Intrinsic value of Ensign Group - ENSG

Previous Close

$37.75

  Intrinsic Value

$11.36

stock screener

  Rating & Target

str. sell

-70%

Previous close

$37.75

 
Intrinsic value

$11.36

 
Up/down potential

-70%

 
Rating

str. sell

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

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 2.0

 

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, %
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
Revenue, $m
  2,047
  2,255
  2,471
  2,698
  2,933
  3,179
  3,434
  3,699
  3,975
  4,262
  4,559
  4,869
  5,191
  5,526
  5,874
  6,237
  6,614
  7,008
  7,418
  7,846
  8,293
  8,759
  9,246
  9,755
  10,288
  10,844
  11,426
  12,035
  12,673
  13,341
Variable operating expenses, $m
  1,931
  2,125
  2,328
  2,540
  2,761
  2,991
  3,230
  3,478
  3,737
  4,005
  4,270
  4,560
  4,861
  5,175
  5,501
  5,840
  6,194
  6,563
  6,947
  7,348
  7,766
  8,203
  8,659
  9,136
  9,634
  10,155
  10,700
  11,271
  11,868
  12,493
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
  1,931
  2,125
  2,328
  2,540
  2,761
  2,991
  3,230
  3,478
  3,737
  4,005
  4,270
  4,560
  4,861
  5,175
  5,501
  5,840
  6,194
  6,563
  6,947
  7,348
  7,766
  8,203
  8,659
  9,136
  9,634
  10,155
  10,700
  11,271
  11,868
  12,493
Operating income, $m
  116
  129
  143
  157
  172
  188
  204
  221
  239
  257
  290
  309
  330
  351
  373
  396
  420
  445
  471
  498
  527
  556
  587
  620
  653
  689
  726
  765
  805
  847
EBITDA, $m
  174
  192
  211
  230
  250
  271
  293
  315
  339
  363
  388
  415
  442
  471
  500
  531
  563
  597
  632
  668
  706
  746
  788
  831
  876
  924
  973
  1,025
  1,080
  1,136
Interest expense (income), $m
  6
  17
  20
  24
  28
  32
  36
  41
  45
  50
  55
  60
  65
  71
  76
  82
  89
  95
  102
  109
  116
  124
  132
  140
  149
  158
  167
  177
  187
  198
  210
Earnings before tax, $m
  99
  109
  119
  129
  140
  152
  164
  176
  189
  202
  230
  244
  259
  275
  291
  308
  325
  343
  362
  382
  403
  425
  447
  471
  496
  522
  549
  577
  607
  638
Tax expense, $m
  27
  29
  32
  35
  38
  41
  44
  48
  51
  55
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  127
  134
  141
  148
  156
  164
  172
Net income, $m
  72
  79
  87
  95
  103
  111
  119
  128
  138
  148
  168
  178
  189
  200
  212
  225
  237
  251
  265
  279
  294
  310
  327
  344
  362
  381
  401
  421
  443
  466

