Intrinsic value of Cantel Medical Corp. - CMD

Previous Close

$90.87

  Intrinsic Value

$37.22

stock screener

  Rating & Target

str. sell

-59%

Previous close

$90.87

 
Intrinsic value

$37.22

 
Up/down potential

-59%

 
Rating

str. sell

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

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

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 3.8

 

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, %
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.15
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
Revenue, $m
  919
  968
  1,020
  1,074
  1,130
  1,190
  1,252
  1,317
  1,385
  1,456
  1,531
  1,609
  1,692
  1,778
  1,868
  1,963
  2,063
  2,168
  2,277
  2,392
  2,513
  2,640
  2,773
  2,913
  3,059
  3,213
  3,374
  3,544
  3,722
  3,909
Variable operating expenses, $m
  785
  824
  865
  909
  954
  1,001
  1,051
  1,103
  1,157
  1,214
  1,223
  1,286
  1,352
  1,421
  1,493
  1,569
  1,649
  1,732
  1,820
  1,912
  2,008
  2,109
  2,216
  2,327
  2,444
  2,567
  2,696
  2,832
  2,974
  3,123
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
  785
  824
  865
  909
  954
  1,001
  1,051
  1,103
  1,157
  1,214
  1,223
  1,286
  1,352
  1,421
  1,493
  1,569
  1,649
  1,732
  1,820
  1,912
  2,008
  2,109
  2,216
  2,327
  2,444
  2,567
  2,696
  2,832
  2,974
  3,123
Operating income, $m
  134
  144
  154
  165
  177
  189
  201
  214
  228
  242
  308
  323
  340
  357
  375
  394
  414
  435
  458
  481
  505
  530
  557
  585
  615
  646
  678
  712
  748
  785
EBITDA, $m
  206
  217
  229
  241
  254
  267
  281
  295
  311
  327
  343
  361
  379
  399
  419
  440
  463
  486
  511
  537
  564
  592
  622
  653
  686
  721
  757
  795
  835
  877
Interest expense (income), $m
  3
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  47
  49
  52
  55
  59
  62
  66
  69
  73
Earnings before tax, $m
  124
  132
  142
  151
  162
  172
  183
  195
  207
  220
  284
  298
  313
  329
  345
  362
  380
  399
  418
  439
  461
  484
  508
  533
  559
  587
  616
  646
  678
  712
Tax expense, $m
  33
  36
  38
  41
  44
  46
  50
  53
  56
  59
  77
  81
  85
  89
  93
  98
  103
  108
  113
  119
  124
  131
  137
  144
  151
  158
  166
  175
  183
  192
Net income, $m
  90
  97
  103
  110
  118
  126
  134
  142
  151
  161
  207
  218
  229
  240
  252
  264
  277
  291
  305
  321
  336
  353
  371
  389
  408
  428
  450
  472
  495
  520

