Intrinsic value of Halyard Health - HYH

Previous Close

$57.25

  Intrinsic Value

$1.60

stock screener

  Rating & Target

str. sell

-97%

Previous close

$57.25

 
Intrinsic value

$1.60

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of HYH 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 2.7

 

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, %
  8.00
  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
Revenue, $m
  661
  712
  765
  820
  877
  936
  998
  1,062
  1,129
  1,199
  1,271
  1,347
  1,425
  1,507
  1,593
  1,683
  1,776
  1,874
  1,976
  2,083
  2,194
  2,311
  2,434
  2,562
  2,696
  2,837
  2,984
  3,139
  3,300
  3,470
Variable operating expenses, $m
  755
  807
  860
  915
  972
  1,032
  1,094
  1,158
  1,226
  1,296
  1,277
  1,353
  1,432
  1,514
  1,601
  1,690
  1,784
  1,883
  1,985
  2,092
  2,205
  2,322
  2,445
  2,574
  2,709
  2,850
  2,998
  3,153
  3,316
  3,486
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
  755
  807
  860
  915
  972
  1,032
  1,094
  1,158
  1,226
  1,296
  1,277
  1,353
  1,432
  1,514
  1,601
  1,690
  1,784
  1,883
  1,985
  2,092
  2,205
  2,322
  2,445
  2,574
  2,709
  2,850
  2,998
  3,153
  3,316
  3,486
Operating income, $m
  -94
  -95
  -95
  -95
  -95
  -96
  -96
  -96
  -97
  -97
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
EBITDA, $m
  108
  117
  125
  134
  144
  154
  164
  174
  185
  197
  209
  221
  234
  247
  261
  276
  291
  307
  324
  342
  360
  379
  399
  420
  442
  465
  490
  515
  541
  569
Interest expense (income), $m
  30
  31
  36
  40
  45
  49
  54
  59
  65
  70
  76
  82
  88
  95
  102
  109
  116
  124
  132
  141
  149
  159
  168
  178
  189
  200
  212
  224
  237
  250
  264
Earnings before tax, $m
  -126
  -130
  -135
  -140
  -145
  -150
  -155
  -161
  -167
  -173
  -88
  -95
  -102
  -109
  -116
  -124
  -132
  -141
  -150
  -159
  -169
  -179
  -190
  -201
  -213
  -225
  -238
  -251
  -265
  -280
Tax expense, $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
Net income, $m
  -126
  -130
  -135
  -140
  -145
  -150
  -155
  -161
  -167
  -173
  -88
  -95
  -102
  -109
  -116
  -124
  -132
  -141
  -150
  -159
  -169
  -179
  -190
  -201
  -213
  -225
  -238
  -251
  -265
  -280

