Intrinsic value of Henry Schein, Inc. - HSIC

Previous Close

$67.02

  Intrinsic Value

$42.67

stock screener

  Rating & Target

sell

-36%

Previous close

$67.02

 
Intrinsic value

$42.67

 
Up/down potential

-36%

 
Rating

sell

We calculate the intrinsic value of HSIC 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 10.2

 

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
  13,466
  13,776
  14,130
  14,527
  14,968
  15,451
  15,977
  16,547
  17,160
  17,819
  18,524
  19,275
  20,076
  20,926
  21,829
  22,786
  23,798
  24,869
  26,001
  27,195
  28,456
  29,785
  31,187
  32,663
  34,218
  35,855
  37,579
  39,392
  41,300
  43,306
Variable operating expenses, $m
  12,536
  12,824
  13,152
  13,521
  13,930
  14,378
  14,867
  15,395
  15,965
  16,576
  17,192
  17,890
  18,632
  19,422
  20,260
  21,148
  22,087
  23,081
  24,131
  25,240
  26,410
  27,644
  28,945
  30,315
  31,758
  33,277
  34,877
  36,560
  38,330
  40,193
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
  12,536
  12,824
  13,152
  13,521
  13,930
  14,378
  14,867
  15,395
  15,965
  16,576
  17,192
  17,890
  18,632
  19,422
  20,260
  21,148
  22,087
  23,081
  24,131
  25,240
  26,410
  27,644
  28,945
  30,315
  31,758
  33,277
  34,877
  36,560
  38,330
  40,193
Operating income, $m
  930
  952
  978
  1,006
  1,038
  1,073
  1,110
  1,151
  1,196
  1,243
  1,332
  1,386
  1,443
  1,504
  1,569
  1,638
  1,711
  1,788
  1,869
  1,955
  2,046
  2,141
  2,242
  2,348
  2,460
  2,578
  2,702
  2,832
  2,969
  3,113
EBITDA, $m
  1,085
  1,110
  1,138
  1,170
  1,206
  1,245
  1,287
  1,333
  1,382
  1,435
  1,492
  1,553
  1,617
  1,686
  1,758
  1,836
  1,917
  2,003
  2,095
  2,191
  2,292
  2,399
  2,512
  2,631
  2,756
  2,888
  3,027
  3,173
  3,327
  3,489
Interest expense (income), $m
  29
  106
  112
  119
  127
  136
  146
  157
  169
  182
  196
  211
  227
  244
  262
  281
  302
  324
  346
  371
  396
  424
  452
  482
  514
  547
  583
  620
  659
  700
  743
Earnings before tax, $m
  824
  840
  858
  879
  902
  926
  953
  982
  1,013
  1,047
  1,121
  1,159
  1,199
  1,242
  1,288
  1,336
  1,387
  1,441
  1,499
  1,559
  1,622
  1,689
  1,760
  1,834
  1,913
  1,995
  2,082
  2,173
  2,269
  2,370
Tax expense, $m
  222
  227
  232
  237
  243
  250
  257
  265
  274
  283
  303
  313
  324
  335
  348
  361
  375
  389
  405
  421
  438
  456
  475
  495
  516
  539
  562
  587
  613
  640
Net income, $m
  601
  613
  627
  642
  658
  676
  696
  717
  740
  764
  818
  846
  876
  907
  940
  976
  1,013
  1,052
  1,094
  1,138
  1,184
  1,233
  1,285
  1,339
  1,396
  1,456
  1,520
  1,586
  1,656
  1,730

