Intrinsic value of Cardiovascular Systems - CSII

Previous Close

$34.80

  Intrinsic Value

$0.88

stock screener

  Rating & Target

str. sell

-97%

Previous close

$34.80

 
Intrinsic value

$0.88

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of CSII 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 2017), $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 1.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
Revenue, $m
  236
  269
  304
  341
  381
  422
  466
  511
  559
  609
  660
  714
  770
  828
  888
  951
  1,016
  1,084
  1,154
  1,228
  1,304
  1,383
  1,466
  1,553
  1,643
  1,737
  1,835
  1,937
  2,044
  2,156
Variable operating expenses, $m
  309
  353
  399
  448
  500
  554
  611
  671
  733
  798
  865
  936
  1,009
  1,085
  1,164
  1,246
  1,332
  1,421
  1,513
  1,609
  1,709
  1,813
  1,922
  2,035
  2,153
  2,276
  2,404
  2,539
  2,679
  2,825
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
  309
  353
  399
  448
  500
  554
  611
  671
  733
  798
  865
  936
  1,009
  1,085
  1,164
  1,246
  1,332
  1,421
  1,513
  1,609
  1,709
  1,813
  1,922
  2,035
  2,153
  2,276
  2,404
  2,539
  2,679
  2,825
Operating income, $m
  -74
  -84
  -95
  -107
  -119
  -132
  -145
  -159
  -174
  -190
  -205
  -222
  -239
  -257
  -276
  -295
  -316
  -337
  -359
  -381
  -405
  -430
  -455
  -482
  -510
  -539
  -570
  -602
  -635
  -669
EBITDA, $m
  -69
  -79
  -89
  -100
  -112
  -124
  -136
  -150
  -164
  -178
  -193
  -209
  -226
  -243
  -260
  -279
  -298
  -318
  -338
  -360
  -382
  -405
  -430
  -455
  -481
  -509
  -537
  -567
  -599
  -632
Interest expense (income), $m
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
Earnings before tax, $m
  -75
  -86
  -97
  -110
  -123
  -136
  -151
  -166
  -181
  -198
  -214
  -232
  -250
  -269
  -289
  -310
  -332
  -354
  -377
  -401
  -426
  -453
  -480
  -508
  -538
  -569
  -601
  -635
  -670
  -707
Tax expense, $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
Net income, $m
  -75
  -86
  -97
  -110
  -123
  -136
  -151
  -166
  -181
  -198
  -214
  -232
  -250
  -269
  -289
  -310
  -332
  -354
  -377
  -401
  -426
  -453
  -480
  -508
  -538
  -569
  -601
  -635
  -670
  -707

