Intrinsic value of Five Star Senior Living Inc. - FVE

Previous Close

$1.05

  Intrinsic Value

$0.01

stock screener

  Rating & Target

str. sell

-99%

Previous close

$1.05

 
Intrinsic value

$0.01

 
Up/down potential

-99%

 
Rating

str. sell

We calculate the intrinsic value of FVE 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 0.1

 

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
  1,418
  1,450
  1,488
  1,530
  1,576
  1,627
  1,682
  1,742
  1,807
  1,876
  1,950
  2,029
  2,114
  2,203
  2,298
  2,399
  2,506
  2,618
  2,738
  2,863
  2,996
  3,136
  3,284
  3,439
  3,603
  3,775
  3,957
  4,147
  4,348
  4,560
Variable operating expenses, $m
  1,441
  1,474
  1,511
  1,553
  1,599
  1,650
  1,706
  1,766
  1,830
  1,899
  1,949
  2,028
  2,113
  2,202
  2,297
  2,398
  2,504
  2,617
  2,736
  2,862
  2,994
  3,134
  3,282
  3,437
  3,601
  3,773
  3,954
  4,145
  4,346
  4,557
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
  1,441
  1,474
  1,511
  1,553
  1,599
  1,650
  1,706
  1,766
  1,830
  1,899
  1,949
  2,028
  2,113
  2,202
  2,297
  2,398
  2,504
  2,617
  2,736
  2,862
  2,994
  3,134
  3,282
  3,437
  3,601
  3,773
  3,954
  4,145
  4,346
  4,557
Operating income, $m
  -24
  -24
  -24
  -24
  -24
  -23
  -23
  -23
  -23
  -23
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
EBITDA, $m
  37
  38
  39
  40
  42
  43
  44
  46
  48
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  99
  104
  109
  115
  120
Interest expense (income), $m
  5
  5
  6
  7
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  69
Earnings before tax, $m
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -15
  -16
  -18
  -20
  -21
  -23
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66
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
Net income, $m
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -15
  -16
  -18
  -20
  -21
  -23
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66

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
  414
  423
  434
  446
  460
  475
  491
  508
  527
  547
  569
  592
  617
  643
  671
  700
  731
  764
  799
  836
  874
  915
  958
  1,004
  1,051
  1,102
  1,155
  1,210
  1,269
  1,330
Adjusted assets (=assets-cash), $m
  414
  423
  434
  446
  460
  475
  491
  508
  527
  547
  569
  592
  617
  643
  671
  700
  731
  764
  799
  836
  874
  915
  958
  1,004
  1,051
  1,102
  1,155
  1,210
  1,269
  1,330
Revenue / Adjusted assets
  3.425
  3.428
  3.429
  3.430
  3.426
  3.425
  3.426
  3.429
  3.429
  3.430
  3.427
  3.427
  3.426
  3.426
  3.425
  3.427
  3.428
  3.427
  3.427
  3.425
  3.428
  3.427
  3.428
  3.425
  3.428
  3.426
  3.426
  3.427
  3.426
  3.429
Average production assets, $m
  252
  258
  265
  272
  281
  290
  299
  310
  322
  334
  347
  361
  376
  392
  409
  427
  446
  466
  487
  510
  533
  558
  584
  612
  641
  672
  704
  738
  774
  812
Working capital, $m
  -112
  -115
  -118
  -121
  -124
  -129
  -133
  -138
  -143
  -148
  -154
  -160
  -167
  -174
  -182
  -190
  -198
  -207
  -216
  -226
  -237
  -248
  -259
  -272
  -285
  -298
  -313
  -328
  -344
  -360
Total debt, $m
  66
  74
  83
  93
  104
  117
  130
  144
  160
  177
  194
  213
  234
  255
  278
  302
  328
  355
  384
  414
  446
  480
  515
  553
  592
  634
  677
  723
  772
  823
Total liabilities, $m
  341
  349
  358
  368
  379
  392
  405
  419
  435
  452
  470
  489
  509
  530
  553
  578
  603
  630
  659
  689
  721
  755
  790
  828
  867
  909
  952
  998
  1,047
  1,098
Total equity, $m
  72
  74
  76
  78
  80
  83
  86
  89
  92
  96
  100
  104
  108
  113
  117
  123
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  222
  233
Total liabilities and equity, $m
  413
  423
  434
  446
  459
  475
  491
  508
  527
  548
  570
  593
  617
  643
  670
  701
  731
  764
  799
  835
  874
  915
  958
  1,004
  1,051
  1,102
  1,154
  1,210
  1,269
  1,331
Debt-to-equity ratio
  0.910
  1.000
  1.090
  1.190
  1.300
  1.400
  1.510
  1.620
  1.730
  1.840
  1.950
  2.060
  2.170
  2.270
  2.370
  2.470
  2.560
  2.660
  2.750
  2.830
  2.920
  3.000
  3.070
  3.150
  3.220
  3.290
  3.350
  3.420
  3.480
  3.530
Adjusted equity ratio
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175
  0.175