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
  1,016
  1,070
  1,127
  1,187
  1,249
  1,314
  1,383
  1,455
  1,530
  1,609
  1,692
  1,778
  1,869
  1,965
  2,065
  2,169
  2,280
  2,395
  2,516
  2,643
  2,777
  2,917
  3,064
  3,218
  3,380
  3,550
  3,729
  3,916
  4,113
  4,319
Adjusted assets (=assets-cash), $m
  1,016
  1,070
  1,127
  1,187
  1,249
  1,314
  1,383
  1,455
  1,530
  1,609
  1,692
  1,778
  1,869
  1,965
  2,065
  2,169
  2,280
  2,395
  2,516
  2,643
  2,777
  2,917
  3,064
  3,218
  3,380
  3,550
  3,729
  3,916
  4,113
  4,319
Revenue / Adjusted assets
  0.905
  0.905
  0.905
  0.905
  0.905
  0.906
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
  0.905
Average production assets, $m
  353
  372
  392
  412
  434
  457
  481
  506
  532
  559
  588
  618
  650
  683
  717
  754
  792
  832
  874
  919
  965
  1,014
  1,065
  1,118
  1,175
  1,234
  1,296
  1,361
  1,429
  1,501
Working capital, $m
  126
  133
  140
  147
  155
  163
  171
  180
  190
  199
  210
  220
  232
  244
  256
  269
  283
  297
  312
  328
  344
  362
  380
  399
  419
  440
  462
  486
  510
  535
Total debt, $m
  216
  236
  257
  279
  302
  326
  351
  378
  406
  435
  465
  497
  530
  565
  602
  641
  681
  724
  768
  815
  864
  916
  970
  1,027
  1,086
  1,149
  1,215
  1,284
  1,356
  1,432
Total liabilities, $m
  374
  394
  415
  437
  460
  484
  509
  535
  563
  592
  622
  654
  688
  723
  760
  798
  839
  881
  926
  973
  1,022
  1,073
  1,128
  1,184
  1,244
  1,306
  1,372
  1,441
  1,513
  1,589
Total equity, $m
  642
  676
  712
  750
  789
  831
  874
  919
  967
  1,017
  1,069
  1,124
  1,181
  1,242
  1,305
  1,371
  1,441
  1,514
  1,590
  1,671
  1,755
  1,844
  1,936
  2,034
  2,136
  2,244
  2,356
  2,475
  2,599
  2,730
Total liabilities and equity, $m
  1,016
  1,070
  1,127
  1,187
  1,249
  1,315
  1,383
  1,454
  1,530
  1,609
  1,691
  1,778
  1,869
  1,965
  2,065
  2,169
  2,280
  2,395
  2,516
  2,644
  2,777
  2,917
  3,064
  3,218
  3,380
  3,550
  3,728
  3,916
  4,112
  4,319
Debt-to-equity ratio
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.490
  0.490
  0.500
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
  0.520
  0.520
Adjusted equity ratio
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  90
  97
  103
  110
  118
  126
  134
  142
  151
  161
  207
  218
  229
  240
  252
  264
  277
  291
  305
  321
  336
  353
  371
  389
  408
  428
  450
  472
  495
  520
Depreciation, amort., depletion, $m
  72
  73
  74
  76
  77
  78
  80
  81
  83
  85
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
Funds from operations, $m
  162
  170
  178
  186
  195
  204
  214
  224
  234
  245
  243
  255
  268
  281
  295
  310
  326
  342
  359
  377
  395
  415
  436
  457
  480
  504
  529
  555
  582
  611
Change in working capital, $m
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
Cash from operations, $m
  156
  163
  171
  179
  187
  196
  205
  215
  225
  236
  233
  245
  257
  270
  283
  297
  312
  327
  344
  361
  379
  398
  417
  438
  460
  483
  507
  532
  558
  586
Maintenance CAPEX, $m
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
New CAPEX, $m
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
Cash from investing activities, $m
  -38
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -88
  -93
  -97
  -102
  -108
  -113
  -119
  -124
  -131
  -137
  -144
  -151
  -159
Free cash flow, $m
  118
  123
  128
  134
  140
  147
  153
  161
  168
  176
  170
  179
  188
  197
  207
  217
  228
  239
  251
  263
  276
  290
  304
  319
  335
  352
  369
  388
  407
  427
Issuance/(repayment) of debt, $m
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  72
  76
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  
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  72
  76
Total cash flow (excl. dividends), $m
  136
  143
  149
  156
  163
  171
  179
  187
  196
  205
  201
  211
  221
  232
  244
  256
  268
  282
  295
  310
  325
  342
  358
  376
  395
  414
  435
  456
  479
  503
Retained Cash Flow (-), $m
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -89
  -93
  -98
  -102
  -107
  -113
  -118
  -124
  -130
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
  103
  108
  113
  118
  124
  129
  135
  142
  148
  155
  148
  156
  164
  172
  180
  189
  199
  209
  219
  230
  241
  253
  266
  279
  293
  307
  322
  338
  355
  372
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
  99
  99
  99
  97
  96
  94
  91
  88
  85
  81
  70
  66
  62
  58
  53
  48
  43
  38
  34
  29
  25
  21
  17
  14
  11
  9
  7
  5
  4
  3
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

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 Corp. (CMD)

Valuation Ratios
P/E Ratio 53.4
Price to Sales 4.9
Price to Book 7.2
Price to Tangible Book
Price to Cash Flow 35.1
Price to Free Cash Flow 46.8
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 $872 million for the last fiscal year's total revenue generated by Cantel Medical Corp.. The default revenue input number comes from 0001 income statement of Cantel Medical Corp.. 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 5.4% 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 Corp., 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 Corp..
    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 85.7%.

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 5.4% for Cantel Medical Corp..

Corporate tax rate of 27% is the nominal tax rate for Cantel Medical Corp.. 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 38.4%.

Life of production assets of 16.4 years is the average useful life of capital assets used in Cantel Medical Corp. 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 13.7%. 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 - $608.867 million for Cantel Medical Corp. - 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 41.783 million for Cantel Medical Corp. 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 Corp. at the current share price and the inputted number of shares is $3.8 billion.

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