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
  145
  166
  187
  210
  235
  260
  287
  315
  345
  375
  407
  440
  475
  510
  548
  586
  626
  668
  712
  757
  804
  853
  904
  957
  1,013
  1,071
  1,131
  1,194
  1,260
  1,329
Adjusted assets (=assets-cash), $m
  145
  166
  187
  210
  235
  260
  287
  315
  345
  375
  407
  440
  475
  510
  548
  586
  626
  668
  712
  757
  804
  853
  904
  957
  1,013
  1,071
  1,131
  1,194
  1,260
  1,329
Revenue / Adjusted assets
  1.628
  1.620
  1.626
  1.624
  1.621
  1.623
  1.624
  1.622
  1.620
  1.624
  1.622
  1.623
  1.621
  1.624
  1.620
  1.623
  1.623
  1.623
  1.621
  1.622
  1.622
  1.621
  1.622
  1.623
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
Average production assets, $m
  41
  47
  53
  60
  67
  74
  82
  90
  98
  107
  116
  126
  135
  146
  156
  167
  179
  191
  203
  216
  230
  243
  258
  273
  289
  306
  323
  341
  360
  379
Working capital, $m
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  30
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  65
Total debt, $m
  32
  44
  57
  71
  86
  101
  117
  134
  151
  170
  189
  208
  229
  250
  273
  296
  320
  345
  371
  398
  426
  455
  486
  518
  551
  585
  622
  659
  699
  740
Total liabilities, $m
  87
  99
  112
  126
  140
  156
  172
  189
  206
  224
  243
  263
  284
  305
  327
  351
  375
  400
  426
  453
  481
  510
  541
  572
  606
  640
  676
  714
  754
  795
Total equity, $m
  58
  67
  75
  85
  94
  105
  115
  127
  139
  151
  164
  177
  191
  205
  220
  236
  252
  269
  286
  304
  323
  343
  363
  385
  407
  430
  455
  480
  507
  534
Total liabilities and equity, $m
  145
  166
  187
  211
  234
  261
  287
  316
  345
  375
  407
  440
  475
  510
  547
  587
  627
  669
  712
  757
  804
  853
  904
  957
  1,013
  1,070
  1,131
  1,194
  1,261
  1,329
Debt-to-equity ratio
  0.550
  0.660
  0.760
  0.840
  0.910
  0.960
  1.010
  1.050
  1.090
  1.120
  1.150
  1.180
  1.200
  1.220
  1.240
  1.250
  1.270
  1.280
  1.300
  1.310
  1.320
  1.330
  1.340
  1.350
  1.350
  1.360
  1.370
  1.370
  1.380
  1.380
Adjusted equity ratio
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -75
  -86
  -97
  -110
  -123
  -136
  -151
  -166
  -181
  -198
  -214
  -232
  -250
  -269
  -289
  -310
  -332
  -354
  -377
  -401
  -426
  -453
  -480
  -508
  -538
  -569
  -601
  -635
  -670
  -707
Depreciation, amort., depletion, $m
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
Funds from operations, $m
  -70
  -80
  -91
  -103
  -115
  -128
  -142
  -156
  -171
  -186
  -203
  -219
  -237
  -255
  -274
  -293
  -314
  -335
  -357
  -380
  -404
  -428
  -454
  -481
  -509
  -538
  -569
  -601
  -634
  -669
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  -71
  -81
  -92
  -104
  -117
  -130
  -143
  -158
  -172
  -188
  -204
  -221
  -238
  -257
  -276
  -295
  -316
  -337
  -359
  -382
  -406
  -431
  -457
  -484
  -512
  -541
  -572
  -604
  -638
  -673
Maintenance CAPEX, $m
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
New CAPEX, $m
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
Free cash flow, $m
  -80
  -91
  -103
  -116
  -130
  -144
  -158
  -174
  -190
  -207
  -224
  -242
  -261
  -280
  -301
  -322
  -344
  -367
  -390
  -415
  -441
  -468
  -496
  -525
  -555
  -587
  -620
  -654
  -691
  -728
Issuance/(repayment) of debt, $m
  11
  12
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  39
  41
Issuance/(repurchase) of shares, $m
  83
  94
  106
  119
  132
  147
  161
  177
  193
  210
  227
  245
  264
  284
  304
  326
  348
  371
  395
  419
  445
  472
  500
  530
  560
  592
  626
  660
  697
  735
Cash from financing (excl. dividends), $m  
  94
  106
  119
  133
  147
  162
  177
  194
  211
  228
  246
  265
  285
  305
  326
  349
  372
  396
  421
  446
  473
  501
  531
  562
  593
  627
  662
  698
  736
  776
Total cash flow (excl. dividends), $m
  13
  15
  16
  16
  17
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
Retained Cash Flow (-), $m
  -83
  -94
  -106
  -119
  -132
  -147
  -161
  -177
  -193
  -210
  -227
  -245
  -264
  -284
  -304
  -326
  -348
  -371
  -395
  -419
  -445
  -472
  -500
  -530
  -560
  -592
  -626
  -660
  -697
  -735
Prev. year cash balance distribution, $m
  68
  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
  10
  12
  14
  16
  17
  19
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  49
  52
  55
  59
  63
  67
  71
  75
  79
  84
  89
  94
  99
  104
Cash available for distribution, $m
  -1
  -79
  -90
  -102
  -115
  -128
  -142
  -157
  -172
  -188
  -205
  -222
  -240
  -259
  -279
  -299
  -320
  -342
  -364
  -388
  -413
  -438
  -465
  -493
  -522
  -552
  -584
  -617
  -651
  -687
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
  -1
  -73
  -79
  -84
  -89
  -93
  -96
  -98
  -99
  -99
  -97
  -95
  -91
  -87
  -82
  -76
  -70
  -63
  -56
  -49
  -43
  -36
  -30
  -25
  -20
  -16
  -13
  -10
  -7
  -5
Current shareholders' claim on cash, %
  85.1
  72.8
  62.3
  53.3
  45.8
  39.3
  33.8
  29.1
  25.0
  21.6
  18.6
  16.0
  13.8
  12.0
  10.3
  8.9
  7.7
  6.7
  5.8
  5.0
  4.3
  3.8
  3.3
  2.8
  2.4
  2.1
  1.8
  1.6
  1.4
  1.2

