Intrinsic value of Health Insurance Innovations Cl A - HIIQ

Previous Close

$41.22

  Intrinsic Value

$70.33

stock screener

  Rating & Target

str. buy

+71%

Previous close

$41.22

 
Intrinsic value

$70.33

 
Up/down potential

+71%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as HIIQ.

We calculate the intrinsic value of HIIQ 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 0.6

 

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, %
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
Revenue, $m
  291
  334
  381
  431
  484
  540
  599
  661
  725
  793
  863
  936
  1,012
  1,091
  1,174
  1,259
  1,348
  1,440
  1,536
  1,636
  1,740
  1,848
  1,961
  2,078
  2,201
  2,328
  2,461
  2,600
  2,745
  2,897
Variable operating expenses, $m
  232
  266
  302
  341
  383
  427
  473
  521
  571
  624
  674
  731
  791
  853
  917
  984
  1,053
  1,125
  1,200
  1,278
  1,359
  1,444
  1,532
  1,624
  1,719
  1,819
  1,923
  2,031
  2,145
  2,263
Fixed operating expenses, $m
  18
  19
  19
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
Total operating expenses, $m
  250
  285
  321
  361
  403
  448
  494
  542
  593
  646
  697
  754
  815
  877
  942
  1,009
  1,079
  1,152
  1,227
  1,306
  1,387
  1,473
  1,562
  1,654
  1,750
  1,851
  1,955
  2,064
  2,179
  2,298
Operating income, $m
  41
  50
  59
  70
  81
  93
  105
  118
  132
  146
  166
  181
  198
  214
  232
  250
  269
  288
  309
  330
  352
  375
  399
  424
  450
  478
  506
  536
  567
  599
EBITDA, $m
  48
  57
  68
  78
  90
  102
  115
  129
  143
  158
  174
  190
  207
  224
  242
  261
  281
  301
  322
  345
  368
  392
  417
  443
  470
  498
  528
  559
  591
  625
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
Earnings before tax, $m
  41
  49
  58
  68
  78
  89
  100
  112
  125
  138
  156
  171
  186
  201
  217
  234
  251
  269
  288
  308
  328
  349
  371
  394
  418
  444
  470
  497
  526
  556
Tax expense, $m
  11
  13
  16
  18
  21
  24
  27
  30
  34
  37
  42
  46
  50
  54
  59
  63
  68
  73
  78
  83
  89
  94
  100
  107
  113
  120
  127
  134
  142
  150
Net income, $m
  30
  36
  42
  49
  57
  65
  73
  82
  91
  101
  114
  125
  135
  147
  159
  171
  183
  197
  210
  225
  239
  255
  271
  288
  305
  324
  343
  363
  384
  406

