Intrinsic value of CONMED Corporation - CNMD

Previous Close

$79.42

  Intrinsic Value

$26.37

stock screener

  Rating & Target

str. sell

-67%

Previous close

$79.42

 
Intrinsic value

$26.37

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of CNMD 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 2.2

 

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, %
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
Revenue, $m
  937
  1,016
  1,099
  1,185
  1,275
  1,368
  1,465
  1,565
  1,670
  1,779
  1,892
  2,010
  2,132
  2,260
  2,393
  2,532
  2,677
  2,828
  2,986
  3,151
  3,324
  3,504
  3,693
  3,890
  4,097
  4,313
  4,539
  4,777
  5,025
  5,286
Variable operating expenses, $m
  572
  620
  670
  721
  775
  831
  889
  949
  1,011
  1,076
  1,133
  1,203
  1,277
  1,353
  1,433
  1,516
  1,603
  1,694
  1,788
  1,887
  1,990
  2,098
  2,211
  2,330
  2,453
  2,583
  2,718
  2,861
  3,009
  3,165
Fixed operating expenses, $m
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  356
  363
  371
  380
  388
  397
  405
  414
  423
  433
  442
  452
  462
  472
  482
  493
  504
  515
Total operating expenses, $m
  846
  900
  956
  1,013
  1,074
  1,136
  1,201
  1,268
  1,337
  1,409
  1,473
  1,551
  1,633
  1,716
  1,804
  1,896
  1,991
  2,091
  2,193
  2,301
  2,413
  2,531
  2,653
  2,782
  2,915
  3,055
  3,200
  3,354
  3,513
  3,680
Operating income, $m
  90
  116
  144
  172
  201
  232
  264
  298
  333
  369
  418
  458
  500
  543
  588
  636
  686
  738
  793
  850
  910
  973
  1,039
  1,109
  1,182
  1,258
  1,339
  1,423
  1,512
  1,605
EBITDA, $m
  121
  148
  177
  207
  238
  271
  305
  341
  378
  416
  457
  499
  543
  589
  637
  687
  740
  795
  853
  914
  977
  1,044
  1,114
  1,187
  1,264
  1,345
  1,430
  1,520
  1,614
  1,712
Interest expense (income), $m
  14
  25
  28
  32
  35
  39
  43
  47
  51
  56
  61
  65
  70
  76
  81
  87
  93
  99
  105
  112
  119
  126
  134
  142
  150
  159
  168
  178
  188
  198
  209
Earnings before tax, $m
  66
  88
  112
  137
  162
  189
  217
  246
  277
  308
  353
  388
  424
  462
  502
  543
  587
  633
  681
  731
  784
  839
  897
  958
  1,022
  1,090
  1,161
  1,235
  1,314
  1,396
Tax expense, $m
  18
  24
  30
  37
  44
  51
  59
  66
  75
  83
  95
  105
  114
  125
  135
  147
  158
  171
  184
  197
  212
  227
  242
  259
  276
  294
  313
  334
  355
  377
Net income, $m
  48
  65
  82
  100
  118
  138
  158
  180
  202
  225
  258
  283
  310
  337
  366
  397
  428
  462
  497
  534
  572
  612
  655
  700
  746
  796
  847
  902
  959
  1,019