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
  8,671
  8,870
  9,098
  9,354
  9,638
  9,949
  10,288
  10,655
  11,050
  11,474
  11,928
  12,412
  12,927
  13,475
  14,056
  14,672
  15,324
  16,014
  16,742
  17,512
  18,323
  19,179
  20,082
  21,032
  22,034
  23,088
  24,197
  25,365
  26,593
  27,886
Adjusted assets (=assets-cash), $m
  8,671
  8,870
  9,098
  9,354
  9,638
  9,949
  10,288
  10,655
  11,050
  11,474
  11,928
  12,412
  12,927
  13,475
  14,056
  14,672
  15,324
  16,014
  16,742
  17,512
  18,323
  19,179
  20,082
  21,032
  22,034
  23,088
  24,197
  25,365
  26,593
  27,886
Revenue / Adjusted assets
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
  1.553
Average production assets, $m
  2,006
  2,053
  2,105
  2,165
  2,230
  2,302
  2,381
  2,465
  2,557
  2,655
  2,760
  2,872
  2,991
  3,118
  3,253
  3,395
  3,546
  3,706
  3,874
  4,052
  4,240
  4,438
  4,647
  4,867
  5,098
  5,342
  5,599
  5,869
  6,154
  6,453
Working capital, $m
  1,872
  1,915
  1,964
  2,019
  2,081
  2,148
  2,221
  2,300
  2,385
  2,477
  2,575
  2,679
  2,791
  2,909
  3,034
  3,167
  3,308
  3,457
  3,614
  3,780
  3,955
  4,140
  4,335
  4,540
  4,756
  4,984
  5,223
  5,475
  5,741
  6,020
Total debt, $m
  2,079
  2,209
  2,357
  2,524
  2,709
  2,912
  3,133
  3,372
  3,630
  3,906
  4,202
  4,517
  4,854
  5,211
  5,590
  5,991
  6,416
  6,866
  7,341
  7,843
  8,372
  8,930
  9,518
  10,138
  10,791
  11,478
  12,202
  12,963
  13,764
  14,606
Total liabilities, $m
  5,653
  5,784
  5,932
  6,099
  6,284
  6,487
  6,708
  6,947
  7,204
  7,481
  7,777
  8,092
  8,428
  8,786
  9,165
  9,566
  9,991
  10,441
  10,916
  11,418
  11,947
  12,505
  13,093
  13,713
  14,366
  15,053
  15,777
  16,538
  17,339
  18,181
Total equity, $m
  3,018
  3,087
  3,166
  3,255
  3,354
  3,462
  3,580
  3,708
  3,845
  3,993
  4,151
  4,319
  4,499
  4,689
  4,892
  5,106
  5,333
  5,573
  5,826
  6,094
  6,376
  6,674
  6,988
  7,319
  7,668
  8,035
  8,421
  8,827
  9,255
  9,704
Total liabilities and equity, $m
  8,671
  8,871
  9,098
  9,354
  9,638
  9,949
  10,288
  10,655
  11,049
  11,474
  11,928
  12,411
  12,927
  13,475
  14,057
  14,672
  15,324
  16,014
  16,742
  17,512
  18,323
  19,179
  20,081
  21,032
  22,034
  23,088
  24,198
  25,365
  26,594
  27,885
Debt-to-equity ratio
  0.690
  0.720
  0.740
  0.780
  0.810
  0.840
  0.880
  0.910
  0.940
  0.980
  1.010
  1.050
  1.080
  1.110
  1.140
  1.170
  1.200
  1.230
  1.260
  1.290
  1.310
  1.340
  1.360
  1.390
  1.410
  1.430
  1.450
  1.470
  1.490
  1.510
Adjusted equity ratio
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  601
  613
  627
  642
  658
  676
  696
  717
  740
  764
  818
  846
  876
  907
  940
  976
  1,013
  1,052
  1,094
  1,138
  1,184
  1,233
  1,285
  1,339
  1,396
  1,456
  1,520
  1,586
  1,656
  1,730
Depreciation, amort., depletion, $m
  155
  158
  161
  164
  168
  172
  177
  182
  187
  193
  160
  167
  174
  181
  189
  197
  206
  215
  225
  236
  247
  258
  270
  283
  296
  311
  326
  341
  358
  375
Funds from operations, $m
  756
  771
  787
  806
  826
  848
  872
  899
  927
  957
  979
  1,013
  1,049
  1,088
  1,129
  1,173
  1,219
  1,268
  1,319
  1,373
  1,431
  1,491
  1,555
  1,622
  1,693
  1,767
  1,845
  1,928
  2,014
  2,105
Change in working capital, $m
  37
  43
  49
  55
  61
  67
  73
  79
  85
  92
  98
  104
  111
  118
  125
  133
  141
  149
  157
  166
  175
  185
  195
  205
  216
  228
  240
  252
  265
  279
Cash from operations, $m
  720
  728
  738
  750
  765
  781
  799
  819
  841
  865
  881
  908
  938
  970
  1,004
  1,040
  1,078
  1,119
  1,162
  1,207
  1,256
  1,306
  1,360
  1,417
  1,476
  1,539
  1,606
  1,676
  1,749
  1,826
Maintenance CAPEX, $m
  -115
  -117
  -119
  -122
  -126
  -130
  -134
  -138
  -143
  -149
  -154
  -160
  -167
  -174
  -181
  -189
  -197
  -206
  -215
  -225
  -236
  -247
  -258
  -270
  -283
  -296
  -311
  -326
  -341
  -358
New CAPEX, $m
  -34
  -46
  -53
  -59
  -66
  -72
  -78
  -85
  -91
  -98
  -105
  -112
  -119
  -127
  -135
  -143
  -151
  -160
  -169
  -178
  -188
  -198
  -209
  -220
  -232
  -244
  -257
  -270
  -284
  -299
Cash from investing activities, $m
  -149
  -163
  -172
  -181
  -192
  -202
  -212
  -223
  -234
  -247
  -259
  -272
  -286
  -301
  -316
  -332
  -348
  -366
  -384
  -403
  -424
  -445
  -467
  -490
  -515
  -540
  -568
  -596
  -625
  -657
Free cash flow, $m
  571
  565
  566
  569
  573
  579
  587
  596
  607
  618
  621
  636
  652
  669
  688
  708
  730
  753
  778
  804
  832
  862
  893
  927
  962
  999
  1,038
  1,080
  1,124
  1,170
Issuance/(repayment) of debt, $m
  114
  130
  149
  167
  185
  203
  221
  239
  258
  276
  296
  316
  336
  357
  379
  402
  425
  450
  475
  502
  529
  558
  588
  620
  653
  687
  723
  761
  801
  842
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  
  114
  130
  149
  167
  185
  203
  221
  239
  258
  276
  296
  316
  336
  357
  379
  402
  425
  450
  475
  502
  529
  558
  588
  620
  653
  687
  723
  761
  801
  842
Total cash flow (excl. dividends), $m
  685
  695
  715
  736
  758
  782
  808
  835
  864
  895
  917
  952
  988
  1,026
  1,067
  1,110
  1,155
  1,203
  1,253
  1,306
  1,361
  1,420
  1,482
  1,546
  1,615
  1,686
  1,762
  1,841
  1,925
  2,012
Retained Cash Flow (-), $m
  -56
  -69
  -79
  -89
  -99
  -108
  -118
  -128
  -138
  -148
  -158
  -168
  -179
  -191
  -202
  -214
  -227
  -240
  -254
  -268
  -282
  -298
  -314
  -331
  -348
  -367
  -386
  -406
  -427
  -450
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
  629
  625
  635
  647
  660
  674
  690
  708
  727
  747
  759
  783
  809
  836
  865
  896
  928
  963
  999
  1,038
  1,079
  1,122
  1,168
  1,216
  1,266
  1,320
  1,376
  1,435
  1,497
  1,563
Discount rate, %
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
  595
  557
  529
  501
  472
  442
  412
  382
  351
  320
  286
  256
  228
  200
  174
  149
  126
  106
  87
  70
  56
  44
  34
  25
  19
  13
  9
  6
  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
  100.0
  100.0
  100.0
  100.0

