Intrinsic value of Ensign Group - ENSG

Previous Close

$23.50

  Intrinsic Value

$23.05

stock screener

  Rating & Target

hold

-2%

Previous close

$23.50

 
Intrinsic value

$23.05

 
Up/down potential

-2%

 
Rating

hold

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

We calculate the intrinsic value of ENSG 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, %
  23.32
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
  5.72
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
Revenue, $m
  1,655
  1,825
  2,004
  2,190
  2,384
  2,586
  2,797
  3,015
  3,242
  3,478
  3,724
  3,979
  4,244
  4,520
  4,806
  5,105
  5,416
  5,740
  6,078
  6,430
  6,797
  7,181
  7,582
  8,000
  8,438
  8,896
  9,374
  9,875
  10,399
  10,948
  11,523
Variable operating expenses, $m
 
  1,699
  1,864
  2,037
  2,217
  2,404
  2,599
  2,802
  3,012
  3,231
  3,458
  3,688
  3,934
  4,189
  4,455
  4,732
  5,020
  5,321
  5,634
  5,960
  6,301
  6,657
  7,028
  7,416
  7,822
  8,246
  8,690
  9,154
  9,640
  10,148
  10,681
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
  1,563
  1,699
  1,864
  2,037
  2,217
  2,404
  2,599
  2,802
  3,012
  3,231
  3,458
  3,688
  3,934
  4,189
  4,455
  4,732
  5,020
  5,321
  5,634
  5,960
  6,301
  6,657
  7,028
  7,416
  7,822
  8,246
  8,690
  9,154
  9,640
  10,148
  10,681
Operating income, $m
  92
  127
  140
  153
  167
  182
  198
  214
  230
  247
  265
  291
  310
  330
  351
  373
  396
  419
  444
  470
  497
  525
  554
  584
  616
  650
  685
  721
  760
  800
  842
EBITDA, $m
  131
  172
  188
  206
  224
  243
  263
  284
  305
  327
  350
  374
  399
  425
  452
  480
  509
  540
  572
  605
  639
  675
  713
  752
  794
  837
  882
  929
  978
  1,030
  1,084
Interest expense (income), $m
  6
  10
  12
  14
  16
  18
  20
  23
  25
  28
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  72
  77
  82
  87
  92
  97
  103
  109
  115
Earnings before tax, $m
  86
  117
  128
  140
  152
  164
  177
  191
  205
  220
  235
  258
  274
  291
  309
  327
  347
  367
  388
  410
  433
  457
  481
  507
  535
  563
  593
  624
  657
  691
  727
Tax expense, $m
  33
  32
  35
  38
  41
  44
  48
  52
  55
  59
  63
  70
  74
  79
  83
  88
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  169
  177
  187
  196
Net income, $m
  50
  85
  94
  102
  111
  120
  129
  139
  150
  160
  172
  188
  200
  213
  226
  239
  253
  268
  283
  299
  316
  333
  351
  370
  390
  411
  433
  456
  479
  504
  530

