Intrinsic value of Diversicare Healthcare Services - DVCR

Previous Close

$4.95

  Intrinsic Value

$1.15

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  Rating & Target

str. sell

-77%

Previous close

$4.95

 
Intrinsic value

$1.15

 
Up/down potential

-77%

 
Rating

str. sell

We calculate the intrinsic value of DVCR 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 0.0

 

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
  586
  600
  615
  632
  652
  673
  696
  720
  747
  776
  806
  839
  874
  911
  950
  992
  1,036
  1,083
  1,132
  1,184
  1,239
  1,297
  1,358
  1,422
  1,490
  1,561
  1,636
  1,715
  1,798
  1,885
Variable operating expenses, $m
  561
  574
  589
  605
  624
  644
  666
  689
  715
  742
  772
  803
  836
  872
  910
  949
  992
  1,036
  1,083
  1,133
  1,186
  1,241
  1,299
  1,361
  1,426
  1,494
  1,566
  1,641
  1,721
  1,804
Fixed operating expenses, $m
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  27
  28
  29
  29
  30
  31
  31
  32
  33
Total operating expenses, $m
  578
  592
  607
  624
  643
  663
  686
  709
  736
  763
  794
  825
  859
  895
  934
  973
  1,017
  1,061
  1,109
  1,159
  1,213
  1,268
  1,327
  1,390
  1,455
  1,524
  1,597
  1,672
  1,753
  1,837
Operating income, $m
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  25
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
EBITDA, $m
  19
  19
  20
  21
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  40
  42
  44
  47
  50
  53
  56
  59
  63
  67
  71
  75
  79
  84
Interest expense (income), $m
  4
  7
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  30
Earnings before tax, $m
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
Tax expense, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
Net income, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13

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
  171
  175
  179
  184
  190
  196
  203
  210
  218
  226
  235
  245
  255
  266
  277
  289
  302
  316
  330
  345
  361
  378
  396
  414
  434
  455
  477
  500
  524
  550
Adjusted assets (=assets-cash), $m
  171
  175
  179
  184
  190
  196
  203
  210
  218
  226
  235
  245
  255
  266
  277
  289
  302
  316
  330
  345
  361
  378
  396
  414
  434
  455
  477
  500
  524
  550
Revenue / Adjusted assets
  3.427
  3.429
  3.436
  3.435
  3.432
  3.434
  3.429
  3.429
  3.427
  3.434
  3.430
  3.424
  3.427
  3.425
  3.430
  3.433
  3.430
  3.427
  3.430
  3.432
  3.432
  3.431
  3.429
  3.435
  3.433
  3.431
  3.430
  3.430
  3.431
  3.427
Average production assets, $m
  66
  67
  69
  71
  73
  75
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
  159
  167
  175
  183
  192
  201
  211
Working capital, $m
  18
  19
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
Total debt, $m
  80
  84
  88
  92
  98
  103
  109
  116
  123
  130
  138
  147
  156
  166
  176
  187
  198
  211
  224
  237
  252
  267
  283
  300
  317
  336
  356
  376
  398
  421
Total liabilities, $m
  154
  157
  161
  166
  171
  176
  182
  189
  196
  204
  212
  220
  229
  239
  249
  260
  272
  284
  297
  311
  325
  340
  356
  373
  391
  409
  429
  450
  472
  495
Total equity, $m
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
  43
  45
  48
  50
  52
  55
Total liabilities and equity, $m
  171
  174
  179
  184
  190
  196
  202
  210
  218
  227
  236
  244
  254
  266
  277
  289
  302
  316
  330
  346
  361
  378
  396
  414
  434
  454
  477
  500
  524
  550
Debt-to-equity ratio
  4.700
  4.800
  4.900
  5.020
  5.130
  5.250
  5.380
  5.500
  5.630
  5.750
  5.880
  6.000
  6.120
  6.230
  6.350
  6.460
  6.570
  6.670
  6.770
  6.870
  6.970
  7.060
  7.140
  7.230
  7.310
  7.390
  7.460
  7.530
  7.600
  7.660
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
Depreciation, amort., depletion, $m
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
Funds from operations, $m
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
Change in working capital, $m
  0
  0
  0
  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
Cash from operations, $m
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
Maintenance CAPEX, $m
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
New CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Cash from investing activities, $m
  -12
  -13
  -13
  -14
  -14
  -14
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -24
  -25
  -27
  -27
  -28
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
Free cash flow, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  1
  1
  1
  2
  2
Issuance/(repayment) of debt, $m
  -7
  4
  4
  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
  22
  23
Issuance/(repurchase) of shares, $m
  10
  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  
  3
  4
  4
  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
  22
  23
Total cash flow (excl. dividends), $m
  2
  3
  4
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
Retained Cash Flow (-), $m
  -11
  0
  0
  -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
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
  -9
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
Discount rate, %
  12.40
  13.02
  13.67
  14.35
  15.07
  15.83
  16.62
  17.45
  18.32
  19.24
  20.20
  21.21
  22.27
  23.38
  24.55
  25.78
  27.07
  28.42
  29.84
  31.33
  32.90
  34.55
  36.27
  38.09
  39.99
  41.99
  44.09
  46.29
  48.61
  51.04
PV of cash for distribution, $m
  -8
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8
  76.8