Henry Schein, Inc. is a provider of healthcare products and services primarily to office-based dental, animal health and medical practitioners. The Company operates through two segments: healthcare distribution, and technology and value-added services. The healthcare distribution segment distributes consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins. The technology and value-added services segment provides software, technology and other value-added services to healthcare practitioners. Its technology group offerings include practice management software systems for dental and medical practitioners and animal health clinics. The Company provides its services to dental practitioners and laboratories, animal health clinics and physician practices, as well as government and institutional healthcare clinics.

FINANCIAL RATIOS  of  Henry Schein, Inc. (HSIC)

Valuation Ratios
P/E Ratio 21
Price to Sales 0.9
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 17.3
Price to Free Cash Flow 19.5
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.8%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 25.6%
Total Debt to Equity 43.6%
Interest Coverage 27
Management Effectiveness
Return On Assets 8%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 13.2%
Ret/ On T. Cap. - 3 Yr. Avg. 13.4%
Return On Equity 17.9%
Return On Equity - 3 Yr. Avg. 17.1%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 27.9%
Gross Margin - 3 Yr. Avg. 28.1%
EBITDA Margin 8.3%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 6.7%
Oper. Margin - 3 Yr. Avg. 6.8%
Pre-Tax Margin 6.5%
Pre-Tax Margin - 3 Yr. Avg. 6.7%
Net Profit Margin 4.4%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 28.8%
Eff/ Tax Rate - 3 Yr. Avg. 29.5%
Payout Ratio 0%

HSIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HSIC stock intrinsic value calculation we used $13202 million for the last fiscal year's total revenue generated by Henry Schein, Inc.. The default revenue input number comes from 0001 income statement of Henry Schein, 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 HSIC 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 5.7%, whose default value for HSIC is calculated based on our internal credit rating of Henry Schein, 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 Henry Schein, 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 HSIC stock the variable cost ratio is equal to 93.1%.

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 HSIC 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 Henry Schein, Inc..

Corporate tax rate of 27% is the nominal tax rate for Henry Schein, 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 HSIC 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 HSIC are equal to 14.9%.

Life of production assets of 17.2 years is the average useful life of capital assets used in Henry Schein, 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 HSIC is equal to 13.9%. 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 - $2961.332 million for Henry Schein, 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 151.459 million for Henry Schein, 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 Henry Schein, Inc. at the current share price and the inputted number of shares is $10.2 billion.

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