
  1,239
  1,310
  1,385
  1,462
  1,543
  1,628
  1,716
  1,809
Working capital, $m
  150
  128
  144
  161
  179
  198
  217
  238
  259
  281
  304
  328
  353
  379
  406
  434
  463
  494
  525
  558
  592
  628
  665
  703
  744
  786
  830
  876
  924
  974
  1,026
Total debt, $m
  126
  161
  198
  237
  278
  322
  367
  414
  464
  515
  569
  624
  682
  742
  805
  870
  937
  1,007
  1,080
  1,156
  1,235
  1,318
  1,404
  1,493
  1,587
  1,684
  1,786
  1,892
  2,004
  2,120
  2,241
Total liabilities, $m
  262
  297
  334
  373
  414
  458
  503
  550
  600
  651
  705
  760
  818
  878
  941
  1,006
  1,073
  1,143
  1,216
  1,292
  1,371
  1,454
  1,540
  1,629
  1,723
  1,820
  1,922
  2,028
  2,140
  2,256
  2,377
Total equity, $m
  524
  552
  620
  693
  770
  850
  934
  1,022
  1,114
  1,209
  1,309
  1,412
  1,519
  1,631
  1,747
  1,868
  1,993
  2,123
  2,259
  2,400
  2,547
  2,700
  2,859
  3,026
  3,199
  3,380
  3,569
  3,767
  3,974
  4,189
  4,415
Total liabilities and equity, $m
  786
  849
  954
  1,066
  1,184
  1,308
  1,437
  1,572
  1,714
  1,860
  2,014
  2,172
  2,337
  2,509
  2,688
  2,874
  3,066
  3,266
  3,475
  3,692
  3,918
  4,154
  4,399
  4,655
  4,922
  5,200
  5,491
  5,795
  6,114
  6,445
  6,792
Debt-to-equity ratio
  0.240
  0.290
  0.320
  0.340
  0.360
  0.380
  0.390
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.470
  0.470
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
Adjusted equity ratio
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  71
  92
  106
  121
  136
  152
  169
  187
  205
  224
  244
  288
  309
  332
  355
  379
  404
  430
  458
  486
  516
  546
  578
  612
  647
  683
  721
  761
  802
  846
  891
Depreciation, amort., depletion, $m
  33
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  39
  41
  45
  48
  51
  54
  58
  62
  66
  70
  74
  78
  83
  87
  92
  97
  103
  109
  114
  121
Funds from operations, $m
  101
  138
  154
  171
  188
  206
  226
  246
  267
  288
  311
  326
  351
  376
  403
  430
  459
  488
  519
  552
  585
  620
  656
  694
  734
  775
  818
  864
  911
  960
  1,011
Change in working capital, $m
  -7
  15
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
Cash from operations, $m
  108
  123
  138
  154
  170
  188
  206
  225
  245
  266
  288
  302
  326
  350
  376
  402
  430
  458
  488
  519
  551
  584
  619
  656
  694
  733
  774
  818
  863
  910
  959
Maintenance CAPEX, $m
  0
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -33
  -36
  -39
  -41
  -45
  -48
  -51
  -54
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -103
  -109
  -114
New CAPEX, $m
  -27
  -26
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -88
  -93
Cash from investing activities, $m
  -97
  -39
  -43
  -47
  -50
  -54
  -57
  -62
  -66
  -69
  -74
  -78
  -83
  -87
  -93
  -97
  -102
  -107
  -114
  -120
  -126
  -133
  -139
  -146
  -154
  -161
  -169
  -178
  -188
  -197
  -207
Free cash flow, $m
  11
  83
  95
  107
  120
  134
  148
  164
  180
  197
  214
  224
  243
  263
  284
  305
  327
  350
  374
  399
  425
  452
  480
  509
  540
  572
  605
  639
  675
  713
  752
Issuance/(repayment) of debt, $m
  10
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  93
  98
  102
  106
  111
  116
  122
Issuance/(repurchase) of shares, $m
  -7
  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  
  3
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  93
  98
  102
  106
  111
  116
  122
Total cash flow (excl. dividends), $m
  14
  119
  132
  146
  161
  177
  194
  211
  229
  248
  268
  280
  301
  323
  346
  370
  395
  421
  447
  475
  504
  535
  566
  599
  633
  669
  707
  746
  786
  829
  874
Retained Cash Flow (-), $m
  -70
  -65
  -69
  -73
  -77
  -80
  -84
  -88
  -92
  -95
  -99
  -103
  -107
  -112
  -116
  -121
  -125
  -130
  -136
  -141
  -147
  -153
  -160
  -166
  -174
  -181
  -189
  -198
  -207
  -216
  -226
Prev. year cash balance distribution, $m
 
  37
  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
 
  91
  63
  73
  85
  97
  110
  123
  138
  153
  168
  177
  194
  212
  230
  249
  269
  290
  312
  334
  357
  382
  407
  433
  460
  488
  517
  548
  580
  613
  648
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
 
