Intrinsic value of CRH Medical - CRHM

Previous Close

$3.14

  Intrinsic Value

$21.90

stock screener

  Rating & Target

str. buy

+597%

Previous close

$3.14

 
Intrinsic value

$21.90

 
Up/down potential

+597%

 
Rating

str. buy

We calculate the intrinsic value of CRHM 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 0.2

 

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, %
  27.90
  25.61
  23.55
  21.69
  20.02
  18.52
  17.17
  15.95
  14.86
  13.87
  12.98
  12.19
  11.47
  10.82
  10.24
  9.71
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
  7.26
  7.03
  6.83
  6.64
  6.48
  6.33
  6.20
  6.08
Revenue, $m
  128
  161
  199
  242
  291
  344
  404
  468
  538
  612
  692
  776
  865
  958
  1,056
  1,159
  1,266
  1,378
  1,494
  1,615
  1,741
  1,872
  2,007
  2,148
  2,295
  2,448
  2,606
  2,771
  2,943
  3,122
Variable operating expenses, $m
  83
  100
  119
  142
  167
  194
  225
  258
  294
  333
  358
  401
  447
  496
  547
  600
  655
  713
  773
  836
  901
  968
  1,038
  1,111
  1,187
  1,266
  1,348
  1,434
  1,522
  1,615
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
  83
  100
  119
  142
  167
  194
  225
  258
  294
  333
  358
  401
  447
  496
  547
  600
  655
  713
  773
  836
  901
  968
  1,038
  1,111
  1,187
  1,266
  1,348
  1,434
  1,522
  1,615
Operating income, $m
  46
  61
  80
  101
  124
  150
  179
  210
  243
  279
  334
  374
  417
  463
  510
  560
  611
  665
  721
  780
  840
  903
  969
  1,037
  1,108
  1,181
  1,258
  1,338
  1,421
  1,507
EBITDA, $m
  77
  97
  120
  146
  175
  208
  243
  282
  324
  369
  417
  468
  521
  578
  637
  699
  763
  831
  901
  974
  1,049
  1,128
  1,210
  1,295
  1,384
  1,476
  1,571
  1,671
  1,774
  1,882
Interest expense (income), $m
  0
  7
  12
  17
  23
  30
  37
  45
  55
  65
  75
  87
  99
  112
  126
  141
  156
  172
  189
  206
  224
  243
  262
  283
  304
  326
  348
  372
  397
  422
  449
Earnings before tax, $m
  38
  50
  63
  78
  94
  113
  133
  155
  179
  204
  247
  275
  305
  336
  369
  403
  439
  477
  515
  556
  597
  641
  686
  733
  782
  833
  886
  941
  998
  1,058
Tax expense, $m
  10
  13
  17
  21
  26
  30
  36
  42
  48
  55
  67
  74
  82
  91
  100
  109
  119
  129
  139
  150
  161
  173
  185
  198
  211
  225
  239
  254
  269
  286
Net income, $m
  28
  36
  46
  57
  69
  82
  97
  113
  130
  149
  180
  201
  223
  246
  270
  295
  321
  348
  376
  406
  436
  468
  501
  535
  571
  608
  647
  687
  729
  772

