Intrinsic value of Entellus Medical - ENTL

Previous Close

$18.74

  Intrinsic Value

$0.35

stock screener

  Rating & Target

str. sell

-98%

  Value-price divergence*

-80%

Previous close

$18.74

 
Intrinsic value

$0.35

 
Up/down potential

-98%

 
Rating

str. sell

 
Value-price divergence*

-80%

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

We calculate the intrinsic value of ENTL 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 2016), $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 0.5

 

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, %
  20.97
  15.80
  14.72
  13.75
  12.87
  12.09
  11.38
  10.74
  10.17
  9.65
  9.18
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
Revenue, $m
  75
  87
  100
  113
  128
  143
  160
  177
  195
  214
  233
  254
  275
  297
  320
  344
  369
  395
  422
  449
  478
  509
  540
  573
  607
  643
  680
  718
  759
  801
  845
Variable operating expenses, $m
 
  108
  124
  141
  159
  178
  198
  219
  242
  265
  289
  315
  341
  368
  397
  427
  457
  489
  523
  557
  593
  631
  670
  710
  753
  797
  843
  891
  941
  993
  1,048
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
  102
  108
  124
  141
  159
  178
  198
  219
  242
  265
  289
  315
  341
  368
  397
  427
  457
  489
  523
  557
  593
  631
  670
  710
  753
  797
  843
  891
  941
  993
  1,048
Operating income, $m
  -27
  -21
  -24
  -27
  -31
  -34
  -38
  -42
  -47
  -51
  -56
  -61
  -66
  -71
  -77
  -83
  -89
  -95
  -101
  -108
  -115
  -122
  -130
  -137
  -146
  -154
  -163
  -172
  -182
  -192
  -203
EBITDA, $m
  -25
  -19
  -21
  -24
  -27
  -31
  -34
  -38
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -79
  -84
  -90
  -96
  -102
  -109
  -115
  -122
  -130
  -137
  -145
  -153
  -162
  -171
  -181
Interest expense (income), $m
  2
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
Earnings before tax, $m
  -29
  -22
  -25
  -29
  -33
  -37
  -42
  -47
  -52
  -57
  -62
  -68
  -74
  -80
  -86
  -93
  -100
  -107
  -114
  -122
  -130
  -138
  -147
  -156
  -165
  -175
  -185
  -196
  -207
  -219
  -231
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
  0
Net income, $m
  -29
  -22
  -25
  -29
  -33
  -37
  -42
  -47
  -52
  -57
  -62
  -68
  -74
  -80
  -86
  -93
  -100
  -107
  -114
  -122
  -130
  -138
  -147
  -156
  -165
  -175
  -185
  -196
  -207
  -219
  -231