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
  2,369
  2,551
  2,741
  2,938
  3,143
  3,356
  3,577
  3,807
  4,047
  4,296
  4,556
  4,826
  5,108
  5,403
  5,710
  6,031
  6,366
  6,716
  7,082
  7,465
  7,865
  8,284
  8,723
  9,183
  9,664
  10,168
  10,696
  11,249
  11,829
  12,437
Adjusted assets (=assets-cash), $m
  2,369
  2,551
  2,741
  2,938
  3,143
  3,356
  3,577
  3,807
  4,047
  4,296
  4,556
  4,826
  5,108
  5,403
  5,710
  6,031
  6,366
  6,716
  7,082
  7,465
  7,865
  8,284
  8,723
  9,183
  9,664
  10,168
  10,696
  11,249
  11,829
  12,437
Revenue / Adjusted assets
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
Average production assets, $m
  1,115
  1,201
  1,290
  1,383
  1,479
  1,579
  1,684
  1,792
  1,905
  2,022
  2,144
  2,272
  2,404
  2,543
  2,688
  2,839
  2,996
  3,161
  3,333
  3,514
  3,702
  3,899
  4,106
  4,322
  4,548
  4,786
  5,034
  5,295
  5,568
  5,854
Working capital, $m
  -87
  -93
  -100
  -107
  -115
  -123
  -131
  -139
  -148
  -157
  -167
  -176
  -187
  -197
  -209
  -220
  -233
  -245
  -259
  -273
  -287
  -303
  -319
  -336
  -353
  -372
  -391
  -411
  -432
  -455
Total debt, $m
  659
  740
  825
  913
  1,005
  1,100
  1,199
  1,302
  1,409
  1,520
  1,636
  1,757
  1,883
  2,015
  2,152
  2,296
  2,446
  2,602
  2,766
  2,937
  3,116
  3,303
  3,499
  3,705
  3,920
  4,145
  4,381
  4,628
  4,888
  5,160
Total liabilities, $m
  1,059
  1,140
  1,225
  1,313
  1,405
  1,500
  1,599
  1,702
  1,809
  1,920
  2,036
  2,157
  2,283
  2,415
  2,552
  2,696
  2,846
  3,002
  3,166
  3,337
  3,516
  3,703
  3,899
  4,105
  4,320
  4,545
  4,781
  5,028
  5,288
  5,560
Total equity, $m
  1,310
  1,411
  1,516
  1,625
  1,738
  1,856
  1,978
  2,105
  2,238
  2,376
  2,519
  2,669
  2,825
  2,988
  3,158
  3,335
  3,520
  3,714
  3,916
  4,128
  4,350
  4,581
  4,824
  5,078
  5,344
  5,623
  5,915
  6,221
  6,542
  6,878
Total liabilities and equity, $m
  2,369
  2,551
  2,741
  2,938
  3,143
  3,356
  3,577
  3,807
  4,047
  4,296
  4,555
  4,826
  5,108
  5,403
  5,710
  6,031
  6,366
  6,716
  7,082
  7,465
  7,866
  8,284
  8,723
  9,183
  9,664
  10,168
  10,696
  11,249
  11,830
  12,438
Debt-to-equity ratio
  0.500
  0.520
  0.540
  0.560
  0.580
  0.590
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
  0.700
  0.710
  0.710
  0.720
  0.720
  0.730
  0.730
  0.730
  0.740
  0.740
  0.740
  0.750
  0.750
Adjusted equity ratio
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -126
  -130
  -135
  -140
  -145
  -150
  -155
  -161
  -167
  -173
  -88
  -95
  -102
  -109
  -116
  -124
  -132
  -141
  -150
  -159
  -169
  -179
  -190
  -201
  -213
  -225
  -238
  -251
  -265
  -280
Depreciation, amort., depletion, $m
  203
  211
  220
  230
  239
  249
  260
  271
  282
  294
  214
  227
  240
  254
  269
  284
  300
  316
  333
  351
  370
  390
  411
  432
  455
  479
  503
  529
  557
  585
Funds from operations, $m
  77
  81
  85
  90
  95
  99
  104
  110
  115
  121
  126
  133
  139
  146
  153
  160
  167
  175
  184
  192
  201
  211
  221
  231
  242
  254
  266
  278
  291
  305
Change in working capital, $m
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
Cash from operations, $m
  83
  88
  92
  97
  102
  107
  112
  118
  124
  130
  136
  142
  149
  156
  164
  172
  180
  188
  197
  206
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
Maintenance CAPEX, $m
  -103
  -112
  -120
  -129
  -138
  -148
  -158
  -168
  -179
  -190
  -202
  -214
  -227
  -240
  -254
  -269
  -284
  -300
  -316
  -333
  -351
  -370
  -390
  -411
  -432
  -455
  -479
  -503
  -529
  -557
New CAPEX, $m
  -83
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -133
  -139
  -145
  -151
  -158
  -165
  -172
  -180
  -188
  -197
  -206
  -216
  -226
  -237
  -249
  -260
  -273
  -286
Cash from investing activities, $m
  -186
  -198
  -209
  -222
  -234
  -248
  -262
  -276
  -292
  -307
  -324
  -341
  -360
  -379
  -399
  -420
  -442
  -465
  -488
  -513
  -539
  -567
  -596
  -627
  -658
  -692
  -728
  -763
  -802
  -843
Free cash flow, $m
  -103
  -110
  -117
  -125
  -133
  -141
  -150
  -159
  -168
  -178
  -189
  -199
  -211
  -223
  -235
  -248
  -262
  -276
  -291
  -307
  -324
  -341
  -359
  -379
  -399
  -420
  -442
  -465
  -490
  -515
Issuance/(repayment) of debt, $m
  78
  82
  85
  88
  92
  95
  99
  103
  107
  111
  116
  121
  126
  132
  137
  143
  150
  157
  164
  171
  179
  187
  196
  205
  215
  225
  236
  247
  259
  272
Issuance/(repurchase) of shares, $m
  221
  231
  240
  249
  258
  268
  278
  288
  299
  311
  232
  244
  258
  272
  286
  301
  318
  334
  352
  371
  390
  411
  432
  455
  479
  504
  530
  557
  586
  616
Cash from financing (excl. dividends), $m  
  299
  313
  325
  337
  350
  363
  377
  391
  406
  422
  348
  365
  384
  404
  423
  444
  468
  491
  516
  542
  569
  598
  628
  660
  694
  729
  766
  804
  845
  888
Total cash flow (excl. dividends), $m
  196
  203
  208
  212
  217
  222
  227
  232
  238
  244
  159
  166
  173
  180
  188
  197
  205
  215
  224
  235
  245
  257
  269
  282
  295
  309
  324
  339
  356
  373
Retained Cash Flow (-), $m
  -221
  -231
  -240
  -249
  -258
  -268
  -278
  -288
  -299
  -311
  -232
  -244
  -258
  -272
  -286
  -301
  -318
  -334
  -352
  -371
  -390
  -411
  -432
  -455
  -479
  -504
  -530
  -557
  -586
  -616
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
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  69
Cash available for distribution, $m
  -25
  -28
  -32
  -37
  -41
  -46
  -51
  -56
  -61
  -67
  -72
  -78
  -85
  -91
  -98
  -105
  -112
  -120
  -128
  -136
  -145
  -154
  -163
  -173
  -184
  -195
  -206
  -218
  -231
  -244
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  -24
  -25
  -28
  -30
  -31
  -33
  -33
  -34
  -34
  -33
  -33
  -32
  -30
  -28
  -26
  -24
  -22
  -20
  -17
  -15
  -13
  -11
  -9
  -7
  -6
  -5
  -3
  -3
  -2
  -1
Current shareholders' claim on cash, %
  92.4
  85.6
  79.5
  74.0
  69.1
  64.6
  60.5
  56.7
  53.3
  50.2
  48.1
  46.0
  44.1
  42.3
  40.5
  38.9
  37.3
  35.7
  34.3
  32.8
  31.5
  30.2
  29.0
  27.8
  26.7
  25.6
  24.5
  23.5
  22.6
  21.6

