Intrinsic value of Computer Programs&Systems - CPSI

Previous Close

$25.38

  Intrinsic Value

$14.52

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  Rating & Target

sell

-43%

Previous close

$25.38

 
Intrinsic value

$14.52

 
Up/down potential

-43%

 
Rating

sell

We calculate the intrinsic value of CPSI 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 0.4

 

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
  282
  289
  296
  305
  314
  324
  335
  347
  360
  374
  389
  404
  421
  439
  458
  478
  499
  522
  545
  570
  597
  625
  654
  685
  718
  752
  788
  826
  866
  908
Variable operating expenses, $m
  267
  272
  279
  286
  294
  303
  312
  322
  333
  345
  334
  348
  362
  378
  394
  411
  429
  449
  469
  491
  514
  538
  563
  589
  618
  647
  678
  711
  745
  782
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
  267
  272
  279
  286
  294
  303
  312
  322
  333
  345
  334
  348
  362
  378
  394
  411
  429
  449
  469
  491
  514
  538
  563
  589
  618
  647
  678
  711
  745
  782
Operating income, $m
  16
  17
  18
  19
  20
  22
  23
  25
  27
  28
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  115
  121
  127
EBITDA, $m
  46
  47
  49
  50
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  82
  86
  89
  94
  98
  102
  107
  112
  118
  123
  129
  135
  142
  149
Interest expense (income), $m
  6
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
Earnings before tax, $m
  8
  9
  10
  10
  11
  13
  14
  15
  16
  18
  43
  45
  47
  48
  50
  53
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  98
Tax expense, $m
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
Net income, $m
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  68
  72

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
  325
  332
  341
  350
  361
  373
  385
  399
  414
  430
  447
  465
  484
  505
  526
  549
  574
  600
  627
  656
  686
  718
  752
  788
  825
  864
  906
  950
  996
  1,044
Adjusted assets (=assets-cash), $m
  325
  332
  341
  350
  361
  373
  385
  399
  414
  430
  447
  465
  484
  505
  526
  549
  574
  600
  627
  656
  686
  718
  752
  788
  825
  864
  906
  950
  996
  1,044
Revenue / Adjusted assets
  0.868
  0.870
  0.868
  0.871
  0.870
  0.869
  0.870
  0.870
  0.870
  0.870
  0.870
  0.869
  0.870
  0.869
  0.871
  0.871
  0.869
  0.870
  0.869
  0.869
  0.870
  0.870
  0.870
  0.869
  0.870
  0.870
  0.870
  0.869
  0.869
  0.870
Average production assets, $m
  143
  147
  151
  155
  159
  165
  170
  176
  183
  190
  197
  205
  214
  223
  233
  243
  254
  265
  277
  290
  303
  317
  332
  348
  365
  382
  400
  420
  440
  461
Working capital, $m
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  74
Total debt, $m
  146
  150
  155
  161
  167
  173
  181
  189
  197
  206
  216
  226
  237
  249
  261
  275
  289
  303
  319
  335
  353
  371
  390
  411
  432
  455
  479
  504
  530
  558
Total liabilities, $m
  186
  190
  195
  200
  206
  213
  220
  228
  237
  246
  255
  266
  277
  289
  301
  314
  328
  343
  359
  375
  392
  411
  430
  450
  472
  494
  518
  543
  570
  597
Total equity, $m
  139
  142
  146
  150
  154
  159
  165
  171
  177
  184
  191
  199
  207
  216
  225
  235
  246
  257
  268
  281
  294
  307
  322
  337
  353
  370
  388
  406
  426
  447
Total liabilities and equity, $m
  325
  332
  341
  350
  360
  372
  385
  399
  414
  430
  446
  465
  484
  505
  526
  549
  574
  600
  627
  656
  686
  718
  752
  787
  825
  864
  906
  949
  996
  1,044
Debt-to-equity ratio
  1.050
  1.060
  1.060
  1.070
  1.080
  1.090
  1.100
  1.100
  1.110
  1.120
  1.130
  1.140
  1.140
  1.150
  1.160
  1.170
  1.170
  1.180
  1.190
  1.190
  1.200
  1.210
  1.210
  1.220
  1.220
  1.230
  1.230
  1.240
  1.240
  1.250
Adjusted equity ratio
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  68
  72
Depreciation, amort., depletion, $m
  31
  31
  31
  31
  31
  32
  32
  32
  32
  33
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  36
  37
  38
  39
  40
  41
  42
  43
  44
  46
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  85
  90
  94
Change in working capital, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  36
  37
  37
  38
  39
  40
  41
  42
  43
  45
  40
  41
  43
  45
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
Maintenance CAPEX, $m
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -21
  -21
  -23
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -34
  -36
  -38
  -40
  -42
Free cash flow, $m
  27
  26
  26
  27
  27
  27
  27
  28
  28
  29
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
Issuance/(repayment) of debt, $m
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
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  
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
Total cash flow (excl. dividends), $m
  30
  31
  31
  32
  33
  34
  35
  36
  37
  38
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
Retained Cash Flow (-), $m
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
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
  27
  28
  28
  28
  28
  29
  29
  30
  31
  31
  26
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
Discount rate, %
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
  25
  23
  21
  20
  18
  16
  14
  13
  11
  10
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
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

Computer Programs and Systems, Inc. (CPSI) is a provider of healthcare information technology (IT) solutions for rural and community hospitals, and post-acute care facilities. The Company's segments include acute care EHR, post-acute care EHR, and TruBridge, Rycan, and other outsourcing. Its Acute Care EHR segment consists of acute care software solutions and supports sales generated by its subsidiaries, Evident, LLC (Evident) and Healthland Inc. (Healthland). Its Post-acute Care EHR segment consists of post-acute care software solutions and support sales generated by American HealthTech, Inc. (AHT). Its TruBridge, Rycan, and Other Outsourcing segment primarily consists of business management, consulting and managed IT services sales generated by TruBridge, LLC (TruBridge) and the sale of Rycan Technologies, Inc.'s (Rycan's) revenue cycle management workflow and automation software.