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
  1,491
  1,618
  1,750
  1,888
  2,030
  2,178
  2,333
  2,493
  2,659
  2,832
  3,012
  3,200
  3,395
  3,599
  3,811
  4,032
  4,262
  4,503
  4,755
  5,018
  5,292
  5,579
  5,880
  6,194
  6,523
  6,868
  7,228
  7,606
  8,002
  8,417
Adjusted assets (=assets-cash), $m
  1,491
  1,618
  1,750
  1,888
  2,030
  2,178
  2,333
  2,493
  2,659
  2,832
  3,012
  3,200
  3,395
  3,599
  3,811
  4,032
  4,262
  4,503
  4,755
  5,018
  5,292
  5,579
  5,880
  6,194
  6,523
  6,868
  7,228
  7,606
  8,002
  8,417
Revenue / Adjusted assets
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
  0.628
Average production assets, $m
  568
  617
  667
  720
  774
  830
  889
  950
  1,014
  1,080
  1,148
  1,220
  1,294
  1,372
  1,453
  1,537
  1,625
  1,717
  1,813
  1,913
  2,017
  2,127
  2,241
  2,361
  2,487
  2,618
  2,755
  2,899
  3,050
  3,208
Working capital, $m
  233
  253
  274
  295
  317
  341
  365
  390
  416
  443
  471
  500
  531
  563
  596
  630
  667
  704
  744
  785
  828
  872
  919
  969
  1,020
  1,074
  1,130
  1,189
  1,251
  1,316
Total debt, $m
  520
  585
  653
  724
  798
  874
  954
  1,036
  1,122
  1,211
  1,304
  1,401
  1,502
  1,607
  1,716
  1,830
  1,949
  2,074
  2,204
  2,339
  2,481
  2,629
  2,784
  2,946
  3,116
  3,294
  3,480
  3,675
  3,879
  4,093
Total liabilities, $m
  770
  835
  903
  974
  1,048
  1,124
  1,204
  1,286
  1,372
  1,461
  1,554
  1,651
  1,752
  1,857
  1,966
  2,080
  2,199
  2,324
  2,453
  2,589
  2,731
  2,879
  3,034
  3,196
  3,366
  3,544
  3,730
  3,925
  4,129
  4,343
Total equity, $m
  722
  783
  847
  914
  983
  1,054
  1,129
  1,206
  1,287
  1,371
  1,458
  1,549
  1,643
  1,742
  1,844
  1,951
  2,063
  2,180
  2,301
  2,429
  2,561
  2,700
  2,846
  2,998
  3,157
  3,324
  3,498
  3,681
  3,873
  4,074
Total liabilities and equity, $m
  1,492
  1,618
  1,750
  1,888
  2,031
  2,178
  2,333
  2,492
  2,659
  2,832
  3,012
  3,200
  3,395
  3,599
  3,810
  4,031
  4,262
  4,504
  4,754
  5,018
  5,292
  5,579
  5,880
  6,194
  6,523
  6,868
  7,228
  7,606
  8,002
  8,417
Debt-to-equity ratio
  0.720
  0.750
  0.770
  0.790
  0.810
  0.830
  0.840
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.940
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
  0.990
  0.990
  1.000
  1.000
  1.000
Adjusted equity ratio
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48
  65
  82
  100
  118
  138
  158
  180
  202
  225
  258
  283
  310
  337
  366
  397
  428
  462
  497
  534
  572
  612
  655
  700
  746
  796
  847
  902
  959
  1,019
Depreciation, amort., depletion, $m
  30
  32
  34
  35
  37
  39
  41
  43
  45
  47
  38
  41
  43
  46
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  107
Funds from operations, $m
  78
  96
  115
  135
  156
  177
  199
  223
  247
  272
  296
  324
  353
  383
  415
  448
  483
  519
  557
  597
  639
  683
  730
  778
  829
  883
  939
  998
  1,061
  1,126
Change in working capital, $m
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
Cash from operations, $m
  59
  77
  95
  114
  133
  154
  175
  198
  221
  245
  268
  294
  322
  351
  382
  413
  447
  481
  518
  556
  596
  638
  683
  729
  778
  829
  883
  939
  999
  1,061
Maintenance CAPEX, $m
  -17
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
New CAPEX, $m
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -109
  -115
  -120
  -125
  -131
  -137
  -144
  -151
  -158
Cash from investing activities, $m
  -63
  -67
  -71
  -74
  -78
  -83
  -87
  -91
  -95
  -100
  -105
  -109
  -115
  -121
  -127
  -132
  -139
  -146
  -153
  -160
  -169
  -176
  -186
  -195
  -204
  -214
  -224
  -236
  -248
  -260
Free cash flow, $m
  -4
  9
  24
  39
  55
  71
  89
  107
  126
  146
  163
  185
  207
  230
  255
  281
  307
  335
  365
  396
  428
  462
  497
  535
  574
  615
  658
  703
  751
  801
Issuance/(repayment) of debt, $m
  63
  65
  68
  71
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
Issuance/(repurchase) of shares, $m
  11
  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  
  74
  65
  68
  71
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
Total cash flow (excl. dividends), $m
  70
  75
  92
  110
  128
  148
  168
  190
  212
  235
  256
  281
  308
  335
  364
  395
  426
  460
  495
  531
  570
  610
  652
  697
  743
  793
  844
  898
  955
  1,015
Retained Cash Flow (-), $m
  -60
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -103
  -107
  -112
  -117
  -122
  -127
  -133
  -139
  -145
  -152
  -159
  -167
  -175
  -183
  -192
  -201
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
  10
  13
  28
  43
  59
  76
  94
  112
  131
  151
  169
  191
  213
  237
  262
  288
  315
  343
  373
  404
  437
  471
  507
  545
  584
  626
  670
  716
  764
  815
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  10
  11
  22
  32
  39
  45
  50
  52
  53
  53
  51
  48
  45
  41
  36
  32
  27
  23
  19
  15
  12
  9
  7
  5
  3
  2
  2
  1
  1
  0
Current shareholders' claim on cash, %
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5

