Intrinsic value of Harrow Health, Inc. - HROW

Previous Close

$5.32

  Intrinsic Value

$135.42

stock screener

  Rating & Target

str. buy

+999%

Previous close

$5.32

 
Intrinsic value

$135.42

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of HROW 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, %
  55.20
  50.18
  45.66
  41.60
  37.94
  34.64
  31.68
  29.01
  26.61
  24.45
  22.50
  20.75
  19.18
  17.76
  16.48
  15.34
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
Revenue, $m
  64
  96
  139
  197
  272
  366
  482
  622
  787
  980
  1,200
  1,449
  1,727
  2,034
  2,369
  2,733
  3,124
  3,541
  3,985
  4,455
  4,949
  5,469
  6,013
  6,581
  7,173
  7,790
  8,433
  9,100
  9,795
  10,516
Variable operating expenses, $m
  34
  51
  73
  104
  143
  192
  252
  325
  412
  512
  627
  757
  902
  1,063
  1,238
  1,428
  1,632
  1,850
  2,082
  2,327
  2,585
  2,857
  3,141
  3,438
  3,747
  4,069
  4,405
  4,754
  5,116
  5,493
Fixed operating expenses, $m
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
  35
  36
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
Total operating expenses, $m
  61
  78
  101
  132
  172
  222
  282
  356
  444
  544
  660
  791
  937
  1,098
  1,274
  1,465
  1,670
  1,888
  2,121
  2,367
  2,626
  2,899
  3,184
  3,482
  3,792
  4,115
  4,452
  4,802
  5,165
  5,543
Operating income, $m
  3
  18
  38
  65
  100
  145
  199
  265
  344
  435
  540
  659
  791
  936
  1,096
  1,268
  1,454
  1,653
  1,864
  2,088
  2,323
  2,570
  2,829
  3,099
  3,381
  3,675
  3,981
  4,299
  4,629
  4,973
EBITDA, $m
  6
  22
  44
  73
  110
  158
  217
  288
  372
  470
  582
  709
  851
  1,008
  1,179
  1,364
  1,564
  1,777
  2,004
  2,244
  2,496
  2,762
  3,039
  3,330
  3,632
  3,948
  4,276
  4,617
  4,972
  5,341
Interest expense (income), $m
  0
  3
  5
  8
  12
  17
  24
  33
  44
  57
  72
  90
  111
  134
  160
  188
  220
  253
  290
  329
  370
  414
  460
  508
  559
  612
  667
  725
  784
  847
  911
Earnings before tax, $m
  1
  13
  30
  53
  83
  120
  166
  222
  287
  363
  450
  548
  657
  777
  907
  1,049
  1,201
  1,363
  1,535
  1,717
  1,909
  2,110
  2,321
  2,540
  2,770
  3,008
  3,256
  3,514
  3,783
  4,062
Tax expense, $m
  0
  4
  8
  14
  22
  33
  45
  60
  77
  98
  122
  148
  177
  210
  245
  283
  324
  368
  415
  464
  515
  570
  627
  686
  748
  812
  879
  949
  1,021
  1,097
Net income, $m
  0
  10
  22
  39
  61
  88
  121
  162
  210
  265
  329
  400
  479
  567
  662
  766
  877
  995
  1,121
  1,254
  1,394
  1,540
  1,694
  1,854
  2,022
  2,196
  2,377
  2,566
  2,761
  2,965

