Intrinsic value of Computer Programs&Systems - CPSI

Previous Close

$29.70

  Intrinsic Value

$21.77

stock screener

  Rating & Target

sell

-27%

Previous close

$29.70

 
Intrinsic value

$21.77

 
Up/down potential

-27%

 
Rating

sell

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

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

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
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  46.70
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
Revenue, $m
  267
  275
  284
  294
  305
  316
  329
  342
  356
  370
  386
  403
  421
  440
  459
  480
  503
  526
  551
  576
  604
  633
  663
  695
  728
  764
  801
  840
  881
  924
  970
Variable operating expenses, $m
 
  236
  244
  252
  260
  269
  279
  289
  301
  312
  325
  322
  336
  351
  367
  383
  401
  420
  439
  460
  482
  505
  529
  555
  581
  609
  639
  670
  703
  738
  774
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
  253
  236
  244
  252
  260
  269
  279
  289
  301
  312
  325
  322
  336
  351
  367
  383
  401
  420
  439
  460
  482
  505
  529
  555
  581
  609
  639
  670
  703
  738
  774
Operating income, $m
  14
  39
  41
  43
  45
  47
  50
  52
  55
  58
  61
  81
  85
  89
  93
  97
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
  170
  178
  187
  196
EBITDA, $m
  27
  62
  64
  66
  68
  71
  73
  76
  79
  83
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  141
  148
  155
  163
  171
  179
  188
  197
  207
  217
Interest expense (income), $m
  6
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
Earnings before tax, $m
  8
  27
  28
  30
  32
  33
  35
  37
  39
  42
  44
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
Tax expense, $m
  4
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  39
  40
Net income, $m
  4
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  339
  348
  359
  371
  385
  399
  415
  431
  449
  468
  488
  509
  531
  555
  580
  607
  634
  664
  695
  728
  762
  799
  837
  877
  920
  964
  1,011
  1,060
  1,112
  1,167
  1,224
Adjusted assets (=assets-cash), $m
  337
  348
  359
  371
  385
  399
  415
  431
  449
  468
  488
  509
  531
  555
  580
  607
  634
  664
  695
  728
  762
  799
  837
  877
  920
  964
  1,011
  1,060
  1,112
  1,167
  1,224
Revenue / Adjusted assets
  0.792
  0.790
  0.791
  0.792
  0.792
  0.792
  0.793
  0.794
  0.793
  0.791
  0.791
  0.792
  0.793
  0.793
  0.791
  0.791
  0.793
  0.792
  0.793
  0.791
  0.793
  0.792
  0.792
  0.792
  0.791
  0.793
  0.792
  0.792
  0.792
  0.792
  0.792
Average production assets, $m
  68
  70
  72
  74
  77
  80
  83
  86
  90
  94
  98
  102
  106
  111
  116
  122
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
  203
  212
  223
  234
  245
Working capital, $m
  14
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
  51
  54
  56
  59
  62
  65
Total debt, $m
  153
  157
  163
  169
  176
  184
  192
  201
  210
  220
  231
  242
  254
  267
  280
  294
  309
  325
  341
  358
  377
  396
  416
  438
  460
  484
  509
  535
  563
  592
  622
Total liabilities, $m
  181
  185
  191
  197
  204
  212
  220
  229
  238
  248
  259
  270
  282
  295
  308
  322
  337
  353
  369
  386
  405
  424
  444
  466
  488
  512
  537
  563
  591
  620
  650
Total equity, $m
  158
  163
  168
  174
  180
  187
  195
  202
  211
  219
  229
  239
  249
  260
  272
  284
  298
  311
  326
  341
  358
  375
  393
  411
  431
  452
  474
  497
  522
  547
  574
Total liabilities and equity, $m
  339
  348
  359
  371
  384
  399
  415
  431
  449
  467
  488
  509
  531
  555
  580
  606
  635
  664
  695
  727
  763
  799
  837
  877
  919
  964
  1,011
  1,060
  1,113
  1,167
  1,224
Debt-to-equity ratio
  0.968
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
  1.080
  1.080
  1.080
  1.080
Adjusted equity ratio
  0.463
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
Depreciation, amort., depletion, $m
  13
  23
  23
  23
  23
  24
  24
  24
  24
  25
  25
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
Funds from operations, $m
  -25
  42
  44
  45
  46
  48
  50
  51
  53
  55
  57
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  85
  89
  94
  98
  103
  108
  113
  118
  124
  130
Change in working capital, $m
  -27
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
Cash from operations, $m
  2
  42
  43
  44
  46
  47
  49
  50
  52
  54
  56
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  101
  105
  110
  116
  121
  127
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
New CAPEX, $m
  0
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -152
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -22
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
Free cash flow, $m
  -150
  34
  35
  36
  37
  38
  39
  40
  41
  43
  44
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
Issuance/(repayment) of debt, $m
  151
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  30
Issuance/(repurchase) of shares, $m
  1
  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  
  152
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  30
Total cash flow (excl. dividends), $m
  2
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  52
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  86
  91
  95
  99
  104
  109
  115
  120
  126
Retained Cash Flow (-), $m
  -83
  -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
  -23
  -24
  -26
  -27
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
 
  35
  36
  36
  37
  39
  40
  41
  42
  44
  45
  43
  44
  46
  48
  50
  52
  55
  57
  60
  63
  65
  68
  72
  75
  79
  82
  86
  90
  95
  99
Discount rate, %
 
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
 
  32
  30
  28
  26
  24
  22
  20
  18
  16
  14
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
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

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 100.5
Price to Sales 1.5
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 200.9
Price to Free Cash Flow 200.9
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 $267 million for the last fiscal year's total revenue generated by Computer Programs&Systems. The default revenue input number comes from 2016 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 3.1% 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 7.9%, 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 86.1%.

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 7.8% 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 25.3%.

Life of production assets of 11.7 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 6.7%. 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 - $158 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 13.482 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

▶ 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]
▶ Computer Programs and Systems posts 1Q profit   [May-04-17 04:58PM  Associated Press]
▶ CPSI Announces First Quarter 2017 Results   [04:05PM  Business Wire]
▶ Evident, TruBridge Solutions Selected by Kansas Hospital   [Apr-13-17 10:00AM  Business Wire]
▶ TruCode and CPSI Announce Partnership   [09:00AM  Business Wire]
▶ 8 High-Yield Stocks With Falling Prices   [Feb-21-17 05:51PM  GuruFocus.com]
▶ Evident Highest Ranked EHR Vendor for 7th Consecutive Year   [Feb-14-17 04:05PM  Business Wire]
▶ Computer Programs and Systems posts 4Q profit   [Feb-09-17 04:37PM  Associated Press]
▶ CPSI Launches Rural ACOs in Partnership with Caravan Health   [Jan-09-17 10:00AM  Business Wire]
▶ Evident EHR Selected by Oklahoma Childrens Hospital   [Jan-05-17 02:00PM  Business Wire]
▶ Is Computer Programs & Systems, Inc. (CPSI) A Good Stock To Buy?   [Dec-13-16 01:47PM  at Insider Monkey]
▶ These 2 Dividend Stocks Could Slash Their Payouts   [Dec-02-16 06:21PM  at Motley Fool]
Financial statements of CPSI
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