Intrinsic value of Evolent Health Cl A - EVH

Previous Close

$16.10

  Intrinsic Value

$3,609

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

0%

Previous close

$16.10

 
Intrinsic value

$3,609

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of EVH 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 1.2

 

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, %
  161.86
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  254
  406
  628
  939
  1,362
  1,922
  2,643
  3,547
  4,658
  5,993
  7,570
  9,400
  11,493
  13,852
  16,482
  19,380
  22,543
  25,968
  29,648
  33,578
  37,752
  42,163
  46,809
  51,685
  56,788
  62,119
  67,678
  73,467
  79,490
  85,752
  92,262
Variable operating expenses, $m
 
  -1,185
  -1,865
  -2,820
  -4,120
  -5,838
  -8,050
  -10,827
  -14,236
  -18,336
  -23,176
  -28,857
  -35,281
  -42,525
  -50,596
  -59,492
  -69,204
  -79,717
  -91,015
  -103,079
  -115,892
  -129,436
  -143,697
  -158,665
  -174,332
  -190,697
  -207,761
  -225,532
  -244,022
  -263,247
  -283,229
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
  492
  -1,185
  -1,865
  -2,820
  -4,120
  -5,838
  -8,050
  -10,827
  -14,236
  -18,336
  -23,176
  -28,857
  -35,281
  -42,525
  -50,596
  -59,492
  -69,204
  -79,717
  -91,015
  -103,079
  -115,892
  -129,436
  -143,697
  -158,665
  -174,332
  -190,697
  -207,761
  -225,532
  -244,022
  -263,247
  -283,229
Operating income, $m
  -237
  1,591
  2,493
  3,759
  5,482
  7,760
  10,692
  14,374
  18,893
  24,329
  30,746
  38,257
  46,773
  56,378
  67,078
  78,872
  91,747
  105,685
  120,663
  136,657
  153,643
  171,599
  190,506
  210,349
  231,121
  252,816
  275,439
  298,999
  323,512
  349,000
  375,491
EBITDA, $m
  -220
  1,666
  2,575
  3,850
  5,587
  7,882
  10,836
  14,545
  19,098
  24,575
  31,040
  38,545
  47,125
  56,801
  67,582
  79,464
  92,436
  106,479
  121,569
  137,683
  154,797
  172,888
  191,937
  211,929
  232,856
  254,715
  277,508
  301,245
  325,942
  351,621
  378,311
Interest expense (income), $m
  0
  4
  15
  30
  51
  80
  118
  168
  230
  306
  397
  505
  630
  774
  935
  1,115
  1,313
  1,530
  1,764
  2,016
  2,285
  2,571
  2,873
  3,191
  3,525
  3,874
  4,239
  4,620
  5,016
  5,428
  5,857
Earnings before tax, $m
  -238
  1,587
  2,478
  3,729
  5,431
  7,680
  10,574
  14,206
  18,664
  24,023
  30,349
  37,752
  46,143
  55,604
  66,143
  77,757
  90,434
  104,155
  118,899
  134,641
  151,358
  169,028
  187,633
  207,158
  227,596
  248,942
  271,200
  294,380
  318,496
  343,571
  369,634
Tax expense, $m
  -11
  429
  669
  1,007
  1,466
  2,074
  2,855
  3,836
  5,039
  6,486
  8,194
  10,193
  12,459
  15,013
  17,859
  20,994
  24,417
  28,122
  32,103
  36,353
  40,867
  45,638
  50,661
  55,933
  61,451
  67,214
  73,224
  79,483
  85,994
  92,764
  99,801
Net income, $m
  -160
  1,159
  1,809
  2,722
  3,965
  5,607
  7,719
  10,370
  13,624
  17,537
  22,155
  27,559
  33,684
  40,591
  48,284
  56,763
  66,017
  76,033
  86,796
  98,288
  110,491
  123,390
  136,972
  151,226
  166,145
  181,728
  197,976
  214,897
  232,502
  250,807
  269,833