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
  46
  70
  101
  143
  198
  266
  351
  453
  573
  713
  874
  1,055
  1,257
  1,480
  1,724
  1,989
  2,273
  2,577
  2,901
  3,242
  3,602
  3,980
  4,376
  4,789
  5,221
  5,670
  6,137
  6,623
  7,128
  7,653
Adjusted assets (=assets-cash), $m
  46
  70
  101
  143
  198
  266
  351
  453
  573
  713
  874
  1,055
  1,257
  1,480
  1,724
  1,989
  2,273
  2,577
  2,901
  3,242
  3,602
  3,980
  4,376
  4,789
  5,221
  5,670
  6,137
  6,623
  7,128
  7,653
Revenue / Adjusted assets
  1.391
  1.371
  1.376
  1.378
  1.374
  1.376
  1.373
  1.373
  1.373
  1.374
  1.373
  1.373
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
  1.374
Average production assets, $m
  14
  21
  30
  43
  59
  79
  105
  135
  171
  213
  260
  315
  375
  441
  514
  593
  678
  768
  865
  967
  1,074
  1,187
  1,305
  1,428
  1,557
  1,691
  1,830
  1,975
  2,125
  2,282
Working capital, $m
  -6
  -9
  -14
  -20
  -27
  -36
  -48
  -62
  -78
  -97
  -119
  -143
  -171
  -201
  -235
  -271
  -309
  -351
  -395
  -441
  -490
  -541
  -595
  -651
  -710
  -771
  -835
  -901
  -970
  -1,041
Total debt, $m
  27
  44
  67
  97
  136
  185
  246
  319
  406
  507
  622
  752
  898
  1,058
  1,234
  1,424
  1,628
  1,847
  2,079
  2,325
  2,584
  2,856
  3,140
  3,437
  3,747
  4,070
  4,406
  4,756
  5,119
  5,497
Total liabilities, $m
  33
  50
  73
  103
  142
  192
  252
  325
  412
  513
  628
  758
  904
  1,064
  1,240
  1,430
  1,635
  1,853
  2,085
  2,331
  2,590
  2,862
  3,146
  3,444
  3,754
  4,077
  4,413
  4,762
  5,125
  5,503
Total equity, $m
  13
  20
  28
  40
  56
  75
  99
  127
  161
  200
  245
  296
  353
  416
  485
  559
  639
  724
  815
  911
  1,012
  1,118
  1,230
  1,346
  1,467
  1,593
  1,725
  1,861
  2,003
  2,151
Total liabilities and equity, $m
  46
  70
  101
  143
  198
  267
  351
  452
  573
  713
  873
  1,054
  1,257
  1,480
  1,725
  1,989
  2,274
  2,577
  2,900
  3,242
  3,602
  3,980
  4,376
  4,790
  5,221
  5,670
  6,138
  6,623
  7,128
  7,654
Debt-to-equity ratio
  2.080
  2.240
  2.340
  2.400
  2.450
  2.480
  2.500
  2.510
  2.520
  2.530
  2.530
  2.540
  2.540
  2.540
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.560
  2.560
  2.560
  2.560
Adjusted equity ratio
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  10
  22
  39
  61
  88
  121
  162
  210
  265
  329
  400
  479
  567
  662
  766
  877
  995
  1,121
  1,254
  1,394
  1,540
  1,694
  1,854
  2,022
  2,196
  2,377
  2,566
  2,761
  2,965
Depreciation, amort., depletion, $m
  3
  4
  5
  7
  10
  13
  17
  22
  28
  35
  42
  51
  60
  71
  83
  96
  109
  124
  139
  156
  173
  191
  210
  230
  251
  273
  295
  319
  343
  368
Funds from operations, $m
  3
  13
  28
  46
  71
  101
  139
  184
  238
  300
  371
  451
  540
  638
  745
  861
  986
  1,119
  1,260
  1,410
  1,567
  1,732
  1,904
  2,085
  2,273
  2,469
  2,672
  2,884
  3,104
  3,333
Change in working capital, $m
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -14
  -16
  -19
  -22
  -25
  -28
  -30
  -33
  -36
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -71
Cash from operations, $m
  5
  17
  32
  52
  78
  111
  150
  198
  254
  319
  392
  475
  567
  668
  778
  897
  1,025
  1,160
  1,304
  1,456
  1,616
  1,783
  1,958
  2,141
  2,331
  2,530
  2,736
  2,950
  3,173
  3,404
Maintenance CAPEX, $m
  -1
  -2
  -3
  -5
  -7
  -10
  -13
  -17
  -22
  -28
  -34
  -42
  -51
  -60
  -71
  -83
  -96
  -109
  -124
  -139
  -156
  -173
  -191
  -210
  -230
  -251
  -273
  -295
  -319
  -343
New CAPEX, $m
  -5
  -7
  -9
  -13
  -16
  -20
  -25
  -30
  -36
  -42
  -48
  -54
  -60
  -67
  -73
  -79
  -85
  -91
  -96
  -102
  -107
  -113
  -118
  -123
  -129
  -134
  -139
  -145
  -151
  -157
Cash from investing activities, $m
