Intrinsic value of HealthStream - HSTM

Previous Close

$30.21

  Intrinsic Value

$8.72

stock screener

  Rating & Target

str. sell

-71%

Previous close

$30.21

 
Intrinsic value

$8.72

 
Up/down potential

-71%

 
Rating

str. sell

We calculate the intrinsic value of HSTM 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 2017), $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 1.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  272
  297
  323
  349
  378
  407
  437
  468
  501
  535
  570
  607
  645
  685
  727
  770
  815
  862
  911
  962
  1,016
  1,072
  1,130
  1,191
  1,255
  1,322
  1,392
  1,465
  1,542
  1,622
Variable operating expenses, $m
  217
  235
  253
  273
  293
  314
  336
  359
  383
  407
  413
  440
  467
  496
  526
  558
  590
  624
  660
  697
  736
  776
  818
  863
  909
  957
  1,008
  1,061
  1,117
  1,175
Fixed operating expenses, $m
  40
  41
  42
  43
  43
  44
  45
  46
  47
  48
  50
  51
  52
  53
  54
  55
  56
  58
  59
  60
  62
  63
  64
  66
  67
  69
  70
  72
  73
  75
Total operating expenses, $m
  257
  276
  295
  316
  336
  358
  381
  405
  430
  455
  463
  491
  519
  549
  580
  613
  646
  682
  719
  757
  798
  839
  882
  929
  976
  1,026
  1,078
  1,133
  1,190
  1,250
Operating income, $m
  15
  21
  28
  34
  41
  48
  55
  63
  71
  79
  108
  117
  126
  136
  146
  157
  168
  180
  192
  205
  219
  233
  247
  263
  279
  296
  314
  332
  352
  373
EBITDA, $m
  58
  66
  75
  84
  93
  102
  112
  123
  133
  145
  156
  168
  181
  194
  208
  223
  238
  253
  270
  287
  305
  324
  344
  364
  386
  408
  432
  457
  483
  511
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  29
  31
Earnings before tax, $m
  15
  21
  26
  32
  38
  45
  51
  58
  66
  73
  101
  109
  118
  127
  136
  146
  156
  166
  177
  189
  201
  214
  227
  241
  256
  272
  288
  305
  323
  341
Tax expense, $m
  4
  6
  7
  9
  10
  12
  14
  16
  18
  20
  27
  29
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  78
  82
  87
  92
Net income, $m
  11
  15
  19
  24
  28
  33
  38
  43
  48
  53
  74
  80
  86
  92
  99
  106
  114
  121
  130
  138
  147
  156
  166
  176
  187
  198
  210
  222
  236
  249

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
  418
  456
  496
  538
  581
  626
  672
  721
  771
  823
  877
  934
  993
  1,054
  1,118
  1,184
  1,254
  1,326
  1,401
  1,480
  1,563
  1,649
  1,738
  1,832
  1,931
  2,034
  2,141
  2,254
  2,372
  2,496
Adjusted assets (=assets-cash), $m
  418
  456
  496
  538
  581
  626
  672
  721
  771
  823
  877
  934
  993
  1,054
  1,118
  1,184
  1,254
  1,326
  1,401
  1,480
  1,563
  1,649
  1,738
  1,832
  1,931
  2,034
  2,141
  2,254
  2,372
  2,496
Revenue / Adjusted assets
  0.651
  0.651
  0.651
  0.649
  0.651
  0.650
  0.650
  0.649
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
Average production assets, $m
  231
  252
  274
  297
  321
  346
  372
  399
  426
  455
  485
  517
  549
  583
  618
  655
  693
  733
  775
  819
  864
  912
  962
  1,014
  1,068
  1,125
  1,185
  1,247
  1,312
  1,381
Working capital, $m
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
Total debt, $m
  11
  22
  33
  45
  58
  71
  85
  99
  113
  128
  144
  161
  178
  196
  214
  234
  254
  275
  297
  320
  344
  369
  395
  422
  451
  481
  512
  545
  579
  615
Total liabilities, $m
  122
  133
  144
  156
  169
  182
  196
  210
  224
  240
  255
  272
  289
  307
  325
  345
  365
  386
  408
  431
  455
  480
  506
  533
  562
  592
  623
  656
  690
  726
Total equity, $m
  296
  324
  352
  381
  412
  444
  477
  511
  547
  584
  622
  662
  704
  747
  793
  840
  889
  940
  994
  1,050
  1,108
  1,169
  1,233
  1,299
  1,369
  1,442
  1,518
  1,598
  1,682
  1,770
Total liabilities and equity, $m
  418
  457
  496
  537
  581
  626
  673
  721
  771
  824
  877
  934
  993
  1,054
  1,118
  1,185
  1,254
  1,326
  1,402
  1,481
  1,563
  1,649
  1,739
  1,832
  1,931
  2,034
  2,141
  2,254
  2,372
  2,496
Debt-to-equity ratio
  0.040
  0.070
  0.090
  0.120
  0.140
  0.160
  0.180
  0.190
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
  0.350
Adjusted equity ratio
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709
  0.709