Diversicare Healthcare Services, Inc. provides post-acute care services to nursing center patients and residents in approximately nine states, primarily in the Southeast and the Southwest United States. The Company's post-acute care services to patients and residents include skilled nursing, ancillary healthcare services and assisted living. In addition to the nursing, personal care and social services that are provided in long-term care centers, the Company offers a range of rehabilitative, respiratory and other ancillary services. The Company operates 77 skilled nursing and long-term care facilities containing 8,556 skilled nursing beds. The Company's nursing centers range in size from 48 to 320 licensed nursing beds. The nursing centers provide nursing healthcare services, including nutrition services, recreational therapy, social services and laundry services. The Company operates in Alabama, Florida, Indiana, Kansas, Kentucky, Missouri, Ohio, Tennessee and Texas.

FINANCIAL RATIOS  of  Diversicare Healthcare Services (DVCR)

Valuation Ratios
P/E Ratio -15.7
Price to Sales 0.1
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow -5.2
Price to Free Cash Flow -1.6
Growth Rates
Sales Growth Rate 9.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.5%
Cap. Spend. - 3 Yr. Gr. Rate -6.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 654.5%
Total Debt to Equity 727.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -2.4%
Ret/ On T. Cap. - 3 Yr. Avg. 2.9%
Return On Equity -16.7%
Return On Equity - 3 Yr. Avg. 13.1%
Asset Turnover 2.8
Profitability Ratios
Gross Margin 19.5%
Gross Margin - 3 Yr. Avg. 19.8%
EBITDA Margin 2.1%
EBITDA Margin - 3 Yr. Avg. 3.2%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 1.3%
Pre-Tax Margin -0.7%
Pre-Tax Margin - 3 Yr. Avg. 0.3%
Net Profit Margin -0.5%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.1%
Payout Ratio -50%

DVCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DVCR stock intrinsic value calculation we used $574.794 million for the last fiscal year's total revenue generated by Diversicare Healthcare Services. The default revenue input number comes from 0001 income statement of Diversicare Healthcare Services. 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 DVCR 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 12.4%, whose default value for DVCR is calculated based on our internal credit rating of Diversicare Healthcare Services, 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 Diversicare Healthcare Services.
    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 DVCR stock the variable cost ratio is equal to 95.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17 million in the base year in the intrinsic value calculation for DVCR 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 7.6% for Diversicare Healthcare Services.

Corporate tax rate of 27% is the nominal tax rate for Diversicare Healthcare Services. 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 DVCR 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 DVCR are equal to 11.2%.

Life of production assets of 5.9 years is the average useful life of capital assets used in Diversicare Healthcare Services 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 DVCR is equal to 3.1%. 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 - $6.462 million for Diversicare Healthcare Services - 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 6.536 million for Diversicare Healthcare Services 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 Diversicare Healthcare Services at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Diversicare Healthcare: 3Q Earnings Snapshot   [Nov-02-18 05:08AM  Associated Press]
▶ Diversicare Announces 2018 Third Quarter Results   [Nov-01-18 04:50PM  GlobeNewswire]
▶ Diversicare Healthcare: 2Q Earnings Snapshot   [Aug-02-18 06:08PM  Associated Press]
▶ Diversicare Healthcare: 1Q Earnings Snapshot   [May-03-18 05:42PM  Associated Press]
▶ Diversicare Healthcare reports 4Q loss   [Mar-01-18 06:58PM  Associated Press]
▶ 6 High-Yield Stocks With Declining Prices   [Dec-11-17 02:39PM  GuruFocus.com]
▶ Diversicare Healthcare reports 3Q loss   [Nov-06-17 05:37AM  Associated Press]
▶ Diversicare Announces 2017 Third Quarter Results   [Nov-02-17 04:05PM  GlobeNewswire]
▶ Diversicare Healthcare posts 2Q profit   [Aug-05-17 01:10AM  Associated Press]
▶ Diversicare Announces 2017 Second Quarter Results   [Aug-03-17 04:05PM  GlobeNewswire]
▶ Diversicare Healthcare posts 1Q profit   [May-04-17 07:57PM  Associated Press]
▶ Diversicare Healthcare posts 4Q profit   [Mar-02-17 04:40PM  Associated Press]
▶ Diversicare Acquires 12 Facilities in Alabama   [Nov-01-16 04:05PM  GlobeNewswire]
▶ Diversicare Acquires 10 Facilities in Mississippi   [Oct-03-16 09:00AM  GlobeNewswire]

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