Intrinsic value of HealthStream - HSTM

Previous Close

$25.66

  Intrinsic Value

$11.51

stock screener

  Rating & Target

str. sell

-55%

Previous close

$25.66

 
Intrinsic value

$11.51

 
Up/down potential

-55%

 
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 0.8

 

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, %
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  267
  287
  307
  329
  351
  374
  398
  423
  449
  476
  505
  534
  565
  597
  630
  666
  702
  740
  780
  822
  866
  912
  960
  1,010
  1,063
  1,118
  1,176
  1,237
  1,300
  1,367
Variable operating expenses, $m
  210
  225
  240
  255
  271
  288
  306
  324
  343
  362
  366
  387
  410
  433
  457
  483
  509
  537
  566
  596
  628
  661
  696
  733
  771
  811
  853
  897
  943
  991
Fixed operating expenses, $m
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  59
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
Total operating expenses, $m
  253
  269
  285
  301
  318
  336
  355
  374
  394
  414
  419
  442
  466
  490
  515
  542
  570
  599
  630
  661
  694
  729
  765
  804
  843
  885
  929
  974
  1,022
  1,072
Operating income, $m
  13
  18
  23
  27
  33
  38
  43
  49
  55
  62
  85
  92
  100
  107
  115
  123
  132
  141
  151
  161
  172
  183
  195
  207
  220
  233
  248
  263
  278
  295
EBITDA, $m
  45
  51
  57
  63
  69
  76
  83
  90
  97
  105
  113
  122
  131
  140
  150
  160
  171
  182
  194
  207
  220
  233
  248
  263
  279
  295
  313
  331
  350
  371
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
Earnings before tax, $m
  13
  17
  22
  26
  31
  35
  40
  46
  51
  57
  80
  86
  93
  100
  107
  114
  122
  130
  139
  148
  158
  168
  179
  190
  201
  214
  227
  240
  255
  270
Tax expense, $m
  4
  5
  6
  7
  8
  10
  11
  12
  14
  15
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  58
  61
  65
  69
  73
Net income, $m
  10
  13
  16
  19
  22
  26
  29
  33
  37
  41
  58
  63
  68
  73
  78
  83
  89
  95
  102
  108
  115
  123
  130
  139
  147
  156
  165
  175
  186
  197