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
  177
  204
  232
  263
  295
  329
  365
  402
  442
  483
  526
  570
  616
  665
  715
  767
  821
  877
  936
  997
  1,060
  1,126
  1,194
  1,266
  1,340
  1,418
  1,499
  1,584
  1,672
  1,764
Adjusted assets (=assets-cash), $m
  177
  204
  232
  263
  295
  329
  365
  402
  442
  483
  526
  570
  616
  665
  715
  767
  821
  877
  936
  997
  1,060
  1,126
  1,194
  1,266
  1,340
  1,418
  1,499
  1,584
  1,672
  1,764
Revenue / Adjusted assets
  1.644
  1.637
  1.642
  1.639
  1.641
  1.641
  1.641
  1.644
  1.640
  1.642
  1.641
  1.642
  1.643
  1.641
  1.642
  1.641
  1.642
  1.642
  1.641
  1.641
  1.642
  1.641
  1.642
  1.641
  1.643
  1.642
  1.642
  1.641
  1.642
  1.642
Average production assets, $m
  33
  38
  44
  50
  56
  62
  69
  76
  83
  91
  99
  108
  116
  126
  135
  145
  155
  166
  177
  188
  200
  213
  226
  239
  253
  268
  283
  299
  316
  333
Working capital, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
Total debt, $m
  13
  27
  42
  59
  76
  94
  113
  133
  154
  175
  198
  222
  246
  272
  299
  326
  355
  385
  416
  448
  482
  517
  553
  591
  631
  672
  715
  760
  807
  856
Total liabilities, $m
  94
  108
  123
  139
  157
  175
  194
  214
  234
  256
  279
  303
  327
  353
  380
  407
  436
  466
  497
  529
  563
  598
  634
  672
  712
  753
  796
  841
  888
  937
Total equity, $m
  83
  96
  109
  123
  138
  154
  171
  189
  207
  226
  246
  267
  289
  312
  335
  360
  385
  411
  439
  467
  497
  528
  560
  594
  629
  665
  703
  743
  784
  827
Total liabilities and equity, $m
  177
  204
  232
  262
  295
  329
  365
  403
  441
  482
  525
  570
  616
  665
  715
  767
  821
  877
  936
  996
  1,060
  1,126
  1,194
  1,266
  1,341
  1,418
  1,499
  1,584
  1,672
  1,764
Debt-to-equity ratio
  0.160
  0.290
  0.390
  0.480
  0.550
  0.610
  0.660
  0.700
  0.740
  0.770
  0.800
  0.830
  0.850
  0.870
  0.890
  0.910
  0.920
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.020
  1.020
  1.030
  1.030
Adjusted equity ratio
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  36
  42
  49
  57
  65
  73
  82
  91
  101
  114
  125
  135
  147
  159
  171
  183
  197
  210
  225
  239
  255
  271
  288
  305
  324
  343
  363
  384
  406
Depreciation, amort., depletion, $m
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
Funds from operations, $m
  37
  43
  50
  58
  66
  74
  83
  93
  102
  112
  122
  133
  144
  156
  169
  182
  195
  209
  224
  239
  255
  271
  288
  306
  325
  344
  365
  386
  408
  431
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  37
  44
  51
  58
  66
  75
  83
  93
  103
  113
  122
  133
  145
  157
  169
  182
  196
  210
  224
  240
  255
  272
  289
  307
  326
  345
  365
  387
  409
  432
Maintenance CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
New CAPEX, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
Cash from investing activities, $m
  -7
  -8
  -8
  -9
  -10
  -10
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -41
Free cash flow, $m
  30
  36
  42
  49
  56
  64
  72
  80
  89
  99
  107
  117
  128
  139
  150
  162
  174
  187
  201
  215
  229
  244
  260
  276
  293
  311
  329
  349
  369
  390
Issuance/(repayment) of debt, $m
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
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  
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
Total cash flow (excl. dividends), $m
  43
  50
  57
  65
  73
  82
  91
  100
  110
  120
  130
  141
  152
  164
  177
  190
  203
  217
  232
  247
  263
  279
  296
  314
  333
  352
  373
  394
  416
  439
Retained Cash Flow (-), $m
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -40
  -41
  -43
Prev. year cash balance distribution, $m
  13
  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
  44
  38
  44
  51
  58
  66
  74
  83
  92
  101
  110
  120
  131
  142
  153
  165
  178
  191
  204
  218
  233
  248
  264
  281
  298
  316
  334
  354
  375
  396
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
  43
  34
  38
  42
  45
  48
  50
  52
  53
  53
  52
  51
  50
  48
  45
  42
  39
  35
  31
  28
  24
  21
  17
  14
  12
  9
  7
  5
  4
  3
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
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Health Insurance Innovations, Inc. is a developer, distributor and cloud-based administrator of individual and family health insurance plans (IFPs) and supplemental products, which include short-term medical (STM) insurance plans, and guaranteed-issue and underwritten hospital indemnity plans. The Company also develops, distributes and administers supplemental products, which include a range of additional insurance and non-insurance products, such as pharmacy benefit cards, dental plans, vision plans, cancer/critical illness plans, deductible and gap protection plans, and life insurance policies that are purchased as supplements to IFP. The Company's STM plans are provided up to six months, 11 months, or 364 days of health insurance coverage with a range of deductible and copay levels. Individual major medical (IMM) plans cover prescription drugs, pre-existing conditions and preventive care, while STM plans provide optional coverage for prescription drugs.