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  32
  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
  72
  46
  53
  60
  68
  76
  85
  94
  104
  114
  124
  135
  147
  158
  171
  183
  197
  211
  225
  240
  255
  271
  288
  306
  324
  343
  363
  383
  405
  427
  451
Adjusted assets (=assets-cash), $m
  40
  46
  53
  60
  68
  76
  85
  94
  104
  114
  124
  135
  147
  158
  171
  183
  197
  211
  225
  240
  255
  271
  288
  306
  324
  343
  363
  383
  405
  427
  451
Revenue / Adjusted assets
  1.875
  1.891
  1.887
  1.883
  1.882
  1.882
  1.882
  1.883
  1.875
  1.877
  1.879
  1.881
  1.871
  1.880
  1.871
  1.880
  1.873
  1.872
  1.876
  1.871
  1.875
  1.878
  1.875
  1.873
  1.873
  1.875
  1.873
  1.875
  1.874
  1.876
  1.874
Average production assets, $m
  11
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  36
  38
  42
  45
  48
  52
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  106
  112
  118
Working capital, $m
  30
  8
  9
  11
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
Total debt, $m
  20
  15
  20
  25
  31
  37
  43
  49
  56
  63
  70
  78
  86
  94
  103
  111
  121
  130
  140
  151
  162
  173
  185
  197
  210
  223
  237
  251
  266
  282
  299
Total liabilities, $m
  37
  32
  37
  42
  48
  54
  60
  66
  73
  80
  87
  95
  103
  111
  120
  128
  138
  147
  157
  168
  179
  190
  202
  214
  227
  240
  254
  268
  283
  299
  316
Total equity, $m
  35
  14
  16
  18
  20
  23
  26
  28
  31
  34
  37
  41
  44
  48
  51
  55
  59
  63
  67
  72
  77
  81
  86
  92
  97
  103
  109
  115
  121
  128
  135
Total liabilities and equity, $m
  72
  46
  53
  60
  68
  77
  86
  94
  104
  114
  124
  136
  147
  159
  171
  183
  197
  210
  224
  240
  256
  271
  288
  306
  324
  343
  363
  383
  404
  427
  451
Debt-to-equity ratio
  0.571
  1.110
  1.270
  1.400
  1.500
  1.590
  1.670
  1.730
  1.790
  1.840
  1.880
  1.910
  1.950
  1.980
  2.000
  2.020
  2.050
  2.060
  2.080
  2.100
  2.110
  2.120
  2.140
  2.150
  2.160
  2.170
  2.180
  2.190
  2.190
  2.200
  2.210
Adjusted equity ratio
  0.075
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -29
  -22
  -25
  -29
  -33
  -37
  -42
  -47
  -52
  -57
  -62
  -68
  -74
  -80
  -86
  -93
  -100
  -107
  -114
  -122
  -130
  -138
  -147
  -156
  -165
  -175
  -185
  -196
  -207
  -219
  -231
Depreciation, amort., depletion, $m
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  -20
  -20
  -23
  -26
  -30
  -34
  -38
  -42
  -47
  -51
  -56
  -61
  -66
  -72
  -78
  -84
  -90
  -96
  -103
  -110
  -117
  -125
  -133
  -141
  -149
  -158
  -167
  -177
  -187
  -198
  -209
Change in working capital, $m
  0
  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
  3
  4
  4
  4
  4
Cash from operations, $m
  -20
  -21
  -24
  -27
  -31
  -35
  -39
  -44
  -48
  -53
  -58
  -63
  -68
  -74
  -80
  -86
  -92
  -99
  -106
  -113
  -120
  -128
  -136
  -144
  -153
  -162
  -171
  -181
  -191
  -202
  -213
Maintenance CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -4
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Cash from investing activities, $m
  12
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
Free cash flow, $m
  -8
  -24
  -28
  -32
  -36
  -41
  -45
  -50
  -55
  -61
  -66
  -72
  -78
  -84
  -91
  -98
  -105
  -112
  -120
  -128
  -136
  -144
  -153
  -163
  -172
  -183
  -193
  -204
  -216
  -228
  -240
Issuance/(repayment) of debt, $m
  0
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
Issuance/(repurchase) of shares, $m
  1
  24
  28
  31
  36
  40
  45
  49
  55
  60
  65
  71
  77
  83
  90
  97
  104
  111
  119
  126
  135
  143
  152
  161
  171
  181
  191
  202
  214
  226
  238
Cash from financing (excl. dividends), $m  
  1
  28
  33
  36
  41
  46
  51
  55
  62
  67
  72
  79
  85
  91
  99
  106
  113
  121
  129
  136
  146
  154
  164
  173
  184
  194
  205
  216
  229
  242
  254
Total cash flow (excl. dividends), $m
  -7
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
Retained Cash Flow (-), $m
  23
  -24
  -28
  -31
  -36
  -40
  -45
  -49
  -55
  -60
  -65
  -71
  -77
  -83
  -90
  -97
  -104
  -111
  -119
  -126
  -135
  -143
  -152
  -161
  -171
  -181
  -191
  -202
  -214
  -226
  -238
Prev. year cash balance distribution, $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
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
 
  3
  -23
  -27
  -31
  -35
  -39
  -44
  -49
  -54
  -59
  -64
  -70
  -76
  -82
  -89
  -96
  -102
  -110
  -117
  -125
  -133
  -142
  -151
  -160
  -169
  -179
  -190
  -201
  -212
  -224
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
 