Cardiovascular Systems, Inc. is a medical technology company. The Company is engaged in treating patients suffering from peripheral and coronary artery diseases, including those with arterial calcium. The Company develops an orbital atherectomy technology for both peripheral and coronary commercial applications. Its peripheral artery disease (PAD) systems are catheter-based platforms capable of treating a range of plaque types in leg arteries both above and below the knee. Its products include Diamondback 360 Peripheral Orbital Atherectomy System (OAS) (Diamondback 360 Peripheral), the Stealth 360 OAS (Stealth 360), Diamondback 360 Peripheral, Diamondback 360 60cm Peripheral, Diamondback 360 Low Profile Peripheral, Diamondback 360 1.50 Peripheral and Diamondback 360 2.00 Peripheral. The Company's coronary arterial disease (CAD) product, Diamondback 360 Coronary OAS (Coronary OAS), is marketed as a treatment for severely calcified coronary arteries.

FINANCIAL RATIOS  of  Cardiovascular Systems (CSII)

Valuation Ratios
P/E Ratio -571.6
Price to Sales 5.6
Price to Book 9.7
Price to Tangible Book
Price to Cash Flow 57.2
Price to Free Cash Flow 63.5
Growth Rates
Sales Growth Rate 15.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -31.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 17.8%
Total Debt to Equity 17.8%
Interest Coverage -1
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. -18.4%
Return On Total Capital -1.7%
Ret/ On T. Cap. - 3 Yr. Avg. -23.6%
Return On Equity -1.8%
Return On Equity - 3 Yr. Avg. -23.7%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 80.5%
Gross Margin - 3 Yr. Avg. 79.6%
EBITDA Margin 1.5%
EBITDA Margin - 3 Yr. Avg. -14.9%
Operating Margin -0.5%
Oper. Margin - 3 Yr. Avg. -16.5%
Pre-Tax Margin -1%
Pre-Tax Margin - 3 Yr. Avg. -16.9%
Net Profit Margin -1%
Net Profit Margin - 3 Yr. Avg. -16.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CSII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSII stock intrinsic value calculation we used $205 million for the last fiscal year's total revenue generated by Cardiovascular Systems. The default revenue input number comes from 2017 income statement of Cardiovascular 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 CSII stock valuation model: a) initial revenue growth rate of 15% 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 CSII is calculated based on our internal credit rating of Cardiovascular 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 Cardiovascular 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 CSII stock the variable cost ratio is equal to 131.3%.

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 CSII 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 Cardiovascular Systems.

Corporate tax rate of 27% is the nominal tax rate for Cardiovascular 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 CSII stock is equal to 5.1%.

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 CSII are equal to 17.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Cardiovascular 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 CSII is equal to 3%. 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 - $118 million for Cardiovascular 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 32 million for Cardiovascular 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 Cardiovascular Systems at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ Cardiovascular Systems: Fiscal 3Q Earnings Snapshot   [May-02-18 06:11PM  Associated Press]
▶ Cardiovascular Systems reports 2Q loss   [Feb-07-18 06:05PM  Associated Press]
▶ 9 Stocks Steven Cohen Keeps Buying   [Nov-22-17 03:57PM  GuruFocus.com]
▶ Cardiovascular Systems reports 1Q loss   [Oct-25-17 05:47PM  Associated Press]
▶ Cardiovascular Systems beats 4Q profit forecasts   [12:33AM  Associated Press]
▶ Cardiovascular Systems reports 3Q loss   [May-03-17 06:01PM  Associated Press]
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