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  179
  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
  1,200
  1,632
  2,522
  3,771
  5,472
  7,720
  10,613
  14,246
  18,705
  24,069
  30,401
  37,752
  46,155
  55,632
  66,192
  77,830
  90,534
  104,288
  119,068
  134,851
  151,613
  169,331
  187,988
  207,569
  228,066
  249,475
  271,799
  295,048
  319,236
  344,387
  370,528
Adjusted assets (=assets-cash), $m
  1,021
  1,632
  2,522
  3,771
  5,472
  7,720
  10,613
  14,246
  18,705
  24,069
  30,401
  37,752
  46,155
  55,632
  66,192
  77,830
  90,534
  104,288
  119,068
  134,851
  151,613
  169,331
  187,988
  207,569
  228,066
  249,475
  271,799
  295,048
  319,236
  344,387
  370,528
Revenue / Adjusted assets
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
Average production assets, $m
  233
  373
  576
  861
  1,249
  1,763
  2,423
  3,253
  4,271
  5,496
  6,942
  8,620
  10,539
  12,703
  15,114
  17,771
  20,672
  23,812
  27,187
  30,791
  34,618
  38,664
  42,924
  47,395
  52,075
  56,963
  62,061
  67,369
  72,892
  78,635
  84,604
Working capital, $m
  133
  -74
  -114
  -170
  -247
  -348
  -478
  -642
  -843
  -1,085
  -1,370
  -1,701
  -2,080
  -2,507
  -2,983
  -3,508
  -4,080
  -4,700
  -5,366
  -6,078
  -6,833
  -7,632
  -8,472
  -9,355
  -10,279
  -11,244
  -12,250
  -13,298
  -14,388
  -15,521
  -16,699
Total debt, $m
  120
  418
  851
  1,460
  2,288
  3,383
  4,791
  6,561
  8,733
  11,345
  14,429
  18,008
  22,101
  26,716
  31,858
  37,526
  43,713
  50,411
  57,609
  65,295
  73,458
  82,087
  91,173
  100,709
  110,691
  121,117
  131,989
  143,311
  155,091
  167,340
  180,070
Total liabilities, $m
  497
  795
  1,228
  1,837
  2,665
  3,760
  5,168
  6,938
  9,110
  11,722
  14,806
  18,385
  22,478
  27,093
  32,235
  37,903
  44,090
  50,788
  57,986
  65,672
  73,835
  82,464
  91,550
  101,086
  111,068
  121,494
  132,366
  143,688
  155,468
  167,717
  180,447
Total equity, $m
  703
  837
  1,294
  1,935
  2,807
  3,960
  5,444
  7,308
  9,596
  12,348
  15,596
  19,367
  23,678
  28,539
  33,956
  39,927
  46,444
  53,500
  61,082
  69,179
  77,777
  86,867
  96,438
  106,483
  116,998
  127,981
  139,433
  151,360
  163,768
  176,671
  190,081
Total liabilities and equity, $m
  1,200
  1,632
  2,522
  3,772
  5,472
  7,720
  10,612
  14,246
  18,706
  24,070
  30,402
  37,752
  46,156
  55,632
  66,191
  77,830
  90,534
  104,288
  119,068
  134,851
  151,612
  169,331
  187,988
  207,569
  228,066
  249,475
  271,799
  295,048
  319,236
  344,388
  370,528
Debt-to-equity ratio
  0.171
  0.500
  0.660
  0.750
  0.820
  0.850
  0.880
  0.900
  0.910
  0.920
  0.930
  0.930
  0.930
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.940
  0.950
  0.950
  0.950
  0.950
  0.950
  0.950
  0.950
  0.950
  0.950
Adjusted equity ratio
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -160
  1,159
  1,809
  2,722
  3,965
  5,607
  7,719
  10,370
  13,624
  17,537
  22,155
  27,559
  33,684
  40,591
  48,284
  56,763
  66,017
  76,033
  86,796
  98,288
  110,491
  123,390
  136,972
  151,226
  166,145
  181,728
  197,976
  214,897
  232,502
  250,807
  269,833
Depreciation, amort., depletion, $m
  17
  75
  82
  91
  104
  121
  143
  171
  205
  246
  294
  287
  351
  423
  504
  592
  689
  794
  906
  1,026
  1,154
