Intrinsic value of Diversicare Healthcare Services Inc. - DVCR

Previous Close

$4.16

  Intrinsic Value

$0.00

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  Rating & Target

str. sell

-100%

Previous close

$4.16

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
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
  574
  587
  603
  620
  638
  659
  681
  706
  732
  760
  790
  822
  856
  892
  931
  972
  1,015
  1,061
  1,109
  1,160
  1,214
  1,270
  1,330
  1,393
  1,459
  1,529
  1,603
  1,680
  1,761
  1,847
Variable operating expenses, $m
  135
  138
  142
  146
  150
  155
  160
  165
  171
  177
  179
  186
  194
  202
  211
  220
  230
  240
  251
  263
  275
  288
  301
  316
  331
  346
  363
  381
  399
  418
Fixed operating expenses, $m
  452
  462
  472
  482
  493
  504
  515
  526
  538
  549
  562
  574
  587
  599
  613
  626
  640
  654
  668
  683
  698
  713
  729
  745
  762
  778
  795
  813
  831
  849
Total operating expenses, $m
  587
  600
  614
  628
  643
  659
  675
  691
  709
  726
  741
  760
  781
  801
  824
  846
  870
  894
  919
  946
  973
  1,001
  1,030
  1,061
  1,093
  1,124
  1,158
  1,194
  1,230
  1,267
Operating income, $m
  -13
  -13
  -11
  -8
  -4
  1
  7
  14
  23
  33
  49
  62
  76
  91
  107
  125
  145
  166
  189
  214
  240
  269
  299
  332
  367
  404
  444
  486
  531
  579
EBITDA, $m
  4
  4
  6
  9
  14
  19
  26
  34
  43
  53
  65
  78
  93
  108
  126
  145
  165
  187
  211
  237
  265
  294
  326
  360
  396
  435
  476
  520
  566
  616
Interest expense (income), $m
  4
  6
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
Earnings before tax, $m
  -19
  -18
  -16
  -14
  -10
  -6
  0
  7
  15
  25
  41
  52
  65
  80
  96
  113
  132
  152
  174
  198
  223
  251
  280
  311
  345
  381
  419
  460
  503
  549
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  2
  4
  7
  11
  14
  18
  22
  26
  31
  36
  41
  47
  53
  60
  68
  76
  84
  93
  103
  113
  124
  136
  148
Net income, $m
  -19
  -18
  -16
  -14
  -10
  -6
  0
  5
  11
  18
  30
  38
  48
  58
  70
  82
  96
  111
  127
  144
  163
  183
  204
  227
  252
  278
  306
  336
  367
  401