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
  1,221
  1,344
  1,474
  1,609
  1,749
  1,896
  2,048
  2,206
  2,370
  2,541
  2,719
  2,903
  3,095
  3,295
  3,503
  3,719
  3,944
  4,179
  4,423
  4,679
  4,945
  5,223
  5,514
  5,817
  6,134
  6,466
  6,813
  7,177
  7,557
  7,955
Adjusted assets (=assets-cash), $m
  1,221
  1,344
  1,474
  1,609
  1,749
  1,896
  2,048
  2,206
  2,370
  2,541
  2,719
  2,903
  3,095
  3,295
  3,503
  3,719
  3,944
  4,179
  4,423
  4,679
  4,945
  5,223
  5,514
  5,817
  6,134
  6,466
  6,813
  7,177
  7,557
  7,955
Revenue / Adjusted assets
  1.676
  1.678
  1.676
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
  1.677
Average production assets, $m
  639
  703
  771
  842
  915
  992
  1,071
  1,154
  1,240
  1,330
  1,423
  1,519
  1,620
  1,724
  1,833
  1,946
  2,064
  2,186
  2,314
  2,448
  2,587
  2,733
  2,885
  3,044
  3,210
  3,383
  3,565
  3,755
  3,954
  4,162
Working capital, $m
  106
  117
  129
  140
  153
  165
  179
  192
  207
  222
  237
  253
  270
  287
  305
  324
  344
  364
  386
  408
  431
  455
  481
  507
  535
  564
  594
  626
  659
  694
Total debt, $m
  378
  446
  518
  592
  670
  751
  835
  923
  1,014
  1,108
  1,206
  1,308
  1,415
  1,525
  1,640
  1,759
  1,884
  2,014
  2,149
  2,290
  2,438
  2,591
  2,752
  2,920
  3,095
  3,279
  3,471
  3,672
  3,882
  4,102
Total liabilities, $m
  675
  743
  815
  890
  967
  1,048
  1,132
  1,220
  1,311
  1,405
  1,504
  1,606
  1,712
  1,822
  1,937
  2,057
  2,181
  2,311
  2,446
  2,587
  2,735
  2,888
  3,049
  3,217
  3,392
  3,576
  3,768
  3,969
  4,179
  4,399
Total equity, $m
  546
  601
  659
  719
  782
  847
  915
  986
  1,060
  1,136
  1,215
  1,298
  1,384
  1,473
  1,566
  1,662
  1,763
  1,868
  1,977
  2,091
  2,210
  2,335
  2,465
  2,600
  2,742
  2,890
  3,046
  3,208
  3,378
  3,556
Total liabilities and equity, $m
  1,221
  1,344
  1,474
  1,609
  1,749
  1,895
  2,047
  2,206
  2,371
  2,541
  2,719
  2,904
  3,096
  3,295
  3,503
  3,719
  3,944
  4,179
  4,423
  4,678
  4,945
  5,223
  5,514
  5,817
  6,134
  6,466
  6,814
  7,177
  7,557
  7,955
Debt-to-equity ratio
  0.690
  0.740
  0.790
  0.820
  0.860
  0.890
  0.910
  0.940
  0.960
  0.980
  0.990
  1.010
  1.020
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.100
  1.110
  1.120
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
Adjusted equity ratio
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  72
  79
  87
  95
  103
  111
  119
  128
  138
  148
  168
  178
  189
  200
  212
  225
  237
  251
  265
  279
  294
  310
  327
  344
  362
  381
  401
  421
  443
  466
Depreciation, amort., depletion, $m
  58
  63
  67
  72
  77
  83
  88
  94
  100
  106
  99
  105
  112
  120
  127
  135
  143
  152
  161
  170
  180
  190
  200
  211
  223
  235
  248
  261
  275
  289
Funds from operations, $m
  131
  142
  154
  167
  180
  194
  208
  223
  238
  254
  267
  284
  302
  320
  340
  360
  381
  403
  425
  449
  474
  500
  527
  555
  585
  616
  648
  682
  718
  755
Change in working capital, $m
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Cash from operations, $m
  120
  131
  143
  155
  168
  181
  195
  209
  224
  239
  251
  268
  285
  303
  321
  341
  361
  382
  404
  427
  451
  476
  502
  529
  557
  587
  618
  650
  684
  720
Maintenance CAPEX, $m
  -40
  -44
  -49
  -54
  -58
  -64
  -69
  -74
  -80
  -86
  -92
  -99
  -105
  -112
  -120
  -127
  -135
  -143
  -152
  -161
  -170
  -180
  -190
  -200
  -211
  -223
  -235
  -248
  -261
  -275
New CAPEX, $m
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -89
  -93
  -97
  -100
  -104
  -109
  -113
  -118
  -123
  -128
  -134
  -139
  -146
  -152
  -159
  -166
  -174
  -182
  -190
  -199
  -208
Cash from investing activities, $m
  -103
  -109
  -117
  -125
  -132
  -141
  -149
  -157
  -166
  -175
  -185
  -196
  -205
  -216
  -229
  -240
  -253
  -266
  -280
  -295
  -309
  -326
  -342
  -359
  -377
  -397
  -417
  -438
  -460
  -483
Free cash flow, $m
  18
  22
  27
  31
  36
  41
  46
  52
  57
  63
  66
  72
  79
  86
  93
  100
  108
  116
  124
  133
  141
  150
  160
  170
  180
  190
  201
  213
  225
  237
Issuance/(repayment) of debt, $m
  65
  68
  71
  75
  78
  81
  84
  87
  91
  94
  98
  102
  106
  110
  115
  120
  125
  130
  135
  141
  147
  154
  161
  168
  175
  183
  192
  201
  210
  220
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  
  65
  68
  71
  75
  78
  81
  84
  87
  91
  94
  98
  102
  106
  110
  115
  120
  125
  130
  135
  141
  147
  154
  161
  168
  175
  183
  192
  201
  210
  220
Total cash flow (excl. dividends), $m
  83
  91
  98
  106
  113
  122
  130
  139
  148
  158
  164
  174
  185
  196
  208
  220
  233
  246
  259
  274
  289
  304
  320
  337
  355
  374
  393
  414
  435
  457
Retained Cash Flow (-), $m
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -71
  -73
  -76
  -79
  -83
  -86
  -89
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -130
  -136
  -142
  -148
  -155
  -162
  -170
  -178
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
  36
  40
  45
  51
  56
  62
  68
  75
  81
  85
  92
  99
  107
  115
  123
  132
  141
  150
  160
  170
  180
  191
  202
  213
  226
  238
  251
  265
  279
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  28
  32
  33
  35
  36
  37
  37
  36
  36
  34
  31
  30
  27
  25
  23
  20
  17
  15
  13
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  0
Current shareholders' claim on cash, %
  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 38.7
Price to Sales 1.2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 26.2
Price to Free Cash Flow -17.1
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 $1849.317 million for the last fiscal year's total revenue generated by Ensign Group. The default revenue input number comes from 0001 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 10.7% 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 5.8%, 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 94.4%.