  1,289
  1,431
  1,580
  1,736
  1,899
  2,069
  2,246
  2,430
  2,621
  2,820
Funds from operations, $m
  -40
  1,234
  1,891
  2,814
  4,069
  5,728
  7,862
  10,542
  13,829
  17,783
  22,449
  27,847
  34,036
  41,014
  48,788
  57,355
  66,706
  76,827
  87,702
  99,314
  111,645
  124,679
  138,403
  152,805
  167,881
  183,626
  200,045
  217,143
  234,932
  253,428
  272,653
Change in working capital, $m
  -4
  -28
  -40
  -56
  -77
  -101
  -130
  -164
  -201
  -242
  -285
  -331
  -379
  -427
  -476
  -525
  -573
  -620
  -666
  -711
  -755
  -799
  -841
  -883
  -924
  -965
  -1,006
  -1,048
  -1,090
  -1,134
  -1,178
Cash from operations, $m
  -36
  1,261
  1,931
  2,870
  4,146
  5,829
  7,993
  10,705
  14,030
  18,025
  22,734
  28,178
  34,414
  41,441
  49,264
  57,879
  67,278
  77,447
  88,368
  100,025
  112,401
  125,478
  139,244
  153,688
  168,804
  184,591
  201,051
  218,191
  236,022
  254,562
  273,831
Maintenance CAPEX, $m
  0
  -8
  -12
  -19
  -29
  -42
  -59
  -81
  -108
  -142
  -183
  -231
  -287
  -351
  -423
  -504
  -592
  -689
  -794
  -906
  -1,026
  -1,154
  -1,289
  -1,431
  -1,580
  -1,736
  -1,899
  -2,069
  -2,246
  -2,430
  -2,621
New CAPEX, $m
  -16
  -140
  -203
  -285
  -388
  -513
  -661
  -829
  -1,018
  -1,225
  -1,446
  -1,678
  -1,919
  -2,164
  -2,411
  -2,657
  -2,901
  -3,140
  -3,375
  -3,604
  -3,827
  -4,046
  -4,260
  -4,471
  -4,680
  -4,888
  -5,097
  -5,308
  -5,523
  -5,743
  -5,969
Cash from investing activities, $m
  -98
  -148
  -215
  -304
  -417
  -555
  -720
  -910
  -1,126
  -1,367
  -1,629
  -1,909
  -2,206
  -2,515
  -2,834
  -3,161
  -3,493
  -3,829
  -4,169
  -4,510
  -4,853
  -5,200
  -5,549
  -5,902
  -6,260
  -6,624
  -6,996
  -7,377
  -7,769
  -8,173
  -8,590
Free cash flow, $m
  -134
  1,114
  1,715
  2,565
  3,729
  5,274
  7,273
  9,795
  12,904
  16,658
  21,105
  26,268
  32,208
  38,926
  46,430
  54,718
  63,785
  73,617
  84,200
  95,515
  107,547
  120,278
  133,695
  147,786
  162,545
  177,967
  194,055
  210,813
  228,253
  246,389
  265,241
Issuance/(repayment) of debt, $m
  121
  298
  433
  608
  828
  1,095
  1,409
  1,769
  2,172
  2,612
  3,084
  3,580
  4,092
  4,615
  5,142
  5,668
  6,187
  6,698
  7,198
  7,686
  8,163
  8,629
  9,086
  9,536
  9,982
  10,426
  10,872
  11,322
  11,780
  12,248
  12,731
Issuance/(repurchase) of shares, $m
  1
  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  
  122
  298
  433
  608
  828
  1,095
  1,409
  1,769
  2,172
  2,612
  3,084
  3,580
  4,092
  4,615
  5,142
  5,668
  6,187
  6,698
  7,198
  7,686
  8,163
  8,629
  9,086
  9,536
  9,982
  10,426
  10,872
  11,322
  11,780
  12,248
  12,731
Total cash flow (excl. dividends), $m
  -11
  1,412
  2,149
  3,174
  4,557
  6,369
  8,682
  11,564
  15,076
  19,270
  24,189
  29,848
  36,301
  43,542
  51,572
  60,386
  69,972
  80,315
  91,398
  103,202
  115,710
  128,907
  142,781
  157,322
  172,526
  188,393
  204,927
  222,136
  240,033
  258,638
  277,972
Retained Cash Flow (-), $m
  -54
  -313
  -456
  -641
  -872
  -1,153
  -1,484
  -1,864
  -2,288
  -2,752
  -3,248
  -3,771
  -4,311
  -4,862
  -5,417
  -5,970
  -6,518
  -7,056
  -7,582
  -8,097
  -8,599
  -9,090
  -9,571
  -10,045
  -10,515
  -10,983
  -11,452
  -11,927
  -12,409
  -12,902
  -13,410
Prev. year cash balance distribution, $m
 