  87
  58
  64
  70
  75
  80
  83
  86
  88
  88
  84
  83
  80
  77
  73
  68
  63
  57
  51
  45
  39
  34
  28
  23
  19
  15
  12
  9
  7
  5
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
  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

Cantel Medical Corp. is a provider of infection prevention products and services in the healthcare market. The Company's operating segments include Endoscopy; Water Purification and Filtration; Healthcare Disposables, and Dialysis. Its Endoscopy segment includes medical device reprocessing systems, disinfectants, detergents and other supplies. The Company's Water Purification and Filtration segment includes water purification equipment and services, filtration and separation products, and disinfectant, sterilization and decontamination products and services. Its Healthcare Disposables segment includes single-use, infection prevention and control healthcare products. The Company's Dialysis segment includes medical device reprocessing systems, sterilants/disinfectants, dialysate concentrates and other supplies for renal dialysis. The Company offers a range of filters utilizing hollow fiber membrane technology.

FINANCIAL RATIOS  of  Cantel Medical (CMD)

Valuation Ratios
P/E Ratio 65.5
Price to Sales 6
Price to Book 8.9
Price to Tangible Book
Price to Cash Flow 43.1
Price to Free Cash Flow 57.4
Growth Rates
Sales Growth Rate 15.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 42.1%
Cap. Spend. - 3 Yr. Gr. Rate 14%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 24%
Total Debt to Equity 24%
Interest Coverage 36
Management Effectiveness
Return On Assets 9.9%
Ret/ On Assets - 3 Yr. Avg. 9.4%
Return On Total Capital 11.6%
Ret/ On T. Cap. - 3 Yr. Avg. 11.1%
Return On Equity 14.5%
Return On Equity - 3 Yr. Avg. 13.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 47.8%
Gross Margin - 3 Yr. Avg. 46.5%
EBITDA Margin 18.4%
EBITDA Margin - 3 Yr. Avg. 18.3%
Operating Margin 14.3%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 13.8%
Pre-Tax Margin - 3 Yr. Avg. 13.8%
Net Profit Margin 9.2%
Net Profit Margin - 3 Yr. Avg. 8.9%
Effective Tax Rate 33%
Eff/ Tax Rate - 3 Yr. Avg. 35.3%
Payout Ratio 8.5%

CMD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMD stock intrinsic value calculation we used $770 million for the last fiscal year's total revenue generated by Cantel Medical. The default revenue input number comes from 2017 income statement of Cantel Medical. 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 CMD stock valuation model: a) initial revenue growth rate of 13.3% 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 CMD is calculated based on our internal credit rating of Cantel Medical, 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 Cantel Medical.
    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 CMD stock the variable cost ratio is equal to 85.5%.

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 CMD 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 3.5% for Cantel Medical.

Corporate tax rate of 27% is the nominal tax rate for Cantel Medical. 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 CMD 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 CMD are equal to 25.9%.

Life of production assets of 15 years is the average useful life of capital assets used in Cantel Medical 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 CMD is equal to 14.7%. 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 - $524 million for Cantel Medical - 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 41.703 million for Cantel Medical 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 Cantel Medical at the current share price and the inputted number of shares is $4.7 billion.

COMPANY NEWS

▶ Cantel Medical Corp. Keeps Pace on Its Goal   [Dec-08-17 04:15PM  Motley Fool]
▶ Cantel posts 1Q profit   [Dec-07-17 08:23AM  Associated Press]
▶ Cantel Medical Just Within Buy Range As Earnings Approach   [Dec-05-17 03:00AM  Investor's Business Daily]
▶ No. 1-Ranked Medical Stock In Buy Zone With Earnings Due   [Nov-20-17 04:08PM  Investor's Business Daily]
▶ These 4 Stocks Hit Buy Points; This New IPO Soars Late: S&P 500 Futures   [Nov-15-17 12:25AM  Investor's Business Daily]
▶ Cantel posts 4Q profit   [Sep-28-17 09:41PM  Associated Press]
▶ Stocks Showing Improved Relative Strength: Cantel Medical   [03:00AM  Investor's Business Daily]
▶ Stocks With Rising Relative Strength: Cantel Medical   [Sep-20-17 03:00AM  Investor's Business Daily]
▶ This Medical Device Maker Is Now Outperforming 96% Of All Stocks   [Sep-18-17 10:49AM  Investor's Business Daily]
▶ Cantel Medical to Acquire BHT Group in Germany   [Jul-31-17 08:00AM  PR Newswire]
▶ ETFs with exposure to Cantel Medical Corp. : June 9, 2017   [Jun-09-17 01:22PM  Capital Cube]
▶ Cantel Medical Corp. Gives the Bottom Line a Boost   [Jun-08-17 04:21PM  Motley Fool]
▶ Cantel posts 3Q profit   [08:28AM  Associated Press]
▶ Cantel posts 2Q profit   [08:16AM  Associated Press]
▶ Cantel Medical Corp. Takes Its First Step Towards Doubling   [Dec-13-16 04:18PM  at Motley Fool]
Financial statements of CMD
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