CONMED Corporation is a medical technology company. The Company is engaged in the development, manufacturing and sale on a global basis of surgical devices and related equipment. The Company provides surgical devices and equipment for minimally invasive procedures. The Company's products are used by surgeons and physicians in a range of specialties, including orthopedics, general surgery, gynecology, neurosurgery and gastroenterology. The Company's product lines consist of orthopedic surgery, general surgery and surgical visualization. As of December 31, 2016, the Company's products are distributed domestically directly to over 6,000 hospitals, surgery centers and other healthcare institutions, as well as through medical specialty distributors. The Company's orthopedic surgery product lines include sports medicine, powered surgical instruments, and sports biologics and tissue. These products are marketed under a range of brands, including Hall, CONMED Linvatec, Concept and Shutt.

FINANCIAL RATIOS  of  CONMED Corporation (CNMD)

Valuation Ratios
P/E Ratio 147.4
Price to Sales 2.9
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 58.2
Price to Free Cash Flow 96.1
Growth Rates
Sales Growth Rate 6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 84%
Total Debt to Equity 85.7%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 2.6%
Return On Equity - 3 Yr. Avg. 4.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 54.5%
Gross Margin - 3 Yr. Avg. 54.7%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 12.7%
Operating Margin 5%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. 5%
Net Profit Margin 2%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 21.1%
Eff/ Tax Rate - 3 Yr. Avg. 28%
Payout Ratio 146.7%

CNMD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNMD stock intrinsic value calculation we used $860 million for the last fiscal year's total revenue generated by CONMED Corporation. The default revenue input number comes from 0001 income statement of CONMED Corporation. 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 CNMD stock valuation model: a) initial revenue growth rate of 8.9% 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 7.1%, whose default value for CNMD is calculated based on our internal credit rating of CONMED Corporation, 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 CONMED Corporation.
    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 CNMD stock the variable cost ratio is equal to 61.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $268 million in the base year in the intrinsic value calculation for CNMD 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 CONMED Corporation.

Corporate tax rate of 27% is the nominal tax rate for CONMED Corporation. 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 CNMD 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 CNMD are equal to 60.7%.

Life of production assets of 50.2 years is the average useful life of capital assets used in CONMED Corporation 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 CNMD is equal to 24.9%. 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 - $662.27 million for CONMED Corporation - 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 28.137 million for CONMED Corporation 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 CONMED Corporation at the current share price and the inputted number of shares is $2.2 billion.

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