  179
  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
 
  1,277
  1,692
  2,533
  3,685
  5,216
  7,198
  9,701
  12,788
  16,518
  20,940
  26,077
  31,990
  38,680
  46,155
  54,416
  63,455
  73,260
  83,815
  95,105
  107,111
  119,817
  133,210
  147,277
  162,012
  177,410
  193,474
  210,209
  227,624
  245,735
  264,561
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
 
  1,225
  1,549
  2,204
  3,034
  4,043
  5,224
  6,554
  7,993
  9,489
  10,978
  12,384
  13,651
  14,707
  15,495
  15,976
  16,125
  15,940
  15,435
  14,643
  13,611
  12,393
  11,053
  9,653
  8,252
  6,902
  5,645
  4,512
  3,522
  2,682
  1,992
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

Evolent Health, Inc. is engaged in healthcare delivery and payment. The Company supports health systems and physician organizations in their migration toward value-based care and population health management. The Company provides an end-to-end, technology-enabled services platform for providers. The Company's platform, powered by its technology, processes and integrated services, enables providers to migrate their economic orientation from fee-for-service (FFS) reimbursement to payment models that reward value-based payment models. The Company's services include providing its customers, with a population management platform, integrated data and analytics capabilities, pharmacy benefit management (PBM) services and comprehensive health plan administration services. Its value-based operations are empowered and supported by Identifi. Identifi is the Company's technology platform that aggregates and analyzes data, manages care workflows and engages patients.

FINANCIAL RATIOS  of  Evolent Health Cl A (EVH)

Valuation Ratios
P/E Ratio -6.8
Price to Sales 4.3
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow -30.4
Price to Free Cash Flow -21
Growth Rates
Sales Growth Rate 161.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 128.6%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 17.1%
Total Debt to Equity 17.1%
Interest Coverage 0
Management Effectiveness
Return On Assets -14.4%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital -21.7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.3%
Return On Equity -23.7%
Return On Equity - 3 Yr. Avg. 8.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 39%
Gross Margin - 3 Yr. Avg. 26.4%
EBITDA Margin -87%
EBITDA Margin - 3 Yr. Avg. 91.3%
Operating Margin -93.7%
Oper. Margin - 3 Yr. Avg. 96.3%
Pre-Tax Margin -93.7%
Pre-Tax Margin - 3 Yr. Avg. 86.6%
Net Profit Margin -63%
Net Profit Margin - 3 Yr. Avg. 93.1%
Effective Tax Rate 4.6%
Eff/ Tax Rate - 3 Yr. Avg. 3.8%
Payout Ratio 0%

EVH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EVH stock intrinsic value calculation we used $254 million for the last fiscal year's total revenue generated by Evolent Health Cl A. The default revenue input number comes from 2016 income statement of Evolent Health Cl A. 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 EVH stock valuation model: a) initial revenue growth rate of 60% 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 EVH is calculated based on our internal credit rating of Evolent Health Cl A, 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 Evolent Health Cl A.
    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 EVH stock the variable cost ratio is equal to -282.3%.

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 EVH 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 Evolent Health Cl A.

Corporate tax rate of 27% is the nominal tax rate for Evolent Health Cl A. 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 EVH 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 EVH are equal to 91.7%.

Life of production assets of 50.1 years is the average useful life of capital assets used in Evolent Health Cl A 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 EVH is equal to -18.1%. 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 - $703 million for Evolent Health Cl A - 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 75.145 million for Evolent Health Cl A 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 Evolent Health Cl A at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Advisory Board reaches $2.58B deal to sell education, health care businesses   [Aug-30-17 01:51PM  American City Business Journals]
▶ Evolent Health stock falls on bigger loss, new stock offering   [05:25PM  American City Business Journals]
▶ Evolent Health reports 2Q loss   [Aug-07-17 11:56PM  Associated Press]
▶ Analysts: Advisory Board acquisition by UnitedHealthcare, Vista would make sense   [Jul-10-17 05:24PM  American City Business Journals]
▶ ETFs with exposure to Evolent Health, Inc. : May 18, 2017   [May-18-17 01:42PM  Capital Cube]
▶ 3 Digital Health Companies Poised for Sizzling Growth   [May-16-17 03:02PM  Motley Fool]
▶ Evolent Health reports 1Q loss   [May-09-17 05:36PM  Associated Press]
▶ Advisory Board reports massive jump in income despite tumultuous first quarter   [May-05-17 03:15PM  American City Business Journals]
▶ Report: Evolent Health weighs merger with Advisory Board   [10:24AM  American City Business Journals]
▶ Evolent Health reports 4Q loss   [06:35PM  Associated Press]
Financial statements of EVH
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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