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
  248
  312
  386
  469
  563
  668
  782
  907
  1,042
  1,186
  1,340
  1,504
  1,676
  1,857
  2,047
  2,246
  2,454
  2,670
  2,896
  3,130
  3,374
  3,627
  3,890
  4,164
  4,448
  4,743
  5,051
  5,370
  5,703
  6,050
Adjusted assets (=assets-cash), $m
  248
  312
  386
  469
  563
  668
  782
  907
  1,042
  1,186
  1,340
  1,504
  1,676
  1,857
  2,047
  2,246
  2,454
  2,670
  2,896
  3,130
  3,374
  3,627
  3,890
  4,164
  4,448
  4,743
  5,051
  5,370
  5,703
  6,050
Revenue / Adjusted assets
  0.516
  0.516
  0.516
  0.516
  0.517
  0.515
  0.517
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
Average production assets, $m
  96
  120
  148
  180
  217
  257
  301
  349
  400
  456
  515
  578
  644
  714
  787
  864
  943
  1,027
  1,113
  1,203
  1,297
  1,394
  1,495
  1,601
  1,710
  1,823
  1,942
  2,065
  2,192
  2,326
Working capital, $m
  12
  15
  18
  22
  27
  32
  37
  43
  49
  56
  64
  71
  80
  88
  97
  107
  116
  127
  137
  149
  160
  172
  185
  198
  211
  225
  240
  255
  271
  287
Total debt, $m
  98
  141
  190
  246
  309
  378
  455
  538
  628
  725
  828
  937
  1,052
  1,173
  1,300
  1,433
  1,572
  1,716
  1,867
  2,023
  2,186
  2,355
  2,531
  2,714
  2,904
  3,101
  3,306
  3,520
  3,742
  3,974
Total liabilities, $m
  166
  208
  258
  313
  376
  446
  522
  606
  696
  792
  895
  1,004
  1,120
  1,241
  1,368
  1,501
  1,639
  1,784
  1,934
  2,091
  2,254
  2,423
  2,599
  2,781
  2,971
  3,169
  3,374
  3,587
  3,810
  4,041
Total equity, $m
  82
  104
  128
  156
  187
  222
  260
  301
  346
  394
  445
  499
  556
  617
  680
  746
  815
  887
  961
  1,039
  1,120
  1,204
  1,292
  1,382
  1,477
  1,575
  1,677
  1,783
  1,894
  2,009
Total liabilities and equity, $m
  248
  312
  386
  469
  563
  668
  782
  907
  1,042
  1,186
  1,340
  1,503
  1,676
  1,858
  2,048
  2,247
  2,454
  2,671
  2,895
  3,130
  3,374
  3,627
  3,891
  4,163
  4,448
  4,744
  5,051
  5,370
  5,704
  6,050
Debt-to-equity ratio
  1.190
  1.360
  1.480
  1.580
  1.650
  1.710
  1.750
  1.790
  1.820
  1.840
  1.860
  1.880
  1.890
  1.900
  1.910
  1.920
  1.930
  1.940
  1.940
  1.950
  1.950
  1.960
  1.960
  1.960
  1.970
  1.970
  1.970
  1.970
  1.980
  1.980
Adjusted equity ratio
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  36
  46
  57
  69
  82
  97
  113
  130
  149
  180
  201
  223
  246
  270
  295
  321
  348
  376
  406
  436
  468
  501
  535
  571
  608
  647
  687
  729
  772
Depreciation, amort., depletion, $m
  32
  36
  40
  45
  51
  58
  65
  73
  81
  90
  83
  93
  104
  115
  127
  139
  152
  166
  180
  194
  209
  225
  241
  258
  276
  294
  313
  333
  354
  375
Funds from operations, $m
  60
  72
  86
  102
  120
  140
  162
  186
  211
  239
  263
  294
  327
  361
  396
  434
  473
  513
  556
  600
  645
  693
  742
  793
  847
  902
  960
  1,020
  1,082
  1,147
Change in working capital, $m
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
Cash from operations, $m
  57
  69
  83
  98
  116
  135
  157
  180
  205
  232
  256
  286
  318
  352
  387
  424
  463
  503
  545
  589
  634
  681
  730
  780
  833
  888
  945
  1,005
  1,066
  1,131
Maintenance CAPEX, $m
  -12
  -15
  -19
  -24
  -29
  -35
  -41
  -48
  -56
  -65
  -74
  -83
  -93
  -104
  -115
  -127
  -139
  -152
  -166
  -180
  -194
  -209
  -225
  -241
  -258
  -276
  -294
  -313
  -333
  -354
New CAPEX, $m
  -21
  -24
  -28
  -32
  -36
  -40
  -44
  -48
  -52
  -56
  -59
  -63
  -66
  -70
  -73
  -76
  -80
  -83
  -87
  -90
  -94
  -97
  -101
  -105
  -109
  -114
  -118
  -123
  -128
  -133
Cash from investing activities, $m
  -33
  -39
  -47
  -56
  -65
  -75
  -85
  -96
  -108
  -121
  -133
  -146
  -159
  -174
  -188
  -203
  -219
  -235
  -253
  -270
  -288
  -306
  -326
  -346
  -367
  -390
  -412
  -436
  -461
  -487
Free cash flow, $m
  24
  29
  35
  42
  51
  60
  71
  83
  97
  112
  123
  140
  159
  178
  199
  221
  244
  268
  293
  319
  346
  374
  404
  434
  466
  499
  533
  569
  606
  644
Issuance/(repayment) of debt, $m
  37
  43
  49
  56
  63
  70
  77
  83
  90
  97
  103
  109
  115
  121
  127
  133
  139
  145
  151
  157
  163
  169
  176
  183
  190
  197
  205
  214
  222
  232
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  
  37
  43
  49
  56
  63
  70
  77
  83
  90
  97
  103
  109
  115
  121
  127
  133
  139
  145
  151
  157
  163
  169
  176
  183
  190
  197
  205
  214
  222
  232
Total cash flow (excl. dividends), $m
  61
  71
  84
  98
  113
  130
  148
  167
  187
  208
  226
  250
  274
  300
  326
  354
  383
  412
  443
  475
  509
  543
  579
  617
  656
  696
  738
  782
  828
  876
Retained Cash Flow (-), $m
  -18
  -21
  -24
  -28
  -31
  -35
  -38
  -41
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -111
  -115
Prev. year cash balance distribution, $m
  3
  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
  46
  50
  60
  70
  82
  95
  110
  125
  142
  160
  175
  195
  217
  239
  263
  288
  314
  341
  369
  398
  428
  459
  492
  526
  561
  598
  636
  676
  717
  760
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
  44
  46
  52
  58
  64
  69
  74
  78
  82
  84
  83
  83
  82
  80
  77
  73
  68
  63
  57
  51
  44
  38
  32
  27
  22
  17
  14
  10
  8
  6
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
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CRH Medical Corporation is a Canada-based healthcare products and services company. The Company focused on providing physicians with services and products for the treatment of gastrointestinal diseases. The Company also provides anesthesiology services to gastroenterologists in the United States through its subsidiaries. The Company specializes in the treatment of hemorrhoids utilizing its treatment protocol and technology. The Company's product distribution strategy focuses on physician education, patient outcomes, and patient awareness. The Company's CRH O'Regan System, platform that provides gastrointestinal is a single use, disposable, hemorrhoid banding technology for treating hemorrhoid grades I-IV. The Company distributes the CRH O'Regan System, treatment protocols, operational and marketing expertise as a package to physicians. The Company's subsidiary, Gastroenterology Anesthesia Associates, LLC, provides anesthesiology services for gastroenterology procedures.