FINANCIAL RATIOS  of  Health Insurance Innovations Cl A (HIIQ)

Valuation Ratios
P/E Ratio 122.7
Price to Sales 3.3
Price to Book 12.8
Price to Tangible Book
Price to Cash Flow 34.1
Price to Free Cash Flow 40.9
Growth Rates
Sales Growth Rate 76.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 10.4%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 11.4%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 5.9%
EBITDA Margin - 3 Yr. Avg. 4.1%
Operating Margin 10.3%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate -62.5%
Eff/ Tax Rate - 3 Yr. Avg. 12.5%
Payout Ratio 0%

HIIQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HIIQ stock intrinsic value calculation we used $250.476 million for the last fiscal year's total revenue generated by Health Insurance Innovations Cl A. The default revenue input number comes from 0001 income statement of Health Insurance Innovations 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 HIIQ stock valuation model: a) initial revenue growth rate of 16.1% 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 HIIQ is calculated based on our internal credit rating of Health Insurance Innovations 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 Health Insurance Innovations 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 HIIQ stock the variable cost ratio is equal to 80%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $18 million in the base year in the intrinsic value calculation for HIIQ 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 Health Insurance Innovations Cl A.

Corporate tax rate of 27% is the nominal tax rate for Health Insurance Innovations 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 HIIQ 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 HIIQ are equal to 11.5%.

Life of production assets of 13 years is the average useful life of capital assets used in Health Insurance Innovations 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 HIIQ is equal to -0.5%. 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 - $84.205 million for Health Insurance Innovations 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 14.242 million for Health Insurance Innovations 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 Health Insurance Innovations Cl A at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Indexes Mixed As S&P 500 Today Climbs While Tech Stocks Struggle   [Nov-05-18 03:04PM  Investor's Business Daily]
▶ 3 Top Healthcare Stocks to Buy This Week   [Aug-28-18 08:00PM  Motley Fool]
▶ Tampa health insurer tops Fortune's list of 100 fastest-growing companies   [Aug-23-18 06:32AM  American City Business Journals]
▶ Small-Cap Stocks Lead, But This Country's Shares Fall And It's Not Turkey   [Aug-14-18 12:09PM  Investor's Business Daily]
▶ Stock Market Gives Back Gains, But This Health Play Is Hot   [11:57AM  Investor's Business Daily]
▶ Health Insurance Innovations: 2Q Earnings Snapshot   [Aug-01-18 06:08PM  Associated Press]
▶ Health Insurers Fly As Trump Takes New Ax To ObamaCare   [04:22PM  Investor's Business Daily]
▶ Founder of Tampa health insurance company is out   [Jun-08-18 10:54AM  American City Business Journals]
▶ Stocks To Watch: Health Insurance Innovations Sees RS Rating Jump To 84   [May-23-18 03:00AM  Investor's Business Daily]
▶ New York investment firm stocks up on Tampa health insurer shares   [06:43AM  American City Business Journals]
▶ Health Insurance Innovations: 1Q Earnings Snapshot   [May-03-18 05:13AM  Associated Press]
▶ U.S. Insurance Stock Outlook - April 2018   [Apr-17-18 04:02PM  Zacks]
▶ Health Insurance Innovations posts 4Q profit   [Feb-28-18 06:59PM  Associated Press]
▶ See which Tampa Bay stocks were hit hardest in a market downturn   [Feb-06-18 07:20AM  American City Business Journals]
▶ Health Insurance Innovations Clears Key Benchmark, Hitting 90-Plus RS Rating   [Dec-13-17 03:00AM  Investor's Business Daily]

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