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
  162
  166
  170
  175
  181
  186
  193
  200
  207
  215
  223
  233
  242
  252
  263
  275
  287
  300
  314
  328
  343
  359
  376
  394
  413
  433
  453
  475
  498
  522
Adjusted assets (=assets-cash), $m
  162
  166
  170
  175
  181
  186
  193
  200
  207
  215
  223
  233
  242
  252
  263
  275
  287
  300
  314
  328
  343
  359
  376
  394
  413
  433
  453
  475
  498
  522
Revenue / Adjusted assets
  3.543
  3.536
  3.547
  3.543
  3.525
  3.543
  3.528
  3.530
  3.536
  3.535
  3.543
  3.528
  3.537
  3.540
  3.540
  3.535
  3.537
  3.537
  3.532
  3.537
  3.539
  3.538
  3.537
  3.536
  3.533
  3.531
  3.539
  3.537
  3.536
  3.538
Average production assets, $m
  63
  64
  66
  68
  70
  72
  74
  77
  80
  83
  86
  90
  93
  97
  101
  106
  111
  116
  121
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
  201
Working capital, $m
  20
  21
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  47
  49
  51
  54
  56
  59
  62
  65
Total debt, $m
  59
  63
  66
  71
  75
  81
  86
  93
  99
  106
  114
  122
  131
  140
  150
  160
  171
  183
  195
  208
  222
  236
  252
  268
  285
  302
  321
  341
  361
  383
Total liabilities, $m
  146
  150
  153
  158
  163
  168
  173
  180
  186
  193
  201
  209
  218
  227
  237
  247
  258
  270
  282
  295
  309
  323
  339
  355
  372
  389
  408
  428
  448
  470
Total equity, $m
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  48
  50
  52
Total liabilities and equity, $m
  162
  167
  170
  176
  181
  187
  192
  200
  207
  214
  223
  232
  242
  252
  263
  274
  287
  300
  313
  328
  343
  359
  377
  394
  413
  432
  453
  476
  498
  522
Debt-to-equity ratio
  3.640
  3.760
  3.900
  4.040
  4.180
  4.330
  4.490
  4.640
  4.800
  4.950
  5.110
  5.260
  5.410
  5.550
  5.700
  5.830
  5.970
  6.100
  6.230
  6.350
  6.470
  6.580
  6.690
  6.790
  6.890
  6.990
  7.080
  7.170
  7.250
  7.330
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
  -19
  -18
  -16
  -14
  -10
  -6
  0
  5
  11
  18
  30
  38
  48
  58
  70
  82
  96
  111
  127
  144
  163
  183
  204
  227
  252
  278
  306
  336
  367
  401
Depreciation, amort., depletion, $m
  17
  17
  17
  18
  18
  18
  19
  19
  20
  20
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
Funds from operations, $m
  -2
  -1
  1
  4
  8
  13
  19
  25
  31
  38
  45
  55
  65
  76
  88
  102
  116
  132
  149
  167
  187
  208
  231
  255
  281
  308
  338
  369
  402
  438
Change in working capital, $m
  0
  0
  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
  -3
  -1
  0
  3
  7
  12
  18
  24
  30
  37
  44
  53
  64
  75
  87
  100
  115
  130
  147
  166
  185
  206
  229
  253
  278
  306
  335
  366
  399
  435
Maintenance CAPEX, $m
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -12
  -12
  -14
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
Free cash flow, $m
  -15
  -14
  -13
  -11
  -7
  -3
  3
  8
  13
  20
  26
  34
  44
  54
  65
  77
  91
  105
  121
  138
  156
  176
  197
  219
  243
  269
  297
  326
  357
  390
Issuance/(repayment) of debt, $m
  -14
  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
Issuance/(repurchase) of shares, $m
  36
  18
  17
  14
  11
  6
  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  
  22
  21
  21
  18
  16
  11
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Total cash flow (excl. dividends), $m
  7
  7
  8
  8
  8
  9
  9
  14
  20
  27
  34
  42
  52
  63
  75
  88
  102
  117
  133
  151
  170
  190
  212
  235
  260
  287
  315
  346
  378
  412
Retained Cash Flow (-), $m
  -36
  -18
  -17
  -14
  -11
  -6
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
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
  -29
  -10
  -9
  -6
  -3
  2
  8
  13
  19
  26
  33
  42
  51
  62
  74
  87
  101
  116
  132
  150
  168
  189
  210
  234
  259
  285
  313
  343
  376
  410
Discount rate, %
  14.40
  15.12
  15.88
  16.67
  17.50
  18.38
  19.30
  20.26
  21.28
  22.34
  23.46
  24.63
  25.86
  27.15
  28.51
  29.94
  31.43
  33.01
  34.66
  36.39
  38.21
  40.12
  42.12
  44.23
  46.44
  48.76
  51.20
  53.76
  56.45
  59.27
PV of cash for distribution, $m
  -26
  -8
  -6
  -3
  -1
  1
  2
  3
  3
  3
  3
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  23.8
  11.9
  6.4
  4.0
  3.0
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9
  2.9

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 Inc. (DVCR)

Valuation Ratios
P/E Ratio -13.2
Price to Sales 0.1
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow -4.4
Price to Free Cash Flow -1.3
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 $563 million for the last fiscal year's total revenue generated by Diversicare Healthcare Services Inc.. The default revenue input number comes from 0001 income statement of Diversicare Healthcare Services Inc.. 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 14.4%, whose default value for DVCR is calculated based on our internal credit rating of Diversicare Healthcare Services Inc., 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 Inc..
    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 23.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $442 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 8.3% for Diversicare Healthcare Services Inc..

Corporate tax rate of 27% is the nominal tax rate for Diversicare Healthcare Services Inc.. 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 10.9%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Diversicare Healthcare Services Inc. 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 3.5%. 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 - $-1.198 million for Diversicare Healthcare Services Inc. - 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 6.517 million for Diversicare Healthcare Services Inc. 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 Inc. at the current share price and the inputted number of shares is $0.0 billion.

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