FINANCIAL RATIOS  of  CRH Medical (CRHM)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CRHM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRHM stock intrinsic value calculation we used $100.24208 million for the last fiscal year's total revenue generated by CRH Medical. The default revenue input number comes from 0001 income statement of CRH 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 CRHM stock valuation model: a) initial revenue growth rate of 27.9% 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 4.3%, whose default value for CRHM is calculated based on our internal credit rating of CRH 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 CRH 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 CRHM stock the variable cost ratio is equal to 68%.

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 CRHM 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 12% for CRH Medical.

Corporate tax rate of 27% is the nominal tax rate for CRH 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 CRHM 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 CRHM are equal to 74.5%.

Life of production assets of 6.2 years is the average useful life of capital assets used in CRH 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 CRHM is equal to 9.2%. 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 - $67.658972 million for CRH 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 73.019 million for CRH 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 CRH Medical at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

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▶ CRH Medical misses 3Q profit forecasts   [Nov-02-17 06:34AM  Associated Press]
▶ At $3.26, Is It Time To Buy CRH Medical Corporation (TSX:CRH)?   [Oct-05-17 10:44AM  Simply Wall St.]
▶ CRH Medical posts 1Q profit   [07:31PM  Associated Press]
▶ This Week's Hidden Gems: (BFAM)(CRHM)   [Mar-30-17 05:36PM  Zacks]
▶ CRH Medical Announces Third Quarter 2016 Results   [Oct-27-16 07:00AM  Marketwired]
▶ CRH Increases Credit Facility to Fund Additional Growth   [Jun-15-16 09:23AM  Marketwired]

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