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  15
  19
  24
  28
  33
  38
  43
  48
  53
  74
  80
  86
  92
  99
  106
  114
  121
  130
  138
  147
  156
  166
  176
  187
  198
  210
  222
  236
  249
Depreciation, amort., depletion, $m
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  49
  52
  55
  58
  62
  66
  69
  73
  78
  82
  86
  91
  96
  101
  107
  112
  118
  125
  131
  138
Funds from operations, $m
  54
  60
  66
  73
  80
  87
  95
  102
  110
  119
  122
  131
  141
  151
  161
  172
  183
  195
  207
  220
  233
  247
  262
  278
  294
  311
  329
  347
  367
  387
Change in working capital, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
Cash from operations, $m
  55
  61
  67
  74
  81
  88
  95
  103
  111
  119
  123
  132
  142
  151
  162
  173
  184
  196
  208
  221
  234
  249
  263
  279
  295
  312
  330
  349
  368
  389
Maintenance CAPEX, $m
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -66
  -69
  -73
  -78
  -82
  -86
  -91
  -96
  -101
  -107
  -112
  -118
  -125
  -131
New CAPEX, $m
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -68
Cash from investing activities, $m
  -42
  -44
  -47
  -50
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -85
  -89
  -93
  -99
  -104
  -109
  -115
  -122
  -128
  -134
  -141
  -148
  -155
  -164
  -172
  -180
  -190
  -199
Free cash flow, $m
  13
  16
  20
  23
  27
  31
  35
  39
  43
  48
  47
  52
  57
  63
  68
  74
  80
  86
  93
  100
  107
  115
  122
  131
  139
  148
  158
  168
  178
  189
Issuance/(repayment) of debt, $m
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
Issuance/(repurchase) of shares, $m
  15
  12
  9
  6
  3
  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  
  26
  23
  21
  18
  16
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
Total cash flow (excl. dividends), $m
  39
  39
  40
  41
  42
  44
  48
  53
  58
  63
  63
  69
  74
  80
  87
  93
  100
  107
  115
  123
  131
  140
  149
  158
  168
  178
  189
  201
  213
  225
Retained Cash Flow (-), $m
  -27
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
Prev. year cash balance distribution, $m
  30
  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
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
Cash available for distribution, $m
  42
  12
  12
  12
  11
  12
  15
  19
  22
  26
  25
  29
  33
  37
  42
  46
  51
  56
  61
  67
  73
  79
  85
  91
  98
  105
  113
  121
  129
  137
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
  41
  11
  11
  10
  9
  9
  10
  12
  13
  14
  12
  12
  12
  12
  12
  12
  11
  10
  9
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  98.3
  97.0
  96.2
  95.7
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5
  95.5

HealthStream, Inc. (HealthStream) provides workforce, patient experience and provider solutions for healthcare organizations. The Company operates in three segments: HealthStream Workforce Solutions, HealthStream Patient Experience Solutions and HealthStream Provider Solutions. HealthStream's products and services are organized into three segments: Workforce Solutions, Patient Experience Solutions, and Provider Solutions. HealthStream's solutions are provided to a range of customers within the healthcare industry across the continuum of care. Delivered primarily as Software-as-a-Service (SaaS), the Company's solutions focus on challenges facing the healthcare workforce and healthcare organizations, including the need to manage, retain, engage and develop healthcare workforce talent; meet compliance requirements; manage ongoing medical staff credentialing and privileging processes, and deliver patient experiences of care in healthcare organizations.

