Intrinsic value of Integra LifeSciences Holdings Corporatio - IART

Previous Close

$54.23

  Intrinsic Value

$3.35

stock screener

  Rating & Target

str. sell

-94%

Previous close

$54.23

 
Intrinsic value

$3.35

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of IART 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 4.6

 

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, %
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  1,531
  1,594
  1,660
  1,731
  1,807
  1,886
  1,970
  2,060
  2,154
  2,253
  2,358
  2,468
  2,585
  2,707
  2,837
  2,973
  3,116
  3,266
  3,425
  3,591
  3,767
  3,951
  4,144
  4,348
  4,562
  4,787
  5,023
  5,271
  5,532
  5,806
Variable operating expenses, $m
  1,175
  1,221
  1,271
  1,324
  1,381
  1,440
  1,503
  1,570
  1,640
  1,714
  1,763
  1,845
  1,932
  2,024
  2,121
  2,222
  2,329
  2,442
  2,560
  2,685
  2,816
  2,954
  3,098
  3,251
  3,411
  3,579
  3,755
  3,941
  4,136
  4,341
Fixed operating expenses, $m
  240
  245
  251
  256
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  355
  363
  371
  379
  388
  396
  405
  414
  423
  432
  442
  451
Total operating expenses, $m
  1,415
  1,466
  1,522
  1,580
  1,643
  1,708
  1,777
  1,850
  1,926
  2,006
  2,062
  2,150
  2,244
  2,343
  2,447
  2,555
  2,669
  2,790
  2,915
  3,048
  3,187
  3,333
  3,486
  3,647
  3,816
  3,993
  4,178
  4,373
  4,578
  4,792
Operating income, $m
  116
  127
  138
  151
  164
  178
  194
  210
  228
  246
  297
  318
  341
  365
  390
  417
  446
  477
  509
  543
  579
  618
  658
  701
  746
  794
  845
  898
  954
  1,014
EBITDA, $m
  211
  224
  238
  254
  270
  288
  307
  327
  349
  372
  396
  422
  450
  479
  510
  543
  578
  614
  653
  695
  738
  784
  833
  885
  939
  996
  1,057
  1,120
  1,188
  1,259
Interest expense (income), $m
  0
  73
  77
  81
  85
  89
  94
  99
  105
  110
  116
  123
  129
  136
  144
  151
  160
  168
  177
  187
  197
  207
  219
  230
  243
  255
  269
  283
  298
  314
  331
Earnings before tax, $m
  43
  50
  57
  66
  74
  84
  94
  105
  117
  130
  174
  189
  204
  221
  239
  258
  278
  299
  322
  346
  372
  399
  428
  459
  491
  525
  561
  600
  640
  683
Tax expense, $m
  12
  14
  16
  18
  20
  23
  25
  28
  32
  35
  47
  51
  55
  60
  64
  70
  75
  81
  87
  94
  100
  108
  116
  124
  133
  142
  152
  162
  173
  184
Net income, $m
  31
  37
  42
  48
  54
  61
  69
  77
  86
  95
  127
  138
  149
  161
  174
  188
  203
  219
  235
  253
  272
  291
  312
  335
  358
  383
  410
  438
  467
  499