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
  410
  440
  472
  505
  539
  574
  611
  650
  690
  732
  775
  820
  868
  917
  968
  1,022
  1,079
  1,137
  1,199
  1,263
  1,330
  1,401
  1,475
  1,552
  1,633
  1,718
  1,806
  1,900
  1,997
  2,100
Adjusted assets (=assets-cash), $m
  410
  440
  472
  505
  539
  574
  611
  650
  690
  732
  775
  820
  868
  917
  968
  1,022
  1,079
  1,137
  1,199
  1,263
  1,330
  1,401
  1,475
  1,552
  1,633
  1,718
  1,806
  1,900
  1,997
  2,100
Revenue / Adjusted assets
  0.651
  0.652
  0.650
  0.651
  0.651
  0.652
  0.651
  0.651
  0.651
  0.650
  0.652
  0.651
  0.651
  0.651
  0.651
  0.652
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
Average production assets, $m
  111
  119
  127
  136
  146
  155
  165
  176
  186
  198
  209
  222
  234
  248
  262
  276
  291
  307
  324
  341
  359
  378
  398
  419
  441
  464
  488
  513
  540
  567
Working capital, $m
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -102
  -108
  -113
  -119
  -126
  -132
  -139
  -146
  -154
  -162
  -170
  -179
Total debt, $m
  8
  17
  26
  36
  46
  56
  67
  78
  90
  102
  115
  128
  142
  156
  171
  187
  203
  220
  238
  257
  276
  297
  318
  341
  364
  389
  415
  442
  470
  500
Total liabilities, $m
  119
  128
  137
  147
  157
  167
  178
  189
  201
  213
  226
  239
  252
  267
  282
  297
  314
  331
  349
  368
  387
  408
  429
  452
  475
  500
  526
  553
  581
  611
Total equity, $m
  290
  312
  335
  358
  382
  407
  433
  461
  489
  519
  549
  582
  615
  650
  687
  725
  765
  806
  850
  896
  943
  993
  1,045
  1,100
  1,158
  1,218
  1,281
  1,347
  1,416
  1,489
Total liabilities and equity, $m
  409
  440
  472
  505
  539
  574
  611
  650
  690
  732
  775
  821
  867
  917
  969
  1,022
  1,079
  1,137
  1,199
  1,264
  1,330
  1,401
  1,474
  1,552
  1,633
  1,718
  1,807
  1,900
  1,997
  2,100
Debt-to-equity ratio
  0.030
  0.050
  0.080
  0.100
  0.120
  0.140
  0.150
  0.170
  0.180
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.270
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
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
  10
  13
  16
  19
  22
  26
  29
  33
  37
  41
  58
  63
  68
  73
  78
  83
  89
  95
  102
  108
  115
  123
  130
  139
  147
  156
  165
  175
  186
  197
Depreciation, amort., depletion, $m
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
Funds from operations, $m
  42
  46
  50
  54
  59
  64
  69
  74
  79
  85
  86
  92
  99
  106
  113
  120
  128
  136
  145
  154
  163
  173
  183
  194
  206
  218
  231
  244
  258
  273
Change in working capital, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
Cash from operations, $m
  44
  48
  53
  57
  62
  67
  72
  77
  83
  88
  90
  96
  103
  110
  117
  125
  133
  141
  150
  159
  169
  179
  190
  201
  213
  225
  238
  252
  266
  281
Maintenance CAPEX, $m
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
New CAPEX, $m
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
Cash from investing activities, $m
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -44
  -47
  -50
  -52
  -55
  -58
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -94
  -100
Free cash flow, $m
  23
  25
  28
  31
  34
  38
  41
  45
  48
  52
  52
  56
  61
  65
  70
  75
  81
  86
  92
  99
  105
  112
  119
  127
  135
  143
  152
  162
  171
  182
Issuance/(repayment) of debt, $m
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
  30
Issuance/(repurchase) of shares, $m
  11
  9
  7
  4
  2
  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  
  19
  18
  16
  14
  12
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
  30
Total cash flow (excl. dividends), $m
  42
  43
  44
  45
  46
  48
  52
  56
  60
  64
  64
  69
  74
  80
  85
  91
  97
  104
  110
  117
  125
  133
  141
  149
  159
  168
  178
  189
  200
  211
Retained Cash Flow (-), $m
  -20
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -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
  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
  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
  51
  21
  22
  22
  22
  23
  26
  29
  32
  35
  34
  37
  41
  45
  49
  53
  57
  62
  67
  72
  77
  83
  89
  95
  101
  108
  115
  123
  131
  139
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
  49
  20
  19
  18
  17
  17
  17
  18
  18
  18
  16
  16
  16
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  98.6
  97.5
  96.8
  96.3
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1

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 203.7
Price to Sales 3.6
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 33.9
Price to Free Cash Flow 90.5
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 $247.662 million for the last fiscal year's total revenue generated by HealthStream. The default revenue input number comes from 0001 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 7.7% 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 79.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $42 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%.

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 41.5%.

Life of production assets of 7.5 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 -13.1%. 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 - $300.17 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 32.323 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 $0.8 billion.

RELATED COMPANIES Price Int.Val. Rating
INOV Inovalon Holdi 11.51 17.26  buy

COMPANY NEWS

▶ HealthStream: 3Q Earnings Snapshot   [04:45PM  Associated Press]
▶ HealthStream's Earnings Preview   [07:41AM  Benzinga]
▶ Is HealthStream Inc (NASDAQ:HSTM) Attractive At This PE Ratio?   [Sep-05-18 11:59AM  Simply Wall St.]
▶ 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]

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