FINANCIAL RATIOS  of  HealthStream (HSTM)

Valuation Ratios
P/E Ratio 239.8
Price to Sales 4.2
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 40
Price to Free Cash Flow 106.6
Growth Rates
Sales Growth Rate 8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 1.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity 1.4%
Return On Equity - 3 Yr. Avg. 3.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 57.1%
Gross Margin - 3 Yr. Avg. 57.1%
EBITDA Margin 12.4%
EBITDA Margin - 3 Yr. Avg. 14.5%
Operating Margin 2.7%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 4%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.7%
Payout Ratio 0%

HSTM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HSTM stock intrinsic value calculation we used $248 million for the last fiscal year's total revenue generated by HealthStream. The default revenue input number comes from 2017 income statement of HealthStream. 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 HSTM stock valuation model: a) initial revenue growth rate of 9.6% 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 HSTM is calculated based on our internal credit rating of HealthStream, 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 HealthStream.
    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 HSTM stock the variable cost ratio is equal to 80.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $39 million in the base year in the intrinsic value calculation for HSTM 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 HealthStream.

Corporate tax rate of 27% is the nominal tax rate for HealthStream. 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 HSTM stock is equal to 0.7%.

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 HSTM are equal to 85.1%.

Life of production assets of 10 years is the average useful life of capital assets used in HealthStream 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 HSTM is equal to -2%. 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 - $300 million for HealthStream - 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 32 million for HealthStream 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 HealthStream at the current share price and the inputted number of shares is $1.0 billion.

RELATED COMPANIES Price Int.Val. Rating
INOV Inovalon Holdi 11.55 5.31  sell

COMPANY NEWS

▶ Philips now eyes 1,000-plus downtown jobs, juicing an already wild hiring spree   [Aug-09-18 03:04PM  American City Business Journals]
▶ HealthStream, Inc. to Host Earnings Call   [Jul-24-18 07:00AM  ACCESSWIRE]
▶ HealthStream: 2Q Earnings Snapshot   [04:50PM  Associated Press]
▶ HealthStream Earnings Preview   [08:05AM  Benzinga]
▶ HealthStream (HSTM) Jumps: Stock Rises 7.4%   [Jul-10-18 08:49AM  Zacks]
▶ Publix cements deal for downtown Nashville grocery   [May-29-18 12:12PM  American City Business Journals]
▶ HealthStream: 1Q Earnings Snapshot   [Apr-30-18 05:24PM  Associated Press]
▶ Why HealthStream Inc (NASDAQ:HSTM) Could Be A Buy   [Mar-19-18 04:22PM  Simply Wall St.]
▶ HealthStream, Inc. to Host Earnings Call   [Feb-21-18 07:10AM  ACCESSWIRE]
▶ HealthStream tops Street 4Q forecasts   [Feb-20-18 07:51PM  Associated Press]
▶ [$$] The Add-On Deal Roundup: Feb. 13   [Feb-13-18 05:35PM  The Wall Street Journal]
▶ HealthStream beats Street 3Q forecasts   [Oct-23-17 04:39PM  Associated Press]
▶ HealthStream (HSTM) Jumps: Stock Rises 5%   [Oct-12-17 08:40AM  Zacks]
▶ HealthStream tops Street 2Q forecasts   [Jul-24-17 09:45PM  Associated Press]
▶ HealthStream Announces Management Team Changes   [Jul-11-17 09:25AM  Business Wire]
▶ ETFs with exposure to HealthStream, Inc. : June 27, 2017   [Jun-27-17 03:19PM  Capital Cube]
▶ ETFs with exposure to HealthStream, Inc. : May 26, 2017   [May-26-17 01:11PM  Capital Cube]
▶ ETFs with exposure to HealthStream, Inc. : May 5, 2017   [May-05-17 04:13PM  Capital Cube]
▶ Here's Why HealthStream, Inc. Stock Is Soaring   [Apr-25-17 12:29PM  Motley Fool]
▶ HealthStream tops Street 1Q forecasts   [Apr-24-17 04:36PM  Associated Press]
▶ HealthStream reports 4Q loss   [Feb-21-17 05:20PM  Associated Press]
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