  3
  -21
  -23
  -25
  -27
  -28
  -30
  -30
  -31
  -31
  -31
  -30
  -29
  -28
  -26
  -24
  -22
  -20
  -18
  -16
  -14
  -12
  -10
  -8
  -7
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  100
  83.4
  69.6
  58.2
  48.6
  40.7
  34.1
  28.5
  23.9
  20.1
  16.9
  14.2
  11.9
  10.0
  8.4
  7.1
  6.0
  5.0
  4.2
  3.6
  3.0
  2.5
  2.1
  1.8
  1.5
  1.3
  1.1
  0.9
  0.8
  0.6
  0.5

Entellus Medical, Inc. is a medical technology company. The Company is focused on delivering patient and physician experiences through products designed for the minimally invasive treatment of chronic and recurrent sinusitis in both adult and pediatric patients. Its three core product lines, XprESS Multi-Sinus Dilation Systems, MiniFESS Surgical Instruments, and FocESS Imaging & Navigation, are designed to enable ear, nose and throat (ENT), physicians to perform a range of procedures in the ENT physician office and to simplify operating room-based treatment. The Company's XprESS Multi-Sinus Dilation family of products consists of its XprESS Pro device, its XprESS LoProfile device and its XprESS Ultra device. The MiniFESS family of surgical instruments includes eight devices designed to enable physicians to perform various surgical procedures. The Fiagon Image Guidance System (IGS) consists of a navigation unit, navigation sensor, software instruments and a patient localizer.

FINANCIAL RATIOS  of  Entellus Medical (ENTL)

Valuation Ratios
P/E Ratio -12.2
Price to Sales 4.7
Price to Book 10.1
Price to Tangible Book
Price to Cash Flow -17.7
Price to Free Cash Flow -14.8
Growth Rates
Sales Growth Rate 21%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 31.4%
Total Debt to Equity 57.1%
Interest Coverage -14
Management Effectiveness
Return On Assets -34%
Ret/ On Assets - 3 Yr. Avg. -32.2%
Return On Total Capital -43.6%
Ret/ On T. Cap. - 3 Yr. Avg. -48.3%
Return On Equity -62.4%
Return On Equity - 3 Yr. Avg. -6.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 74.7%
Gross Margin - 3 Yr. Avg. 76.5%
EBITDA Margin -33.3%
EBITDA Margin - 3 Yr. Avg. -22.6%
Operating Margin -36%
Oper. Margin - 3 Yr. Avg. -23.5%
Pre-Tax Margin -38.7%
Pre-Tax Margin - 3 Yr. Avg. -27.3%
Net Profit Margin -38.7%
Net Profit Margin - 3 Yr. Avg. -27.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

ENTL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ENTL stock intrinsic value calculation we used $75 million for the last fiscal year's total revenue generated by Entellus Medical. The default revenue input number comes from 2016 income statement of Entellus Medical. 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 ENTL stock valuation model: a) initial revenue growth rate of 15.8% 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 ENTL is calculated based on our internal credit rating of Entellus Medical, 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 Entellus Medical.
    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 ENTL stock the variable cost ratio is equal to 124%.

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 ENTL 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 10% for Entellus Medical.

Corporate tax rate of 27% is the nominal tax rate for Entellus Medical. 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 ENTL 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 ENTL are equal to 14%.

Life of production assets of 5.3 years is the average useful life of capital assets used in Entellus Medical 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 ENTL is equal to 9.3%. 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 - $35 million for Entellus Medical - 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 25.342 million for Entellus Medical 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 Entellus Medical at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Entellus reports 2Q loss   [Aug-04-17 02:50AM  Associated Press]
▶ [$$] Entellus Medical Agrees to Acquire KKR-Backed Spirox   [Jul-07-17 12:05PM  The Wall Street Journal]
▶ Entellus reports 1Q loss   [May-03-17 05:56PM  Associated Press]
▶ Entellus reports 4Q loss   [04:24PM  Associated Press]
▶ Heres What Smart Money Thinks of Ryerson Holding Corp (RYI)   [Dec-08-16 01:23PM  at Insider Monkey]
Financial statements of ENTL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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