Intrinsic value of HealthStream, Inc. - HSTM

Previous Close

$28.33

  Intrinsic Value

$13.20

stock screener

  Rating & Target

str. sell

-53%

Previous close

$28.33

 
Intrinsic value

$13.20

 
Up/down potential

-53%

 
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 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 0.9

 

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, %
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
Revenue, $m
  251
  271
  291
  313
  335
  358
  382
  407
  433
  460
  488
  517
  548
  580
  613
  648
  684
  722
  761
  803
  846
  891
  938
  988
  1,040
  1,094
  1,151
  1,211
  1,274
  1,339
Variable operating expenses, $m
  156
  168
  181
  194
  207
  221
  236
  252
  267
  284
  300
  318
  336
  356
  376
  398
  420
  443
  467
  493
  519
  547
  576
  607
  639
  672
  707
  744
  782
  822
Fixed operating expenses, $m
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
  108
  110
  113
  115
  118
  120
  123
  126
  129
  131
  134
  137
  140
Total operating expenses, $m
  231
  244
  259
  274
  288
  304
  321
  339
  356
  375
  393
  413
  433
  455
  477
  501
  526
  551
  577
  606
  634
  665
  696
  730
  765
  801
  838
  878
  919
  962
Operating income, $m
  21
  27
  33
  39
  46
  53
  61
  69
  77
  85
  96
  105
  115
  125
  135
  147
  158
  171
  183
  197
  211
  226
  242
  258
  276
  294
  313
  333
  354
  377
EBITDA, $m
  36
  43
  51
  58
  67
  75
  84
  93
  102
  112
  123
  134
  145
  157
  169
  183
  196
  211
  226
  242
  258
  276
  294
  313
  333
  355
  377
  401
  425
  451
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
Earnings before tax, $m
  21
  26
  32
  38
  44
  50
  57
  64
  72
  79
  89
  98
  106
  116
  125
  136
  146
  158
  169
  182
  195
  208
  223
  238
  254
  271
  288
  307
  326
  347
Tax expense, $m
  6
  7
  9
  10
  12
  14
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  69
  73
  78
  83
  88
  94
Net income, $m
  15
  19
  23
  28
  32
  37
  42
  47
  52
  58
  65
  71
  78
  84
  92
  99
  107
  115
  124
  133
  142
  152
  163
  174
  185
  198
  210
  224
  238
  253

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
  411
  443
  477
  512
  548
  586
  625
  666
  709
  753
  799
  847
  897
  949
  1,003
  1,060
  1,119
  1,181
  1,246
  1,314
  1,384
  1,458
  1,536
  1,617
  1,702
  1,791
  1,884
  1,982
  2,085
  2,192
Adjusted assets (=assets-cash), $m
  411
  443
  477
  512
  548
  586
  625
  666
  709
  753
  799
  847
  897
  949
  1,003
  1,060
  1,119
  1,181
  1,246
  1,314
  1,384
  1,458
  1,536
  1,617
  1,702
  1,791
  1,884
  1,982
  2,085
  2,192
Revenue / Adjusted assets
  0.611
  0.612
  0.610
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.610
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
Average production assets, $m
  103
  112
  120
  129
  138
  147
  157
  168
  178
  189
  201
  213
  226
  239
  253
  267
  282
  297
  314
  331
  348
  367
  387
  407
  428
  451
  474
  499
  525
  552
Working capital, $m
  -37
  -40
  -43
  -46
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -77
  -81
  -86
  -91
  -96
  -101
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -170
  -179
  -189
  -198
Total debt, $m
  10
  21
  32
  43
  55
  67
  80
  93
  107
  121
  136
  151
  168
  184
  202
  220
  240
  260
  281
  303
  326
  350
  375
  401
  428
  457
  488
  519
  552
  587
Total liabilities, $m
  133
  144
  155
  166
  178
  190
  203
  216
  230
  244
  259
  274
  291
  307
  325
  343
  363
  383
  404
  426
  449
  473
  498
  524
  551
  580
  611
  642
  675
  710
Total equity, $m
  278
  300
  322
  346
  371
  396
  423
  450
  479
  509
  540
  572
  606
  641
  678
  717
  757
  798
  842
  888
  936
  986
  1,038
  1,093
  1,151
  1,211
  1,274
  1,340
  1,409
  1,482
Total liabilities and equity, $m
  411
  444
  477
  512
  549
  586
  626
  666
  709
  753
  799
  846
  897
  948
  1,003
  1,060
  1,120
  1,181
  1,246
  1,314
  1,385
  1,459
  1,536
  1,617
  1,702
  1,791
  1,885
  1,982
  2,084
  2,192
Debt-to-equity ratio
  0.040
  0.070
  0.100
  0.120
  0.150
  0.170
  0.190
  0.210
  0.220
  0.240
  0.250
  0.260
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.400
Adjusted equity ratio
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676
  0.676