Halyard Health, Inc. is a medical technology company. The Company operates through two segments: Medical Devices and Surgical and Infection Prevention (S&IP). The Medical Devices segment provides a portfolio of product offerings focused on pain management, respiratory and digestive health. The S&IP segment provides healthcare supplies and solutions that target the prevention of healthcare-associated infections. The Company address healthcare needs, such as reducing the use of opioids, while helping patients move from surgery to recovery. The Medical Devices segment's products include post-operative pain management solutions, minimally invasive interventional (or chronic) pain therapies, closed airway suction systems and enteral feeding tubes. The S&IP segment includes product offerings, such as sterilization wrap, surgical drapes and gowns, facial protection, protective apparel and medical exam gloves.

FINANCIAL RATIOS  of  Halyard Health (HYH)

Valuation Ratios
P/E Ratio 66.8
Price to Sales 1.7
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 14.1
Price to Free Cash Flow 16.7
Growth Rates
Sales Growth Rate 1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -58.6%
Cap. Spend. - 3 Yr. Gr. Rate -10%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 52.5%
Total Debt to Equity 52.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. -4.4%
Return On Total Capital 2.4%
Ret/ On T. Cap. - 3 Yr. Avg. -6.3%
Return On Equity 3.7%
Return On Equity - 3 Yr. Avg. -9.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 33.9%
EBITDA Margin 9.4%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 5.5%
Oper. Margin - 3 Yr. Avg. -4.3%
Pre-Tax Margin 3.5%
Pre-Tax Margin - 3 Yr. Avg. -5.7%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. -7.6%
Effective Tax Rate 27.3%
Eff/ Tax Rate - 3 Yr. Avg. 31.3%
Payout Ratio 0%

HYH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HYH stock intrinsic value calculation we used $612 million for the last fiscal year's total revenue generated by Halyard Health. The default revenue input number comes from 2017 income statement of Halyard Health. 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 HYH stock valuation model: a) initial revenue growth rate of 8% 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 4.6%, whose default value for HYH is calculated based on our internal credit rating of Halyard Health, 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 Halyard Health.
    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 HYH stock the variable cost ratio is equal to 115.4%.

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 HYH 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 Halyard Health.

Corporate tax rate of 27% is the nominal tax rate for Halyard Health. 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 HYH stock is equal to 2.1%.

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 HYH are equal to 168.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Halyard Health 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 HYH 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 - $1215 million for Halyard Health - 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 47 million for Halyard Health 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 Halyard Health at the current share price and the inputted number of shares is $2.7 billion.

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