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  69
  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
  1,001
  1,028
  1,128
  1,233
  1,342
  1,456
  1,575
  1,698
  1,826
  1,959
  2,097
  2,240
  2,390
  2,545
  2,706
  2,874
  3,050
  3,232
  3,422
  3,620
  3,827
  4,043
  4,269
  4,505
  4,751
  5,009
  5,278
  5,560
  5,855
  6,164
  6,488
Adjusted assets (=assets-cash), $m
  932
  1,028
  1,128
  1,233
  1,342
  1,456
  1,575
  1,698
  1,826
  1,959
  2,097
  2,240
  2,390
  2,545
  2,706
  2,874
  3,050
  3,232
  3,422
  3,620
  3,827
  4,043
  4,269
  4,505
  4,751
  5,009
  5,278
  5,560
  5,855
  6,164
  6,488
Revenue / Adjusted assets
  1.776
  1.775
  1.777
  1.776
  1.776
  1.776
  1.776
  1.776
  1.775
  1.775
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
Average production assets, $m
  452
  498
  547
  598
  651
  706
  763
  823
  885
  950
  1,017
  1,086
  1,159
  1,234
  1,312
  1,394
  1,479
  1,567
  1,659
  1,755
  1,856
  1,960
  2,070
  2,184
  2,304
  2,429
  2,559
  2,696
  2,839
  2,989
  3,146
Working capital, $m
  122
  68
  74
  81
  88
  96
  103
  112
  120
  129
  138
  147
  157
  167
  178
  189
  200
  212
  225
  238
  252
  266
  281
  296
  312
  329
  347
  365
  385
  405
  426
Total debt, $m
  284
  331
  389
  449
  512
  578
  646
  717
  791
  867
  947
  1,029
  1,115
  1,205
  1,298
  1,395
  1,496
  1,601
  1,710
  1,824
  1,944
  2,068
  2,198
  2,334
  2,476
  2,624
  2,779
  2,942
  3,112
  3,290
  3,476
Total liabilities, $m
  545
  592
  650
  710
  773
  839
  907
  978
  1,052
  1,128
  1,208
  1,290
  1,376
  1,466
  1,559
  1,656
  1,757
  1,862
  1,971
  2,085
  2,205
  2,329
  2,459
  2,595
  2,737
  2,885
  3,040
  3,203
  3,373
  3,551
  3,737
Total equity, $m
  456
  436
  478
  523
  569
  617
  668
  720
  774
  830
  889
  950
  1,013
  1,079
  1,147
  1,219
  1,293
  1,370
  1,451
  1,535
  1,623
  1,714
  1,810
  1,910
  2,014
  2,124
  2,238
  2,358
  2,483
  2,614
  2,751
Total liabilities and equity, $m
  1,001
  1,028
  1,128
  1,233
  1,342
  1,456
  1,575
  1,698
  1,826
  1,958
  2,097
  2,240
  2,389
  2,545
  2,706
  2,875
  3,050
  3,232
  3,422
  3,620
  3,828
  4,043
  4,269
  4,505
  4,751
  5,009
  5,278
  5,561
  5,856
  6,165
  6,488
Debt-to-equity ratio
  0.623
  0.760
  0.810
  0.860
  0.900
  0.940
  0.970
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.130
  1.140
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.210
  1.220
  1.230
  1.240
  1.240
  1.250
  1.250
  1.260
  1.260
Adjusted equity ratio
  0.415
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  50
  85
  94
  102
  111
  120
  129
  139
  150
  160
  172
  188
  200
  213
  226
  239
  253
  268
  283
  299
  316
  333
  351
  370
  390
  411
  433
  456
  479
  504
  530
Depreciation, amort., depletion, $m
  39
  45
  49
  53
  57
  61
  65
  70
  75
  80
  85
  84
  89
  95
  101
  107
  114
  121
  128
  135
  143
  151
  159
  168
  177
  187
  197
  207
  218
  230
  242
Funds from operations, $m
  42
  130
  142
  155
  168
  181
  195
  209
  224
  240
  256
  272
  289
  307
  326
  346
  367
  388
  411
  434
  459
  484
  511
  538
  568
  598
  630
  663
  698
  734
  772
Change in working capital, $m
  -32
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
Cash from operations, $m
  74
  124
  136
  148
  160
  173
  187
  201
  216
  231
  247
  262
  279
  297
  316
  335
  355
  376
  398
  421
  445
  470
  496
  523
  551
  581
  612
  644
  678
  714
  751
Maintenance CAPEX, $m
  0
  -35
  -38
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -78
  -84
  -89
  -95
  -101
  -107
  -114
  -121
  -128
  -135
  -143
  -151
  -159
  -168
  -177
  -187
  -197
  -207
  -218
  -230
New CAPEX, $m
  -187
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -72
  -75
  -78
  -82
  -85
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -125
  -131
  -137
  -143
  -150
  -157
Cash from investing activities, $m
  -211
  -82
  -87
  -93
  -99
  -105
  -111
  -119
  -125
  -132
  -140
  -148
  -156
  -164
  -173
  -183
  -192
  -202
  -213
  -224
  -235
  -248
  -260
  -273
  -287
  -302
  -318
  -334
  -350
  -368
  -387
Free cash flow, $m
  -137
  43
  49
  55
  61
  68
  75
  83
  91
  99
  107
  114
  123
  133
  143
  153
  163
  174
  186
  197
  210
  222
  236
  249
  264
  279
  295
  311
  328
  346
  364
Issuance/(repayment) of debt, $m
  184
  55
  58
  60
  63
  66
  68
  71
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  110
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
Issuance/(repurchase) of shares, $m
  -23
  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  
  161
  55
  58
  60
  63
  66
  68
  71
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  110
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
Total cash flow (excl. dividends), $m
  24
  98
  107
  115
  124
  134
  144
  154
  164
  175
  187
  197
  209
  222
  236
  250
  264
  279
  295
  312
  329
  347
  366
  385
  406
  427
  450
  473
  498
  524
  551
Retained Cash Flow (-), $m
  -29
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -100
  -104
  -109
  -114
  -120
  -125
  -131
  -137
Prev. year cash balance distribution, $m
 