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -29
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -15
  -16
  -18
  -20
  -21
  -23
  -26
  -28
  -30
  -33
  -35
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66
Depreciation, amort., depletion, $m
  61
  62
  63
  64
  65
  66
  68
  69
  71
  73
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
Funds from operations, $m
  32
  32
  33
  33
  33
  34
  34
  34
  35
  35
  36
  36
  37
  37
  38
  38
  39
  40
  41
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
Change in working capital, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
Cash from operations, $m
  34
  35
  36
  36
  37
  38
  38
  39
  40
  41
  42
  42
  43
  44
  45
  46
  48
  49
  50
  51
  53
  54
  55
  57
  59
  60
  62
  64
  66
  68
Maintenance CAPEX, $m
  -36
  -37
  -37
  -38
  -39
  -41
  -42
  -43
  -45
  -47
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
New CAPEX, $m
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
Cash from investing activities, $m
  -41
  -43
  -44
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -102
  -107
  -113
  -118
  -124
  -129
  -136
  -143
  -150
Free cash flow, $m
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -31
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -59
  -63
  -67
  -72
  -77
  -82
Issuance/(repayment) of debt, $m
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  37
  39
  41
  44
  46
  48
  51
Issuance/(repurchase) of shares, $m
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  52
  56
  59
  63
  68
  72
  77
Cash from financing (excl. dividends), $m  
  37
  39
  41
  43
  45
  47
  50
  52
  56
  58
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  74
  79
  84
  89
  95
  100
  107
  114
  120
  128
Total cash flow (excl. dividends), $m
  31
  32
  33
  34
  35
  36
  37
  38
  39
  40
  16
  17
  18
  20
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
Retained Cash Flow (-), $m
  -30
  -31
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -34
  -36
  -39
  -42
  -45
  -48
  -52
  -56
  -59
  -63
  -68
  -72
  -77
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
  1
  0
  0
  0
  0
  0
  0
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -31
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
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  63.9
  40.6
  25.8
  16.3
  10.3
  6.5
  4.1
  2.6
  1.6
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Five Star Senior Living Inc., formerly Five Star Quality Care, Inc., operates senior living communities, including independent living communities, assisted living communities and skilled nursing facilities (SNFs). The Company’s segments include senior living communities and rehabilitation and wellness. In the senior living communities segment, the Company operates for its own account or manage for the account of others independent living communities, assisted living communities and SNFs that are subject to centralized oversight and provide housing and services to elderly residents. In the rehabilitation and wellness segment, the Company provides services in the inpatient setting and in outpatient clinics. As of December 31, 2016, the Company operated 283 senior living communities located in 32 states with 31,830 living units, including 253 primarily independent and assisted living communities with 29,229 living units and 30 SNFs with 2,601 living units.

FINANCIAL RATIOS  of  Five Star Senior Living Inc. (FVE)

Valuation Ratios
P/E Ratio -2.4
Price to Sales 0
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow -2.3
Price to Free Cash Flow -0.7
Growth Rates
Sales Growth Rate 1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.2%
Cap. Spend. - 3 Yr. Gr. Rate 0.4%
Financial Strength
Quick Ratio 21
Current Ratio 0.1
LT Debt to Equity 35.4%
Total Debt to Equity 36.6%
Interest Coverage -3
Management Effectiveness
Return On Assets -3.2%
Ret/ On Assets - 3 Yr. Avg. -7.7%
Return On Total Capital -8.5%
Ret/ On T. Cap. - 3 Yr. Avg. -15.7%
Return On Equity -12.6%
Return On Equity - 3 Yr. Avg. -21.7%
Asset Turnover 2.6
Profitability Ratios
Gross Margin 81.9%
Gross Margin - 3 Yr. Avg. 82.6%
EBITDA Margin 1.7%
EBITDA Margin - 3 Yr. Avg. 0.8%
Operating Margin -1.2%
Oper. Margin - 3 Yr. Avg. -1.8%
Pre-Tax Margin -1.5%
Pre-Tax Margin - 3 Yr. Avg. -2%
Net Profit Margin -1.6%
Net Profit Margin - 3 Yr. Avg. -3.7%
Effective Tax Rate -10%
Eff/ Tax Rate - 3 Yr. Avg. -85.3%
Payout Ratio 0%

FVE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FVE stock intrinsic value calculation we used $1390 million for the last fiscal year's total revenue generated by Five Star Senior Living Inc.. The default revenue input number comes from 0001 income statement of Five Star Senior Living 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 FVE 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 4.3%, whose default value for FVE is calculated based on our internal credit rating of Five Star Senior Living 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 Five Star Senior Living 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 FVE stock the variable cost ratio is equal to 101.7%.

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 FVE 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 8.9% for Five Star Senior Living Inc..

Corporate tax rate of 27% is the nominal tax rate for Five Star Senior Living 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 FVE 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 FVE are equal to 17.8%.

Life of production assets of 6.9 years is the average useful life of capital assets used in Five Star Senior Living 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 FVE is equal to -7.9%. 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 - $71.169 million for Five Star Senior Living 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 50.848 million for Five Star Senior Living 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 Five Star Senior Living Inc. at the current share price and the inputted number of shares is $0.1 billion.

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