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  19
  23
  28
  32
  37
  42
  47
  52
  58
  65
  71
  78
  84
  92
  99
  107
  115
  124
  133
  142
  152
  163
  174
  185
  198
  210
  224
  238
  253
Depreciation, amort., depletion, $m
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  27
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  67
  71
  75
Funds from operations, $m
  31
  36
  41
  47
  52
  58
  65
  71
  78
  85
  92
  100
  108
  117
  126
  135
  145
  155
  166
  177
  189
  202
  215
  229
  243
  258
  275
  291
  309
  328
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Cash from operations, $m
  33
  39
  44
  50
  56
  62
  68
  75
  82
  89
  96
  104
  113
  121
  131
  140
  150
  161
  172
  183
  196
  208
  222
  236
  251
  267
  283
  300
  318
  337
Maintenance CAPEX, $m
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -71
New CAPEX, $m
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -27
Cash from investing activities, $m
  -21
  -22
  -23
  -25
  -26
  -29
  -30
  -31
  -34
  -35
  -38
  -39
  -42
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -63
  -66
  -70
  -72
  -76
  -80
  -84
  -89
  -93
  -98
Free cash flow, $m
  13
  17
  21
  25
  29
  34
  38
  43
  48
  54
  59
  65
  71
  78
  85
  92
  99
  107
  115
  124
  133
  143
  153
  163
  175
  186
  199
  211
  225
  239
Issuance/(repayment) of debt, $m
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Issuance/(repurchase) of shares, $m
  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
  0
  0
  0
Cash from financing (excl. dividends), $m  
  16
  13
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Total cash flow (excl. dividends), $m
  28
  30
  31
  36
  41
  46
  51
  57
  62
  68
  74
  81
  87
  95
  102
  110
  118
  127
  136
  146
  156
  167
  178
  190
  202
  215
  229
  243
  258
  274
Retained Cash Flow (-), $m
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
Prev. year cash balance distribution, $m
  62
  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
  70
  8
  9
  12
  16
  20
  25
  29
  34
  38
  43
  48
  54
  59
  65
  72
  78
  85
  93
  100
  108
  117
  126
  135
  145
  155
  166
  177
  189
  202
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
  67
  7
  8
  10
  13
  15
  17
  18
  19
  20
  20
  21
  20
  20
  19
  18
  17
  16
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  99.2
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9
  98.9

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, Inc. (HSTM)

Valuation Ratios
P/E Ratio 224.9
Price to Sales 4
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 37.5
Price to Free Cash Flow 99.9
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 $232 million for the last fiscal year's total revenue generated by HealthStream, Inc.. The default revenue input number comes from 0001 income statement of HealthStream, 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 HSTM stock valuation model: a) initial revenue growth rate of 8.2% 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 HSTM is calculated based on our internal credit rating of HealthStream, 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 HealthStream, 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 HSTM stock the variable cost ratio is equal to 62.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $73 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for HealthStream, 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 HSTM 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 HSTM are equal to 41.2%.

Life of production assets of 7.4 years is the average useful life of capital assets used in HealthStream, 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 HSTM is equal to -14.8%. 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 - $318.947 million for HealthStream, 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 32.329 million for HealthStream, 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 HealthStream, Inc. at the current share price and the inputted number of shares is $0.9 billion.

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