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
  3,230
  3,362
  3,503
  3,653
  3,811
  3,979
  4,157
  4,345
  4,544
  4,753
  4,974
  5,207
  5,453
  5,712
  5,984
  6,271
  6,573
  6,891
  7,225
  7,577
  7,946
  8,335
  8,743
  9,173
  9,624
  10,099
  10,597
  11,121
  11,671
  12,249
Adjusted assets (=assets-cash), $m
  3,230
  3,362
  3,503
  3,653
  3,811
  3,979
  4,157
  4,345
  4,544
  4,753
  4,974
  5,207
  5,453
  5,712
  5,984
  6,271
  6,573
  6,891
  7,225
  7,577
  7,946
  8,335
  8,743
  9,173
  9,624
  10,099
  10,597
  11,121
  11,671
  12,249
Revenue / Adjusted assets
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
Average production assets, $m
  1,362
  1,418
  1,478
  1,541
  1,608
  1,679
  1,754
  1,833
  1,917
  2,005
  2,098
  2,197
  2,300
  2,410
  2,525
  2,646
  2,773
  2,907
  3,048
  3,196
  3,352
  3,516
  3,689
  3,870
  4,060
  4,260
  4,470
  4,691
  4,923
  5,167
Working capital, $m
  412
  429
  447
  466
  486
  507
  530
  554
  579
  606
  634
  664
  695
  728
  763
  800
  838
  879
  921
  966
  1,013
  1,063
  1,115
  1,170
  1,227
  1,288
  1,351
  1,418
  1,488
  1,562
Total debt, $m
  1,421
  1,495
  1,573
  1,657
  1,745
  1,839
  1,938
  2,042
  2,153
  2,270
  2,393
  2,523
  2,660
  2,804
  2,955
  3,115
  3,283
  3,460
  3,647
  3,842
  4,048
  4,265
  4,492
  4,731
  4,983
  5,247
  5,525
  5,816
  6,123
  6,445
Total liabilities, $m
  1,799
  1,873
  1,951
  2,035
  2,123
  2,216
  2,316
  2,420
  2,531
  2,648
  2,771
  2,901
  3,037
  3,182
  3,333
  3,493
  3,661
  3,838
  4,024
  4,220
  4,426
  4,643
  4,870
  5,109
  5,361
  5,625
  5,902
  6,194
  6,501
  6,823
Total equity, $m
  1,431
  1,489
  1,552
  1,618
  1,688
  1,763
  1,842
  1,925
  2,013
  2,106
  2,204
  2,307
  2,416
  2,530
  2,651
  2,778
  2,912
  3,053
  3,201
  3,356
  3,520
  3,692
  3,873
  4,064
  4,264
  4,474
  4,694
  4,926
  5,170
  5,426
Total liabilities and equity, $m
  3,230
  3,362
  3,503
  3,653
  3,811
  3,979
  4,158
  4,345
  4,544
  4,754
  4,975
  5,208
  5,453
  5,712
  5,984
  6,271
  6,573
  6,891
  7,225
  7,576
  7,946
  8,335
  8,743
  9,173
  9,625
  10,099
  10,596
  11,120
  11,671
  12,249
Debt-to-equity ratio
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.090
  1.100
  1.110
  1.110
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.170
  1.170
  1.180
  1.180
  1.180
  1.190
Adjusted equity ratio
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  37
  42
  48
  54
  61
  69
  77
  86
  95
  127
  138
  149
  161
  174
  188
  203
  219
  235
  253
  272
  291
  312
  335
  358
  383
  410
  438
  467
  499
Depreciation, amort., depletion, $m
  95
  97
  100
  103
  106
  110
  113
  117
  121
  125
  99
  104
  109
  114
  120
  125
  131
  138
  144
  151
  159
  167
  175
  183
  192
  202
  212
  222
  233
  245
Funds from operations, $m
  126
  134
  142
  151
  161
  171
  182
  194
  207
  220
  226
  242
  258
  276
  294
  314
  334
  356
  380
  404
  430
  458
  487
  518
  551
  585
  622
  660
  701
  744
Change in working capital, $m
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  38
  41
  43
  45
  47
  50
  52
  55
  58
  60
  64
  67
  70
  74
Cash from operations, $m
  110
  117
  124
  132
  140
  149
  159
  170
  181
  193
  198
  212
  227
  243
  259
  277
  296
  316
  337
  359
  383
  408
  435
  463
  493
  525
  558
  593
  631
  670
Maintenance CAPEX, $m
  -62
  -65
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -99
  -104
  -109
  -114
  -120
  -125
  -131
  -138
  -144
  -151
  -159
  -167
  -175
  -183
  -192
  -202
  -212
  -222
  -233
New CAPEX, $m
  -52
  -56
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -127
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -221
  -232
  -244
Cash from investing activities, $m
  -114
  -121
  -126
  -133
  -140
  -147
  -155
  -162
  -171
  -179
  -188
  -197
  -208
  -218
  -229
  -241
  -252
  -265
  -279
  -292
  -307
  -323
  -339
  -356
  -373
  -392
  -412
  -433
  -454
  -477
Free cash flow, $m
  -4
  -4
  -3
  -1
  0
  2
  5
  7
  11
  14
  10
  14
  19
  24
  30
  36
  43
  50
  58
  67
  76
  86
  96
  107
  119
  132
  146
  161
  176
  193
Issuance/(repayment) of debt, $m
  67
  74
  78
  83
  88
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  216
  228
  239
  251
  264
  278
  292
  306
  322
Issuance/(repurchase) of shares, $m
  24
  22
  20
  18
  16
  13
  10
  6
  2
  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  
  91
  96
  98
  101
  104
  107
  109
  111
  113
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  216
  228
  239
  251
  264
  278
  292
  306
  322
Total cash flow (excl. dividends), $m
  87
  92
  96
  100
  105
  109
  114
  118
  123
  131
  133
  144
  156
  168
  182
  196
  211
  227
  244
  263
  282
  302
  324
  347
  371
  396
  424
  452
  483
  515
Retained Cash Flow (-), $m
  -55
  -59
  -62
  -66
  -70
  -74
  -79
  -83
  -88
  -93
  -98
  -103
  -109
  -115
  -121
  -127
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -221
  -232
  -244
  -256
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
  32
  34
  34
  34
  34
  35
  35
  35
  35
  38
  35
  41
  47
  54
  61
  69
  77
  87
  96
  107
  118
  130
  143
  156
  171
  186
  203
  220
  239
  259
Discount rate, %
  7.50
  7.88
  8.27
  8.68
  9.12
  9.57
  10.05
  10.55
  11.08
  11.63
  12.22
  12.83
  13.47
  14.14
  14.85
  15.59
  16.37
  17.19
  18.05
  18.95
  19.90
  20.89
  21.94
  23.04
  24.19
  25.40
  26.67
  28.00
  29.40
  30.87
PV of cash for distribution, $m
  29
  29
  27
  24
  22
  20
  18
  16
  14
  13
  10
  10
  9
  8
  8
  7
  6
  5
  4
  3
  3
  2
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.5
  99.0
  98.6
  98.3
  98.0
  97.8
  97.6
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5