  61
  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
 
  118
  64
  71
  78
  86
  93
  102
  110
  119
  128
  136
  146
  156
  167
  178
  190
  202
  214
  228
  241
  255
  270
  285
  301
  318
  335
  354
  373
  393
  413
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  112
  58
  60
  63
  64
  65
  65
  65
  63
  62
  58
  56
  52
  49
  44
  40
  36
  32
  27
  23
  20
  16
  13
  10
  8
  6
  5
  3
  2
  2
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

The Ensign Group, Inc., through its operating subsidiaries, provides healthcare services across the post-acute care continuum, as well as other ancillary businesses located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, Oregon, South Carolina, Texas, Utah, Washington and Wisconsin. The Company's subsidiaries provide skilled nursing, assisted living, home health and hospice, and other ancillary services. Its segments include transitional and skilled services segment, which includes the operation of skilled nursing facilities; assisted and independent living services segment, which includes the operation of assisted and independent living facilities; home health and hospice services segment, which includes its home health, home care and hospice businesses, and all other segment, which includes mobile diagnostics and other ancillary operations. As of July10, 2017, it operated in 226 healthcare facilities.

FINANCIAL RATIOS  of  Ensign Group (ENSG)

Valuation Ratios
P/E Ratio 24.1
Price to Sales 0.7
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 16.3
Price to Free Cash Flow -10.7
Growth Rates
Sales Growth Rate 23.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 139.7%
Cap. Spend. - 3 Yr. Gr. Rate 44.2%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 60.5%
Total Debt to Equity 62.3%
Interest Coverage 15
Management Effectiveness
Return On Assets 6.1%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 9.5%
Return On Equity 11.3%
Return On Equity - 3 Yr. Avg. 13%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 11.4%
Gross Margin - 3 Yr. Avg. 13.4%
EBITDA Margin 7.9%
EBITDA Margin - 3 Yr. Avg. 8.9%
Operating Margin 5.6%
Oper. Margin - 3 Yr. Avg. 6.5%
Pre-Tax Margin 5.2%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 38.4%
Eff/ Tax Rate - 3 Yr. Avg. 40.4%
Payout Ratio 16%

ENSG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ENSG stock intrinsic value calculation we used $1655 million for the last fiscal year's total revenue generated by Ensign Group. The default revenue input number comes from 2016 income statement of Ensign Group. 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 ENSG stock valuation model: a) initial revenue growth rate of 10.3% 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 4.9%, whose default value for ENSG is calculated based on our internal credit rating of Ensign Group, 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 Ensign Group.
    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 ENSG stock the variable cost ratio is equal to 93.1%.

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 ENSG 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 3.5% for Ensign Group.

Corporate tax rate of 27% is the nominal tax rate for Ensign Group. 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 ENSG 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 ENSG are equal to 27.3%.

Life of production assets of 13 years is the average useful life of capital assets used in Ensign Group 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 ENSG is equal to 3.7%. 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 - $456 million for Ensign Group - 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 51.351 million for Ensign Group 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 Ensign Group at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ The Ensign Group Closes on HUD-Insured Loan Portfolio   [Dec-27-17 04:30PM  GlobeNewswire]
▶ Ensign Group misses 3Q profit forecasts   [Nov-08-17 07:33PM  Associated Press]
▶ CareTrust REIT Provides an Update on its Texas Properties   [Aug-31-17 11:59PM  GlobeNewswire]
▶ Ensign Group misses 2Q profit forecasts   [Aug-05-17 01:10AM  Associated Press]
▶ The Ensign Group Acquires Colorado Healthcare Communities   [Jul-10-17 09:00AM  GlobeNewswire]
▶ What Happened in the Stock Market Today   [May-01-17 04:55PM  Motley Fool]
▶ Ensign Group meets 1Q profit forecasts   [06:08AM  Associated Press]
▶ Top Insider Buys Highlight for the Week of April 7   [Apr-09-17 03:36PM  GuruFocus.com]
▶ The Ensign Group Acquires Iowa Skilled Nursing Facility   [Apr-06-17 09:00AM  GlobeNewswire]
▶ 3 Top Assisted Living Stocks to Buy in 2017   [Apr-01-17 03:24PM  Motley Fool]
▶ The Ensign Group Acquires Nevada Assisted Living Facility   [Mar-23-17 09:00AM  GlobeNewswire]
Financial statements of ENSG
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