FINANCIAL RATIOS  of  Computer Programs&Systems (CPSI)

Valuation Ratios
P/E Ratio 85.8
Price to Sales 1.3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 171.7
Price to Free Cash Flow 171.7
Growth Rates
Sales Growth Rate 46.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 93%
Total Debt to Equity 96.8%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 18.8%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 23%
Return On Equity 3.4%
Return On Equity - 3 Yr. Avg. 23.5%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 51.7%
Gross Margin - 3 Yr. Avg. 53%
EBITDA Margin 10.1%
EBITDA Margin - 3 Yr. Avg. 17.3%
Operating Margin 5.2%
Oper. Margin - 3 Yr. Avg. 14.5%
Pre-Tax Margin 3%
Pre-Tax Margin - 3 Yr. Avg. 13.7%
Net Profit Margin 1.5%
Net Profit Margin - 3 Yr. Avg. 9.2%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 37.3%
Payout Ratio 625%

CPSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPSI stock intrinsic value calculation we used $276.927 million for the last fiscal year's total revenue generated by Computer Programs&Systems. The default revenue input number comes from 0001 income statement of Computer Programs&Systems. 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 CPSI 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 8.1%, whose default value for CPSI is calculated based on our internal credit rating of Computer Programs&Systems, 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 Computer Programs&Systems.
    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 CPSI stock the variable cost ratio is equal to 94.6%.

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 CPSI 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 Computer Programs&Systems.

Corporate tax rate of 27% is the nominal tax rate for Computer Programs&Systems. 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 CPSI 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 CPSI are equal to 50.8%.

Life of production assets of 20.9 years is the average useful life of capital assets used in Computer Programs&Systems 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 CPSI is equal to 8.1%. 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 - $136.086 million for Computer Programs&Systems - 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 14.086 million for Computer Programs&Systems 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 Computer Programs&Systems at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Computer Programs and Systems: 3Q Earnings Snapshot   [Nov-01-18 04:55PM  Associated Press]
▶ CPSI Announces Third Quarter 2018 Results   [04:05PM  Business Wire]
▶ American HealthTech Announces Partnership with QliqSOFT   [Oct-09-18 11:00AM  Business Wire]
▶ New Strong Sell Stocks for August 10th   [Aug-10-18 07:19AM  Zacks]
▶ CPSI Announces Second Quarter 2018 Results   [04:05PM  Business Wire]
▶ 5 Ultra-Safe Stocks to Counter Fresh Trade War Threats   [Jul-17-18 12:28PM  InvestorPlace]
▶ TruBridge Introduces Denial Management Program   [Jun-21-18 11:00AM  Business Wire]
▶ 4 Undervalued MedTech Stocks to Consider Amid Volatility   [Jun-19-18 12:25PM  InvestorPlace]
▶ Buy 5 Low-Beta Stocks to Counter Global Trade War Conflicts   [Jun-15-18 02:35PM  InvestorPlace]
▶ Quality Systems (QSII) Jumps: Stock Rises 12.9%   [May-29-18 08:54AM  Zacks]
▶ CPSI and Alliance Health Partners Announce Partnership   [May-24-18 12:05PM  Business Wire]
▶ New Strong Buy Stocks for May 22nd   [May-22-18 10:14AM  Zacks]
▶ Computer Programs and Systems: 1Q Earnings Snapshot   [May-03-18 04:51PM  Associated Press]
▶ CPSI Announces First Quarter 2018 Results   [04:05PM  Business Wire]
▶ Evident Highest Ranked EHR Vendor for 8th Consecutive Year   [Mar-06-18 12:00PM  Business Wire]
▶ Computer Programs and Systems posts 4Q loss   [Feb-08-18 05:51PM  Associated Press]
▶ CPSI Adds Three Experienced Directors to Board   [Nov-14-17 07:00AM  Business Wire]
▶ Computer Programs and Systems posts 3Q profit   [Nov-02-17 04:38PM  Associated Press]
▶ CPSI Announces Third Quarter 2017 Results   [04:05PM  Business Wire]
▶ CPSI Welcomes Back Two Returning Community Hospitals   [Nov-01-17 04:45PM  Business Wire]
▶ Evident EHR Solution Implemented by Jackson Medical Center   [Sep-19-17 10:00AM  Business Wire]
▶ Computer Programs and Systems posts 2Q profit   [Aug-04-17 02:36AM  Associated Press]
▶ CPSI Announces Second Quarter 2017 Results   [Aug-03-17 04:05PM  Business Wire]
▶ New Strong Buy Stocks for July 5th   [Jul-05-17 10:07AM  Zacks]
▶ CPSI Launches New Solution at Annual User Conference   [May-15-17 09:00AM  Business Wire]

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