Integra LifeSciences Holdings Corporation is a medical technology company. The Company focuses on the development, manufacturing, and marketing of surgical implants and medical instruments. Its segments include Specialty Surgical Solutions, which offers specialty surgical instrumentation for a range of specialties, including product portfolio used in the neurosurgery operating suite and critical care unit, and Orthopedics and Tissue Technologies, which includes differentiated soft tissue repair and tissue regeneration products, and small bone fixation and joint replacement solutions. It sells products and solutions for dural repair, precision tools and instruments, tissue ablation and neuro critical care. It also sells regenerative technology products for treating acute wounds, such as burns, and chronic wounds, including diabetic foot ulcers and surgical tissue repair. Its products are used in neurosurgery, extremity reconstruction, orthopedics and general surgery.

FINANCIAL RATIOS  of  Integra LifeSciences Holdings Corporatio (IART)

Valuation Ratios
P/E Ratio 54
Price to Sales 4.1
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 34.9
Price to Free Cash Flow 58.7
Growth Rates
Sales Growth Rate 12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 42.4%
Cap. Spend. - 3 Yr. Gr. Rate -0.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 79.2%
Total Debt to Equity 79.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 5.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 9.4%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 66.7%
Gross Margin - 3 Yr. Avg. 65.3%
EBITDA Margin 16.4%
EBITDA Margin - 3 Yr. Avg. 14.3%
Operating Margin 10.8%
Oper. Margin - 3 Yr. Avg. 9.5%
Pre-Tax Margin 9.1%
Pre-Tax Margin - 3 Yr. Avg. 7.3%
Net Profit Margin 7.6%
Net Profit Margin - 3 Yr. Avg. 3.8%
Effective Tax Rate 16.7%
Eff/ Tax Rate - 3 Yr. Avg. 42.3%
Payout Ratio 0%

IART stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IART stock intrinsic value calculation we used $1472 million for the last fiscal year's total revenue generated by Integra LifeSciences Holdings Corporatio. The default revenue input number comes from 0001 income statement of Integra LifeSciences Holdings Corporatio. 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 IART stock valuation model: a) initial revenue growth rate of 4% 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 7.5%, whose default value for IART is calculated based on our internal credit rating of Integra LifeSciences Holdings Corporatio, 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 Integra LifeSciences Holdings Corporatio.
    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 IART stock the variable cost ratio is equal to 76.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $235 million in the base year in the intrinsic value calculation for IART 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 Integra LifeSciences Holdings Corporatio.

Corporate tax rate of 27% is the nominal tax rate for Integra LifeSciences Holdings Corporatio. 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 IART 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 IART are equal to 89%.

Life of production assets of 21.1 years is the average useful life of capital assets used in Integra LifeSciences Holdings Corporatio 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 IART is equal to 26.9%. 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 - $1375.796 million for Integra LifeSciences Holdings Corporatio - 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 85.163 million for Integra LifeSciences Holdings Corporatio 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 Integra LifeSciences Holdings Corporatio at the current share price and the inputted number of shares is $4.6 billion.

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