  -6
  -9
  -12
  -18
  -23
  -30
  -38
  -47
  -58
  -70
  -82
  -96
  -111
  -127
  -144
  -162
  -181
  -200
  -220
  -241
  -263
  -286
  -309
  -333
  -359
  -385
  -412
  -440
  -470
  -500
Free cash flow, $m
  -1
  7
  19
  35
  55
  81
  112
  151
  196
  249
  310
  379
  456
  541
  635
  736
  844
  960
  1,084
  1,215
  1,353
  1,497
  1,649
  1,807
  1,973
  2,145
  2,324
  2,510
  2,704
  2,905
Issuance/(repayment) of debt, $m
  12
  17
  23
  30
  39
  49
  61
  73
  87
  101
  115
  130
  145
  161
  175
  190
  205
  219
  232
  246
  259
  272
  285
  297
  310
  323
  336
  349
  363
  377
Issuance/(repurchase) of shares, $m
  4
  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  
  16
  17
  23
  30
  39
  49
  61
  73
  87
  101
  115
  130
  145
  161
  175
  190
  205
  219
  232
  246
  259
  272
  285
  297
  310
  323
  336
  349
  363
  377
Total cash flow (excl. dividends), $m
  16
  24
  42
  65
  94
  130
  173
  224
  283
  350
  426
  510
  602
  702
  810
  926
  1,049
  1,179
  1,316
  1,460
  1,611
  1,769
  1,933
  2,105
  2,283
  2,468
  2,660
  2,860
  3,067
  3,283
Retained Cash Flow (-), $m
  -5
  -7
  -9
  -12
  -15
  -19
  -24
  -29
  -34
  -39
  -45
  -51
  -57
  -63
  -69
  -74
  -80
  -85
  -91
  -96
  -101
  -106
  -111
  -116
  -121
  -126
  -131
  -137
  -142
  -148
Prev. year cash balance distribution, $m
  16
  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
  27
  18
  33
  53
  79
  111
  149
  195
  249
  311
  381
  459
  545
  639
  741
  851
  969
  1,094
  1,226
  1,364
  1,510
  1,663
  1,822
  1,988
  2,161
  2,341
  2,529
  2,723
  2,925
  3,135
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
  26
  16
  29
  44
  61
  80
  101
  122
  143
  163
  181
  196
  207
  215
  218
  216
  211
  201
  189
  173
  156
  138
  119
  101
  84
  68
  54
  42
  32
  24
Current shareholders' claim on cash, %
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3
  91.3

FINANCIAL RATIOS  of  Harrow Health, Inc. (HROW)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
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 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

HROW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HROW stock intrinsic value calculation we used $41 million for the last fiscal year's total revenue generated by Harrow Health, Inc.. The default revenue input number comes from 0001 income statement of Harrow Health, 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 HROW stock valuation model: a) initial revenue growth rate of 55.2% 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 HROW is calculated based on our internal credit rating of Harrow Health, 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 Harrow Health, 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 HROW stock the variable cost ratio is equal to 53.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $26 million in the base year in the intrinsic value calculation for HROW 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 17.8% for Harrow Health, Inc..

Corporate tax rate of 27% is the nominal tax rate for Harrow Health, 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 HROW 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 HROW are equal to 21.7%.

Life of production assets of 6.2 years is the average useful life of capital assets used in Harrow Health, 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 HROW is equal to -9.9%. 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 - $24.751 million for Harrow Health, 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 24.685 million for Harrow Health, 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 Harrow Health, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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