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 5.4% 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 31.2%.

Life of production assets of 14.4 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 5.2%. 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 - $492.397 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 51.795 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 $2.0 billion.

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COMPANY NEWS

▶ Ensign Group: 2Q Earnings Snapshot   [06:25PM  Associated Press]
▶ New Strong Buy Stocks for July 2nd   [Jul-02-18 09:59AM  Zacks]
▶ 5 Knockout Stocks to Play the World Cup Fever   [Jun-28-18 12:50PM  InvestorPlace]
▶ New Strong Buy Stocks for June 26th   [Jun-26-18 09:15AM  Zacks]
▶ New Strong Buy Stocks for June 15th   [Jun-15-18 10:01AM  Zacks]
▶ New Strong Buy Stocks for June 12th   [Jun-12-18 10:42AM  Zacks]
▶ The Ensign Group Acquires Arizona Skilled Nursing Facility   [Jun-05-18 06:00AM  GlobeNewswire]
▶ New Strong Buy Stocks for May 22nd   [May-22-18 10:14AM  Zacks]
▶ New Strong Buy Stocks for May 18th   [May-18-18 10:36AM  Zacks]
▶ Ensign Group: 1Q Earnings Snapshot   [May-02-18 07:39PM  Associated Press]
▶ The Ensign Group Acquires Texas Post-Acute Care Campus   [May-01-18 09:00AM  GlobeNewswire]
▶ Ensign Group tops Street 4Q forecasts   [05:01AM  Associated Press]
▶ Should You Buy The Ensign Group Inc (NASDAQ:ENSG) At $22.81?   [Feb-01-18 05:39PM  Simply Wall St.]
▶ 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]

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